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As federal and state enforcers ramp up their pursuit of
healthcare fraud, clinical laboratories now sit squarely in the
crosshairs. Regulators deploy sophisticated data analytics,
artificial intelligence tools, and coordinated task forces to
scrutinize billing practices, testing volumes, and referral
arrangements, leaving labs with little room for error.
This summer saw the largest-ever national healthcare fraud takedown
by the U.S. Department of Justice, with 324 defendants charged in
connection with $14.6 billion in alleged fraud 1. Lab
testing played a key role in the crackdown: Nearly 50 defendants
were charged with more than $1 billion in fraudulent claims related
to telemedicine and genetic testing schemes. July also brought news
of a $114.5 million judgment stemming from a genetic cancer
screening conspiracy 2.
This enforcement activity isn't likely to slow down any time
soon. In fact, the U.S. Department of Justice recently announced
two cross-agency efforts — the False Claims Act (FCA) Working
Group and the Health Care Fraud Data Fusion Center — that aim
to improve information sharing among regulators and better leverage
data analytics tools to identify fraudulent activity
3.
With coordinated, data-driven enforcement on the rise, here's
how clinical labs can avoid becoming an enforcement target.
Lab service providers face significant investigations
Lab testing — with its high service volumes and
standardized billing codes — will likely be an easy target
for data-driven healthcare fraud investigations. Case in point: The
Barnes & Thornburg 2024 Healthcare Enforcement & Compliance
Annual Report found that lab service providers accounted for nearly
$240 million in recoveries across 18 civil settlements in fiscal
year (FY) 2024 4. Thus far in FY 2025 (with one month
left to go), they have accounted for $165 million across 14 civil
settlements.
Regulators consistently target medically unnecessary testing,
especially urine drug testing, genetic testing, and cancer
screenings. Enforcement actions frequently uncover improper
arrangements between labs, doctors, marketers, and recruiters,
including forged physician orders, kickbacks to telemedicine
companies, and misuse of patient information to submit claims for
tests that were unnecessary or never performed.
For example, earlier this year, federal regulators reached a $4.425
million settlement with a lab for unnecessary urine drug and
hormone tests, a $6 million settlement with a lab submitting claims
for medically unnecessary genetic testing involving kickbacks, and
a $3.78 million settlement for a lab providing kickbacks to
physicians ordering medically unnecessary genetic cancer screenings
5, 6, 7.
Three best practices for clinical lab compliance
Clinical labs looking to avoid regulatory headaches should ensure that they stay compliant by following these three best practices.
- Conduct regular audits: Labs should conduct
consistent audits of their ordering and billing processes to catch
potential issues before they end up on regulators' radars. What
these audits entail will vary according to the lab's volume of
testing, available resources, and risk appetite. A busy lab or one
that has faced recent government scrutiny might want to consider
quarterly audits, for example, and may benefit from a comprehensive
prebill audit on all claims rather than just representative
sampling.
As part of these actions, labs should look for questionable practices that could indicate fraud. For example, doctors who consistently order elaborate and expensive panels when simpler and cheaper diagnostic options are available could set off regulators' alarm bells. Similarly, telehealth providers who send patients for testing after brief interactions, particularly when there's no established patient-provider relationship, might not meet the standard for reimbursement and could indicate suspicious activity.
- Enhance compliance programs: To protect
themselves, labs should ensure that they have a comprehensive
compliance program and a dedicated compliance officer to address
regulatory issues. Such programs should include clear, accessible
policies and updated annual trainings on fraud and abuse laws, the
Anti-Kickback Statute, and marketing and referral practices.
Additionally, employees should have access to an internal reporting
hotline to proactively address potential risks, especially since
many FCA claims stem from whistleblower reports. Labs should also
be prepared to make self-disclosures to regulators about improper
testing or billing as necessary.
- Maintain robust recordkeeping: If regulators do flag potentially fraudulent activity, labs should ensure that they have the documentation to support ordering and billing practices. Recordkeeping is essential. Although labs are required to maintain medical records for set periods, they should also develop internal policies for keeping and organizing billing and communications records.
Proactive compliance is key
In today's heightened enforcement landscape, labs can no longer afford to rely on reactive compliance efforts. With regulators taking a collaborative, data-driven approach to identifying and prosecuting fraud, labs must invest in robust compliance, from conducting thorough audits to systematizing recordkeeping. Those that do will be well-positioned to thrive even under the regulatory microscope.
Footnotes
1 U.S. Department of Justice. National health care fraud takedown results in 324 defendants charged in connection with over $14.6 billion in alleged fraud. https://www.justice.gov/opa/pr/national-health-care-fraud-takedown-results-324-defendants-charged-connection-over-146 (Accessed August 2025).
2 U.S. Department of Justice. United States and the states of Georgia, Colorado, and South Carolina obtain $114.5M in judgements in a sprawling cancer genetic testing lab scheme. https://www.justice.gov/usao-sc/pr/united-states-and-states-georgia-colorado-and-south-carolina-obtain-1145m-judgments (Accessed August 2025).
3 U.S. Department of Justice. DOJ-HHS false claims act working group. https://www.justice.gov/opa/pr/doj-hhs-false-claims-act-working-group (Accessed August 2025).
4 Barnes & Thornburg. 2024 Healthcare Enforcement & Compliance Annual Report. https://insight.btlaw.com/43/1923/uploads/barnes-and-thornburg-2024-healthcare-enforcement-and-compliance-annual-report.pdf (Accessed August 2025).
5 U.S. Department of Justice. Physicians toxicology laboratory and its owners to pay $4.425 million to settle allegations of unnecessary drug testing. https://www.justice.gov/usao-wdmi/pr/2025_0103_physicians_toxicology_laboratory_settlement (Accessed August 2025).
6 U.S. Department of Justice. Genetic testing marketing companies Genexe, LLC and Immerge, Inc. and two executives agree to pay $6 million to resolve allegations of fraudulent medicare claims. https://www.justice.gov/usao-edpa/pr/genetic-testing-marketing-companies-genexe-llc-and-immerge-inc-and-two-executives (Accessed August 2025).
7 U.S. Department of Justice. Agendia, Inc., Knoxville Comprehensive Breast Center, PLLC, and Knoxville Dermatopathology Laboratory, LLC agree to settle false claims act allegations for more than $3,750,000. https://www.justice.gov/usao-edtn/pr/agendia-inc-knoxville-comprehensive-breast-center-pllc-and-knoxville-0 (Accessed August 2025).
Originally published by Association for Diagnostics & Laboratory Medicine, 09 September 2025
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