Laboratory Fraud Defense
Former DOJ Fraud Section Prosecutors. Nationwide Defense for Clinical Laboratory Owners, Lab CEOs, Pathologists, Physicians, Marketers, and Healthcare Executives Facing Federal Laboratory Fraud Investigations and Charges.
Based in Washington, D.C., Armstrong & Bradylyons PLLC defends clinical laboratory owners, lab CEOs, pathologists, ordering physicians, marketers, sales representatives, management services organization (MSO) operators, and healthcare executives in federal laboratory fraud investigations and cases nationwide.
The firm’s healthcare fraud defense practice is built on nearly a decade of combined experience at the nation’s preeminent healthcare fraud enforcement unit: the Healthcare Fraud Unit of DOJ’s Fraud Section. Scott Armstrong, Drew Bradylyons, and Andrea Savdie tried 17 federal jury trials in healthcare fraud cases at DOJ’s Fraud Section involving over $2.8 billion in alleged false and fraudulent claims to federal healthcare programs. The firm uses that experience to defend individuals in laboratory fraud cases at every stage: from the first grand jury subpoena, through federal indictment, and at trial.
Laboratory fraud is one of the most actively prosecuted categories of healthcare fraud. DOJ’s enforcement targets every type of clinical laboratory: molecular pathology labs, toxicology labs, genetic testing labs, clinical chemistry labs, and COVID-19 testing operations. The firm defends individuals in every federal district where DOJ, HHS-OIG, and the FBI bring laboratory fraud cases.
Armstrong & Bradylyons PLLC defends every laboratory fraud case from the start as if it will go to trial. That is not a slogan. It is the operating principle of the firm, grounded in 25 federal jury trials in complex fraud cases in federal courts across the country.
Trial experience drives results at every stage. Laboratory fraud cases are built on claims data analytics, referral chain analysis, specimen tracking, compensation tracing, and cooperating witness testimony. They involve allegations of billing for medically unnecessary tests, unbundling panel tests, paying kickbacks to physicians and marketers for referrals, billing for tests not ordered or not performed, concealing laboratory ownership to evade scrutiny, and exploiting COVID-19 testing to add unnecessary panels. The firm builds the factual record from the first day of engagement: analyzing billing data, retaining laboratory science and clinical experts, identifying and preparing witnesses, and developing a case theory that can withstand the government’s scrutiny.
The firm’s attorneys know how federal prosecutors build healthcare fraud cases because they built them. Scott Armstrong served for nearly a decade at DOJ’s Fraud Section, where he served as lead trial counsel in 16 federal jury trials, including complex healthcare fraud cases involving Medicare, Medicaid, and Tricare. Drew Bradylyons served as Chief of EDVA’s Financial Crimes and Public Corruption Unit and, before that, supervised the Healthcare Fraud Unit’s Miami Strike Force at DOJ’s Fraud Section. That combined experience provides the firm with an unmatched understanding of how federal healthcare fraud cases are investigated, charged, and tried.
The firm relishes the opportunity to try cases. Its willingness to go to trial and its proven skills at trial provide significant leverage in negotiations with federal prosecutors at every stage of a laboratory fraud case.
Laboratory fraud enforcement is relentless. DOJ, HHS-OIG, and the FBI target clinical laboratories with sustained criminal and civil enforcement. The enforcement covers every laboratory type and every fraud theory: kickbacks for referrals, medically unnecessary testing, unbundling, phantom billing, COVID-19 testing exploitation, and concealed ownership.
Through Q4 2025, federal enforcement actions against clinical laboratories reflected consistent prosecution patterns: fraudulent genetic testing schemes, kickback arrangements disguised as marketing services agreements (MSAs), telemarketing-driven referrals, and billing misconduct. Many cases involved medically unnecessary cancer genetic testing (CGx) and respiratory pathogen panel (RPP) testing, often ordered without patient contact or genuine physician oversight.
The recent enforcement is staggering. In September 2025, the founder and CEO of True Health Diagnostics agreed to pay $4.25 million to resolve False Claims Act litigation alleging illegal kickbacks to physicians for laboratory referrals. In November 2025, a diagnostic laboratory agreed to pay more than $9 million to settle allegations involving medically unnecessary testing. That same month, another lab agreed to pay $1.635 million to resolve allegations that it paid kickbacks through a sham Marketing Services Agreement and billed for medically unnecessary RPP tests. In January 2026, Labtech Diagnostics and its founder agreed to pay at least $6.8 million to resolve allegations of five types of kickbacks to healthcare providers. A Texas lab billed more than $79 million for respiratory pathogen panel tests that ordering providers never requested.
The Eliminating Kickbacks in Recovery Act (EKRA) has expanded laboratory enforcement. EKRA applies to all payors, including private insurance, and covers kickbacks for referrals to laboratories. The Ninth Circuit upheld an EKRA conviction against a laboratory owner in July 2025, confirming that payments to marketing intermediaries constitute illegal inducement. EKRA indictments targeting laboratories increased throughout 2025.
CMS suspended $5.7 billion in suspected fraudulent Medicare payments in 2025. The Health Care Fraud Data Fusion Center combines data from DOJ, HHS-OIG, FBI, and CMS to detect anomalous billing in real time. Laboratories with billing patterns that diverge from peer benchmarks are being identified faster than ever.
The firm’s laboratory fraud defense practice is built on healthcare fraud trial experience, deep knowledge of Medicare laboratory billing rules and CLIA requirements, and years of experience investigating and prosecuting complex healthcare fraud cases at DOJ’s Fraud Section. These tools are deployed at every phase of a case.
Challenging the Government’s Test Billing and Unbundling Analysis
Federal prosecutors build laboratory fraud cases on CPT code and HCPCS billing analysis. The government identifies laboratories that bill disproportionately high volumes of expensive panel tests, unbundle panel tests to bill each component separately at higher aggregate rates, or bill for test methodologies that were not performed. The firm retains laboratory billing and coding experts to challenge the government’s methodology, contest outlier designations, and demonstrate that coding practices were consistent with applicable CMS guidelines, National Correct Coding Initiative (NCCI) edits, and the tests actually performed.
Establishing Clinical Justification for Laboratory Testing
The government alleges that tests were medically unnecessary when they were ordered without a genuine physician-patient relationship, when the results were never communicated to treating physicians, or when the tests were not clinically indicated for the patient’s condition. The firm retains independent laboratory medicine, pathology, and clinical experts to evaluate whether the testing met applicable clinical standards, was consistent with the ordering physician’s treatment plan, and was supported by the clinical record. The government’s medical necessity opinion must be tested through cross-examination at trial.
Analyzing Referral Relationships and Compensation Structures
The government alleges that laboratories paid kickbacks to physicians, marketers, sales representatives, and MSOs for referrals. Prosecutors target compensation arrangements disguised as consulting fees, medical directorships, Marketing Services Agreements (MSAs), draw arrangements, and commission-based sales compensation. The firm analyzes every financial relationship against the Anti-Kickback Statute, EKRA, and applicable safe harbor regulations. EKRA’s narrower safe harbors create traps for arrangements that complied with the AKS. The firm identifies and addresses that exposure.
Challenging the Government’s Proof of Knowledge and Intent
Federal healthcare fraud, EKRA, and Anti-Kickback Statute violations require proof of knowing and willful conduct. Good faith matters. The firm presents evidence of compliance programs, reliance on legal counsel, legitimate business purposes for compensation arrangements, and the clinical basis for testing decisions. Where the government relies on cooperating witness testimony to establish intent, the firm attacks the reliability, credibility, and motivations of those witnesses. The firm’s attorneys have extensive experience cross-examining cooperating witnesses in federal healthcare fraud trials.
Federal laboratory fraud investigations target individuals at every level of the operation: from the laboratory owners who control the business, to the physicians who order tests, the marketers who generate referrals, and the MSO operators who structure compensation arrangements. Armstrong & Bradylyons PLLC defends these individuals in federal investigations, after indictment, and at trial.
Defense of Laboratory Owners and CEOs
The firm defends the founders, owners, and chief executive officers of clinical laboratories in federal fraud, Anti-Kickback Statute, EKRA, and money laundering investigations and prosecutions. Laboratory owners are primary enforcement targets. Prosecutors pursue owners who allegedly directed billing for medically unnecessary tests, designed compensation structures to pay kickbacks for referrals, concealed ownership to evade CMS scrutiny, shifted billing between laboratories to avoid audits, or exploited COVID-19 testing to add unnecessary panels. The firm defends laboratory owners by challenging the government’s evidence of personal knowledge, direction, and intent.
Defense of Ordering Physicians and Pathologists
The firm defends physicians, pathologists, and nurse practitioners who face federal charges in laboratory fraud cases. Physicians face exposure when the government alleges they ordered medically unnecessary tests, signed standing orders without individualized patient evaluation, received kickbacks from laboratories for referrals, or served as sham medical directors for laboratories. The firm defends physicians by establishing the clinical basis for testing orders and challenging the government’s evidence of kickback payments and fraudulent intent.
Defense of Marketers and Sales Representatives
The firm defends laboratory marketers, sales representatives, independent contractors, and referral agents who face federal charges. Marketers face serious criminal exposure. The government treats commission-based compensation tied to the volume of referrals as strong evidence of kickback violations under both the AKS and EKRA. The firm defends marketers by analyzing compensation structures, demonstrating legitimate services rendered, and contesting the government’s theory that sales activity constituted illegal inducement.
Defense of MSO Operators and Investors
The firm defends management services organization (MSO) operators, corporate executives, and investors in laboratory companies. DOJ and qui tam relators increasingly target MSO structures as vehicles for disguising kickbacks. The firm defends MSO operators by demonstrating the legitimacy of management arrangements, the separation between administrative and clinical functions, and the absence of improper influence over ordering decisions.
Defense of Specimen Collectors and Call Center Operators
The firm defends specimen collectors, phlebotomists, call center operators, and patient recruiters who face federal charges for their roles in laboratory fraud schemes. These individuals face exposure when the government alleges they recruited patients through deceptive marketing, collected specimens without legitimate orders, or received per-specimen or per-patient kickback payments. The firm defends these individuals by challenging the government’s evidence of knowledge, intent, and the nature of the compensation arrangement.
Federal laboratory fraud investigations follow a pattern. Understanding that pattern is the first step to defending against it. Scott Armstrong and Drew Bradylyons built these types of cases as senior prosecutors at DOJ’s Fraud Section. They know how federal investigators identify targets, develop evidence, and present cases to grand juries.
Claims Data Analytics and Billing Pattern Analysis
The investigation starts with data. HHS-OIG, CMS, and the FBI analyze laboratory billing data to identify labs with anomalous patterns. The government flags laboratories that bill disproportionately high volumes of expensive panel tests, whose test mix diverges from peer benchmarks, that show rapid billing growth inconsistent with patient population, or whose unbundling patterns suggest systematic overbilling. The Health Care Fraud Data Fusion Center deploys advanced analytics to detect these patterns in real time and generate proactive investigative referrals.
Referral Chain and Compensation Tracing
Federal investigators trace the path of every specimen and map the financial relationships between the laboratory, ordering physicians, marketers, sales representatives, MSOs, and specimen collectors. They compare payments to referral volume. Percentage-based or per-specimen compensation is treated as strong evidence of kickback violations. Investigators analyze contracts, invoices, bank records, and payment platform data to identify compensation that correlates with referral volume rather than legitimate services rendered.
Physician Order Scrutiny
The government examines every physician order for laboratory testing. Prosecutors focus on whether the ordering physician had a genuine treatment relationship with the patient, whether the physician reviewed and used the test results, whether standing orders were used without individualized patient evaluation, and whether the physician received compensation from the laboratory that constituted a kickback. In many laboratory fraud cases, orders were generated through telemarketing campaigns or telemedicine platforms where physicians signed without examining or speaking to the patient.
MSA and Compensation Arrangement Analysis
Federal investigators scrutinize Marketing Services Agreements (MSAs), consulting agreements, medical directorship arrangements, and other compensation structures between laboratories and referral sources. In Q4 2025, a laboratory agreed to pay $1.635 million to resolve allegations that it paid kickbacks through a sham MSA. The government treats MSAs as suspect when the payments correlate with referral volume, when the services described in the agreement are vague or not actually performed, or when the arrangement lacks a legitimate business purpose independent of the referral relationship.
Ownership Concealment and Billing Migration Analysis
Federal investigators examine laboratory ownership structures to determine whether owners concealed their identities to evade CMS scrutiny, whether excluded individuals maintained hidden ownership interests, or whether owners shifted billing from one laboratory to another to avoid audits. In Q4 2025, DOJ prosecuted a laboratory owner who opened a new clinical laboratory and disguised his ownership during a pending criminal case for genetic testing fraud. Ownership concealment is treated as strong evidence of intent.
COVID-19 Testing Exploitation Analysis
The government continues to prosecute laboratories that exploited COVID-19 testing to commit fraud. Investigators examine whether laboratories used COVID-19 screening as a pretext to collect patient identifiers and specimens, added medically unnecessary panel tests to COVID-19 orders, submitted claims for COVID-19 test kits that were never requested or delivered, or billed for RPP tests that ordering providers and facility administrators never requested. COVID-19 testing fraud remains an active enforcement category.
Search Warrants and Electronic Evidence
Federal agents routinely seek and execute search warrants for cell phones, laptops, servers, and cloud-based accounts in laboratory fraud investigations. These warrants target communications between laboratory owners, marketers, physicians, and billing staff that reveal knowledge of fraudulent billing, directives to add unnecessary tests, discussions about kickback payments, and efforts to conceal ownership or avoid audits. Federal agents obtain cloud warrants under 18 U.S.C. § 2703 of the Stored Communications Act.
Federal laboratory fraud prosecutions draw on several criminal statutes. Laboratory cases are distinctive because they often invoke both traditional healthcare fraud statutes and EKRA, which extends kickback liability to private insurance referrals. The government charges aggressively and stacks counts.
Healthcare Fraud (18 U.S.C. § 1347)
The primary charging statute in laboratory fraud cases. Healthcare fraud targets billing for medically unnecessary tests, billing for tests not performed, unbundling panel tests to inflate reimbursement, and submitting claims based on fraudulent physician orders. The penalty is up to 10 years per count. If the fraud results in serious bodily injury, the maximum increases to 20 years.
Eliminating Kickbacks in Recovery Act (18 U.S.C. § 220)
EKRA prohibits kickback payments for referrals to laboratories. EKRA covers all payors, including private insurance. Its safe harbors are narrower than the AKS. Commission-based compensation to sales personnel violates EKRA even if permissible under the AKS. Penalties include up to 10 years and $200,000 per violation. EKRA indictments targeting laboratories increased throughout 2025, and the Ninth Circuit upheld an EKRA conviction against a laboratory owner in July 2025.
Anti-Kickback Statute (42 U.S.C. § 1320a-7b)
The Anti-Kickback Statute is charged in laboratory fraud cases involving referrals for services covered by federal healthcare programs. Prosecutors target kickbacks to physicians, marketers, MSOs, specimen collectors, and referral agents. Violations carry up to 10 years per violation.
Wire Fraud (18 U.S.C. § 1343)
Wire fraud applies to any scheme to defraud that uses interstate wire communications. Wire fraud carries up to 20 years per count. In laboratory cases, wire fraud captures the electronic submission of claims, electronic transmission of test orders, and interstate communications in furtherance of the fraud scheme.
Money Laundering (18 U.S.C. §§ 1956, 1957)
Money laundering charges are common in large-scale laboratory fraud prosecutions. The government charges money laundering when it alleges that defendants conducted financial transactions involving fraud proceeds with the intent to conceal or promote the underlying scheme. Money laundering carries up to 20 years per count.
False Claims Act (31 U.S.C. §§ 3729–3733)
The False Claims Act is the government’s primary civil enforcement tool against laboratories. FCA settlements in laboratory cases regularly reach into the tens of millions of dollars. In FY 2025, FCA settlements and judgments exceeded $6.8 billion, the highest annual total in history, with healthcare fraud accounting for over $5.7 billion. Many laboratory investigations run parallel criminal and civil tracks.
Federal Program Exclusion and Collateral Consequences
Beyond incarceration and fines, a conviction or settlement in a laboratory fraud case triggers mandatory exclusion from Medicare, Medicaid, and all federal healthcare programs under the authority of HHS-OIG. For laboratory owners, exclusion means the laboratory can no longer bill any federal healthcare program. For physicians and licensed professionals, exclusion effectively ends a career. CMS may revoke the laboratory’s CLIA certificate and Medicare enrollment.
What Types of Laboratory Fraud Does the Government Prosecute?
Federal prosecutors target several categories of laboratory fraud. The most common are billing for medically unnecessary tests, unbundling panel tests to bill each component separately at higher aggregate rates, paying kickbacks to physicians and marketers for referrals, billing for tests not ordered or not performed, exploiting COVID-19 testing to add unnecessary panels, concealing laboratory ownership to evade CMS scrutiny, and shifting billing between laboratories to avoid audits.
Through Q4 2025, federal enforcement actions reflected consistent patterns of fraudulent genetic testing schemes, kickback arrangements disguised as Marketing Services Agreements, telemarketing-driven referrals, and billing misconduct involving RPP and CGx testing.
What Is Unbundling and Why Does It Create Federal Exposure for Laboratories?
Unbundling occurs when a laboratory bills each component of a panel test separately rather than using a single panel code that carries a lower reimbursement rate. Medicare and Medicaid assign lower reimbursement rates to bundled panel tests because the tests are typically performed together using shared resources. Billing each component individually inflates the total reimbursement.
In November 2025, an urgent care clinic agreed to pay over $2.8 million to settle claims that it unbundled respiratory and urinary tract infection panel tests. The government uses National Correct Coding Initiative (NCCI) edits and billing pattern analysis to detect unbundling. An experienced healthcare fraud defense attorney challenges the government’s coding analysis and demonstrates compliance with applicable billing guidelines.
How Does EKRA Apply to Clinical Laboratories?
The Eliminating Kickbacks in Recovery Act (EKRA) applies to all clinical laboratories, not just those involved in substance abuse testing. EKRA prohibits kickback payments for referrals to laboratories and covers all payors, including private insurance. Its safe harbors are narrower than the Anti-Kickback Statute.
Commission-based compensation to sales personnel violates EKRA even if it would be permissible under the AKS. In July 2025, the Ninth Circuit upheld an EKRA conviction against a laboratory owner who paid marketing intermediaries to encourage referrals. EKRA indictments targeting laboratories increased throughout 2025. Arrangements that complied with the AKS may violate EKRA.
What Are the Penalties for a Federal Laboratory Fraud Conviction?
The penalties are severe. Healthcare fraud carries up to 10 years per count. Wire fraud carries up to 20 years per count. Money laundering carries up to 20 years per count. EKRA violations carry up to 10 years and $200,000 per violation. Anti-Kickback Statute violations carry up to 10 years per violation.
A Louisiana laboratory owner received 10 years for a CGx telemarketing scheme. A Texas laboratory billed more than $79 million for RPP tests never requested by ordering providers. FCA settlements in laboratory cases regularly reach tens of millions of dollars. Beyond prison, defendants face restitution, forfeiture, and mandatory exclusion from federal healthcare programs.
What Defenses Are Available in a Federal Laboratory Fraud Case?
The available defenses depend on the specific allegations. Common defenses include the following:
Medical necessity. Retaining independent laboratory medicine and pathology experts to demonstrate that testing was clinically appropriate.
Billing accuracy. Retaining coding experts to demonstrate compliance with CMS guidelines and NCCI edits.
Safe harbor and EKRA compliance. Demonstrating that compensation arrangements fell within recognized safe harbors under the AKS or EKRA.
Good faith reliance. Presenting evidence of compliance programs, reliance on legal counsel, and legitimate business purposes.
Cross-examining cooperators. Attacking the credibility of cooperating witnesses with plea agreements and sentencing incentives.
Scott Armstrong and Drew Bradylyons leverage their significant federal trial experience as former prosecutors to anticipate the government’s trial strategy and develop an aggressive, evidence-based defense.
What Triggers a Federal Laboratory Fraud Investigation?
Federal laboratory fraud investigations are typically triggered by CMS claims data analytics identifying billing outliers, HHS-OIG audits of laboratory billing, qui tam whistleblower complaints filed by former employees or marketers under the False Claims Act, complaints from patients, referrals from insurance carriers, and proactive referrals from the Health Care Fraud Data Fusion Center’s Data Analytics Team.
Common red flags include unusually high volumes of expensive panel tests, rapid billing growth, disproportionate test mix relative to patient population, unbundling patterns, and financial relationships between the laboratory and referral sources that suggest kickback arrangements.
What Are Marketing Services Agreements and Why Do They Create Enforcement Risk?
Marketing Services Agreements (MSAs) are contracts under which a laboratory pays a third party to provide marketing, management, or consulting services. MSAs create enforcement risk when the government alleges that the payments were kickbacks disguised as service fees. Prosecutors examine whether the payments correlate with referral volume, whether the services described in the agreement were actually performed, and whether the arrangement served a legitimate business purpose independent of the referral relationship.
In Q4 2025, a laboratory agreed to pay $1.635 million to resolve allegations that it paid kickbacks through a sham MSA. The government treated the payments as disguised per-referral compensation. An experienced defense attorney analyzes MSA structures against AKS and EKRA safe harbors and demonstrates the legitimacy of the services rendered.
Can a Laboratory Owner Be Charged Even If Physicians Ordered the Tests?
Yes. The fact that a physician ordered a test does not insulate the laboratory owner from criminal liability. Federal prosecutors use theories of conspiracy and aiding and abetting to charge laboratory owners who designed the referral arrangements, paid kickbacks to generate orders, or caused the submission of false claims. If the laboratory owner paid a physician to order tests, both the laboratory owner and the physician face federal charges.
Is COVID-19 Testing Fraud Still Being Prosecuted?
Yes. COVID-19 testing fraud remains an active enforcement category. Federal prosecutors continue to bring cases against laboratories that used COVID-19 screening as a pretext to collect patient identifiers and add medically unnecessary panel tests, billed for COVID-19 test kits that were never requested or delivered, and exploited pandemic-era regulatory flexibilities to submit inflated claims. In Q4 2025, a laboratory owner pleaded guilty to wire fraud for paying kickbacks to obtain patient information for fraudulent COVID-19 test kit claims.
Does Armstrong & Bradylyons Handle Laboratory Fraud Cases Nationwide?
Yes. Armstrong & Bradylyons PLLC defends individuals in federal laboratory fraud investigations and prosecutions nationwide. The firm can practice in every federal district court in the country.
Laboratory fraud enforcement is active across the country, with significant cases in the Southern District of Florida, the Eastern and Southern Districts of New York, the District of New Jersey, the District of Maryland, the Middle District of Florida, the Southern District of Texas, the Central District of California, and the District of South Carolina.
Scott Armstrong and Drew Bradylyons have tried healthcare fraud cases and handled investigations in federal courts throughout the country during their combined 25-year DOJ career. The firm is based in Washington, D.C. and represents clients in every jurisdiction where DOJ, CMS, and HHS-OIG investigate and prosecute laboratory fraud cases.