Alleged Kickback Scheme Involving Doctors Leads to Major Lab Punishment

A Virginia-based laboratory has agreed to pay $758,000 to resolve allegations that it engaged in a kickback scheme with doctors and marketers, highlighting ongoing concerns about financial incentives in healthcare.

The laboratory, NEXT Bio-Research Services LLC (doing business as NEXT Molecular Analytics), is settling claims under the False Claims Act. Typically, a settlement involves no admission of guilt.

According to the Department of Justice, the alleged scheme involved payments to physicians in Texas and Arkansas disguised as consulting or medical director fees. These payments were allegedly intended to induce doctors to order laboratory tests from NEXT.

NEXT also allegedly handed out commissions to independent marketers based on volume and value of referrals, further encouraging the use of its services and creating financial incentives divorced from patient care.

Under the settlement, NEXT has agreed to the $758,000 payment, with additional amounts possible if certain financial conditions occur.

The settlement stems from a whistleblower lawsuit filed under the False Claims Act by Sunil Wadhwa and Ken Newton, who will receive $113,700 from the proceeds.

“This settlement shows DOJ’s commitment to rooting out illegal kickback schemes that have no place in our federal health care programs,” Assistant Attorney General Brett Shumate of the Justice Department’s Civil Division said of the move.

“Physicians should make decisions based [on] the best interests of their patients, not their own personal financial interests,” U.S. Attorney Eric Grant for the Eastern District of California remarked. “This settlement demonstrates my office’s commitment to taking all appropriate action to prevent improper inducements that can corrupt the integrity of physician-patient relationships.”

Christian Schrank, the deputy inspector general for investigations at the Department of Health and Human Services Office of Inspector General, emphasized the patient impact.

“Violations of the Anti-Kickback Statute are not victimless crimes — they compromise the integrity of medical decision-making and betray the trust patients place in their providers,” Schrank said.

“When health care decisions are shaped by hidden financial motives, patients may be misled, unnecessary services may be rendered, and taxpayer-funded programs may be manipulated for personal gain,” Schrank added.

The Anti-Kickback Statute “prohibits offering, paying, soliciting, or receiving remuneration to induce referrals of items or services covered by Medicare, Medicaid, and other federally funded health care programs,” the Justice Department release said.

The statute is intended to ensure that medical providers’ judgments are based on the best interests of their patients rather than personal financial incentives, which is particularly important in laboratory testing where choices can significantly impact care.

NEXT’s settlement resolves certain allegations in the lawsuit but does not constitute an admission of liability. The company has agreed to cooperate with Justice Department investigations and litigation against other participants in the alleged schemes.

The case underscores growing public concern over conflicts of interest in healthcare, particularly in the post-COVID era, when scrutiny of laboratory testing, pharmaceutical incentives, and billing practices has intensified.

The settlement was coordinated by the Civil Division’s Commercial Litigation Branch, Fraud Section, and the U.S. Attorney’s Offices for the District of New Jersey and Eastern District of California.

Tips and complaints about possible fraud, waste, abuse, and mismanagement can be reported to the Department of Health and Human Services via 1-800-HHS-TIPS (800-447-8477).

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