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.
Laboratories are a standing federal enforcement priority, and 2026 raised the stakes. On June 23, 2026, the Justice Department announced the 2026 National Health Care Fraud Takedown, the largest coordinated healthcare fraud action in its history. Genetic testing and telemedicine-driven lab referrals were named enforcement categories. Two of the three fugitives on the FBI’s new Most Wanted Fraudsters List are charged in genetic testing schemes.
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. That unit now operates under DOJ’s National Fraud Enforcement Division and leads the annual national healthcare fraud takedowns. Scott Armstrong, Drew Bradylyons, and Andrea Savdie tried 17 federal jury trials in healthcare fraud cases at that unit involving over $2.8 billion in alleged false and fraudulent claims to federal healthcare programs.
That experience includes laboratory fraud tried to verdict. At DOJ, the firm’s attorneys served as trial counsel in the prosecution of a medical professional who was convicted after a week-long federal jury trial for participating in a scheme that fraudulently billed approximately $192 million for laboratory tests, items, and telemedicine services that were not provided or were medically unnecessary.
That case is the government’s current playbook in a single prosecution. A telemedicine pipeline generating orders. A laboratory billing high-value tests. A medical professional in the middle. The firm has proven that theory to a jury and now dismantles it for the defense.
DOJ’s enforcement targets every type of clinical laboratory: molecular pathology labs, toxicology labs, genetic testing labs, clinical chemistry labs, anatomic pathology practices, and COVID-19 testing operations. The firm defends individuals in every federal district where DOJ, HHS-OIG, and the FBI bring laboratory fraud cases, at every stage from the first grand jury subpoena through indictment and trial.
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, generating orders through telemedicine platforms without genuine physician oversight, 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, and in 2026 it accelerated. DOJ, HHS-OIG, CMS, and the FBI now pursue clinical laboratories through criminal charges, civil False Claims Act litigation, and administrative action simultaneously. The theories are consistent: kickbacks for referrals, medically unnecessary testing, unbundling, phantom billing, telemedicine-generated orders, and concealed ownership.
The 2026 National Health Care Fraud Takedown
On June 23, 2026, the Justice Department announced the 2026 National Health Care Fraud Takedown. The government charged 455 defendants, including 90 doctors and other licensed medical professionals, in schemes involving more than $6.5 billion in alleged false claims across 56 federal districts and 45 states and territories. Fifty state Medicaid Fraud Control Units participated, the most in Department history. The government seized over $182 million in assets. It is the largest coordinated healthcare fraud enforcement action DOJ has ever announced.
Laboratory and genetic testing cases ran throughout it. In Oregon, a laboratory owner was charged over fraudulent genetic testing claims submitted to Medicare Advantage plans causing a loss exceeding $15 million, and the owner of two diagnostic companies was charged over fraudulent sleep test claims to HHS, the Veterans Health Administration, and private insurers. In Delaware, the government filed civil claims against a medical company, its owner, and its laboratory director. In Connecticut, a reference laboratory and its owner paid $145,720 to resolve allegations that they made material misrepresentations in a Medicaid provider enrollment application. Enrollment paperwork is now an enforcement vector on its own.
The fugitive list tells the same story. On June 4, 2026, the FBI created its Most Wanted Fraudsters List. In connection with the Takedown, the FBI added two new names. One is wanted in a $547 million genetic testing Medicare fraud scheme and is believed to be in the United Arab Emirates after fleeing while released on bond over the government’s objection. The other is wanted in a $90 million genetic testing Medicare fraud scheme after cutting off an ankle monitor and fleeing to Vietnam by private charter using a fake passport. A third listed fugitive, charged in a $1.2 billion telemedicine and durable medical equipment scheme, was apprehended in the Philippines four days after the list launched.
DOJ Has Restructured Around Fraud Enforcement
On April 7, 2026, the Acting Attorney General established the National Fraud Enforcement Division, a standalone litigating division dedicated to fraud against taxpayer-funded programs. The Criminal Division’s Health Care Fraud Unit, Tax Section, and Market, Government, and Consumer Fraud Unit were placed under its operational control effective immediately. The Health Care Strike Force program now runs nine strike forces nationwide. Since 2007 it has charged more than 6,200 defendants who billed federal programs and private insurers over $45 billion.
Genetic Testing Is the Government’s Central Laboratory Concern
The data explains the focus. In a report issued January 28, 2026 under the Protecting Access to Medicare Act, HHS-OIG found that Medicare Part B spending on clinical laboratory tests rose five percent to $8.4 billion in 2024. Genetic tests accounted for $3.6 billion of that total, or 43 percent of all Part B lab spending, while representing only five percent of tests paid. Genetic testing spending rose 20 percent in a single year. Non-genetic testing was flat at $4.8 billion. The number of enrollees receiving lab tests declined.
Concentration compounds the exposure. In 2024, 346 laboratories received more than $1 million in Medicare payments for genetic tests, and 55 exceeded $10 million. The top 25 laboratory procedure codes drove nearly half of all Part B lab spending. A laboratory operating in that space is a small population under close observation.
On June 15, 2026, HHS-OIG opened a new Work Plan project, Trends and Vulnerabilities in Genetic Tests Covered Under Medicare Part B. Work Plan projects precede audits, and audits precede referrals.
The CRUSH Initiative Targets Laboratory Testing by Name
In February 2026, CMS launched its Comprehensive Regulations to Uncover Suspicious Healthcare initiative, known as CRUSH, through a Request for Information. Reducing Medicare fraud related to laboratory tests is one of its enumerated subject areas, and CMS specifically identified genetic tests and molecular diagnostic tests. The RFI also sought comment on enhanced enrollment screening, identity proofing, ownership transparency, preclusion list reform, and surety bond requirements. Comments closed March 30, 2026. A proposed rule is anticipated. CRUSH signals a shift toward front-end structural controls that operate before a claim is ever paid.
Enforcement Continues Between Takedowns
The pattern holds year-round. In January 2026, a Florida laboratory owner pleaded guilty to submitting more than $52 million in false claims for genetic testing that beneficiaries did not need, based on prescriptions purchased through illegal kickbacks. The United States, together with Georgia, Colorado, and South Carolina, obtained a $114.5 million judgment arising from a cancer genetic testing laboratory scheme built on telemarketing pipelines and referral arrangements. In the District of New Jersey, prosecutors charged operators of a combined telemedicine company, laboratory, and marketing call center with generating orders for medically unnecessary genetic tests, alleging approximately $89 million in claims to Medicare and TRICARE. In June 2026, a Louisiana nurse practitioner was sentenced for causing more than $12 million in false claims for unnecessary cancer genetic tests.
Anatomic pathology drew attention as well. In June 2026, the government pursued allegations that a pathology company established limited-purpose laboratories inside gastroenterology practices nationwide, conferred benefits in exchange for exclusive referrals, and directed staff to order special tests before a pathologist evaluated whether they were necessary.
EKRA and Analytics-Driven Detection
The Eliminating Kickbacks in Recovery Act (EKRA) continues to expand laboratory exposure. EKRA reaches all payors, including private insurance, and its safe harbors are narrower than those under the Anti-Kickback Statute. In July 2025 the Ninth Circuit upheld an EKRA conviction against a laboratory owner, confirming that payments to marketing intermediaries can constitute illegal inducement. The Sixth Circuit separately affirmed a 30-month sentence following a jury conviction on three Anti-Kickback Statute counts arising from a door-to-door genetic testing marketing operation.
Detection is now largely automated. The Health Care Fraud Unit’s Data Fusion Center pools analysts from DOJ, HHS-OIG, FBI, and CMS, and its Financial Intelligence Review Team layers financial analysis onto claims analytics. DOJ and CMS have agreed to give the Fraud Division cloud computing space inside the CMS Integrated Data Repository to run advanced analytics and artificial intelligence tools directly against claims data. The Division entered parallel data-sharing agreements with the Department of Homeland Security and the Federal Trade Commission. CMS suspended an estimated $5.7 billion in suspected fraudulent Medicare payments in 2025 and, in connection with the 2026 Takedown, suspended 1,079 providers and revoked billing privileges for 1,403 more.
For a clinical laboratory, the practical consequence is that a billing outlier is identified, payments are frozen, and enrollment is revoked before any charging decision is made. The financial consequences begin long before an indictment.
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 telemedicine providers who generate those orders, the marketers who drive 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, made misrepresentations in Medicare or Medicaid enrollment applications, 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. In 2026 the government charged 90 doctors and other licensed medical professionals in a single coordinated action, and it has pursued allegations that pathology staff were directed to order special tests before a pathologist assessed necessity. The firm defends these professionals by establishing the clinical basis for testing decisions and challenging the government’s evidence of kickback payments and fraudulent intent.
Defense of Telemedicine Companies, Platforms, and Remote Providers
The firm defends telemedicine companies, platform operators, and remote providers whose consultations generated laboratory test orders. The government’s theory in these cases is that the encounter was a formality used to produce an order rather than a genuine clinical evaluation. Investigators pull platform metadata: consultation duration, whether audio or video occurred, whether the order preceded the encounter, and whether compensation tracked completed consults or orders. At DOJ, the firm’s attorneys served as trial counsel in the prosecution of a medical professional convicted after a week-long federal jury trial in a scheme that fraudulently billed approximately $192 million for laboratory tests, items, and telemedicine services that were not provided or were medically unnecessary. The firm uses that experience to defend compliant remote care against sham-consultation allegations.
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, and appellate courts have upheld convictions arising from marketing intermediary payments and door-to-door genetic testing solicitation. 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 or genetic 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. HHS-OIG reinforces that work through published spending analyses and Work Plan projects, including the June 2026 project examining vulnerabilities in Medicare Part B genetic testing.
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 and Telemedicine Encounter 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. Investigators now obtain platform metadata directly, including consultation duration and whether the order was created before the encounter took place.
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 late 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.
Enrollment, Ownership Concealment, and Billing Migration Analysis
Federal investigators examine laboratory enrollment applications and ownership structures to determine whether owners concealed their identities to evade CMS scrutiny, whether excluded individuals maintained hidden ownership interests, whether enrollment representations were accurate, or whether owners shifted billing from one laboratory to another to avoid audits. In the 2026 Takedown, a reference laboratory and its owner paid a civil settlement to resolve allegations of material misrepresentations in a Medicaid provider enrollment application. In late 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 respiratory pathogen panel tests that ordering providers and facility administrators never requested. COVID-19 testing fraud remains an active enforcement category, and applicable limitations periods leave pandemic-era conduct exposed for years to come.
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 and serve them directly on service providers. The target may not learn of the warrant until well after the government has reviewed the contents.
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 can violate EKRA even where it is 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. The Sixth Circuit affirmed a 30-month sentence following a jury conviction on three AKS counts arising from a door-to-door genetic testing marketing operation.
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. In 2026, the government seized over $182 million in cash, vehicles, jewelry, and other assets in a single coordinated enforcement action.
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 and judgments in laboratory cases regularly reach into the tens and hundreds 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, suspend payments before any charge is filed, and impose a re-enrollment bar.
What Was the 2026 National Health Care Fraud Takedown and What Does It Mean for Clinical Laboratories?
On June 23, 2026, DOJ announced the 2026 National Health Care Fraud Takedown, charging 455 defendants, including 90 doctors and other licensed medical professionals, in schemes involving more than $6.5 billion in alleged false claims across 56 federal districts and 45 states and territories. The government seized over $182 million in assets. It is the largest coordinated healthcare fraud action in DOJ history.
Laboratories were squarely in it. Charged conduct included genetic testing claims to Medicare Advantage plans, fraudulent diagnostic testing, and laboratory enrollment misrepresentations. Two of the fugitives added to the FBI’s Most Wanted Fraudsters List are charged in genetic testing schemes valued at $547 million and $90 million.
The operational lesson is that criminal charges no longer arrive alone. CMS suspended 1,079 providers and revoked billing privileges for 1,403 more in connection with the same action. HHS-OIG maintains a public case index of the Takedown.
What Types of Laboratory Fraud Does the Government Prosecute?
Federal prosecutors target several recurring categories. 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, generating orders through telemedicine platforms without genuine physician oversight, exploiting COVID-19 testing to add unnecessary panels, concealing laboratory ownership to evade CMS scrutiny, and shifting billing between laboratories to avoid audits.
Anatomic pathology arrangements are now included. In June 2026 the government pursued allegations that a pathology company placed limited-purpose laboratories inside gastroenterology practices nationwide, gave those practices benefits in exchange for exclusive referrals, and directed staff to order special tests before a pathologist assessed necessity.
Why Is Genetic Testing the Government’s Top Laboratory Enforcement Priority?
Because of where the money went. In a report issued January 28, 2026, HHS-OIG found that Medicare Part B spent $8.4 billion on clinical laboratory tests in 2024. Genetic tests accounted for $3.6 billion, or 43 percent of that spending, while representing only five percent of tests paid. Genetic testing spending rose 20 percent in one year while non-genetic testing stayed flat and the number of enrollees receiving lab tests declined.
The market is also concentrated. In 2024, 346 laboratories received more than $1 million in Medicare payments for genetic tests and 55 exceeded $10 million. That is a small, visible population.
On June 15, 2026, HHS-OIG opened a Work Plan project examining trends and vulnerabilities in genetic tests under Medicare Part B. Work Plan projects precede audits. Audits precede referrals. High-volume genetic testing labs should expect scrutiny.
What Is the CMS CRUSH Initiative and How Does It Affect Laboratories?
CRUSH stands for Comprehensive Regulations to Uncover Suspicious Healthcare. CMS launched it in February 2026 through a Request for Information seeking comment on more than a dozen fraud-prevention measures. Reducing Medicare fraud related to laboratory tests is an enumerated subject area, and CMS specifically named genetic tests and molecular diagnostic tests.
The RFI also addressed enhanced enrollment screening, identity proofing, ownership transparency requirements, preclusion list reform, and expanded surety bond obligations. Comments closed March 30, 2026, and a proposed rule is anticipated.
The strategic shift matters more than any single provision. CRUSH moves program integrity to the front end, before payment and in some cases before enrollment. Laboratories should assume that ownership disclosures and enrollment representations will receive the same scrutiny as billing. CMS maintains a public page tracking these actions.
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 rates to bundled panels because the tests are typically performed together using shared resources. Billing components individually inflates 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 detects unbundling through National Correct Coding Initiative (NCCI) edits and billing pattern analysis.
Coding disputes are technical, and technical disputes are winnable. An experienced healthcare fraud defense attorney retains coding experts, tests the government’s comparator set, and demonstrates compliance with applicable billing guidance.
How Does EKRA Apply to Clinical Laboratories?
The Eliminating Kickbacks in Recovery Act (EKRA) applies to all clinical laboratories, not only those involved in substance abuse testing. EKRA prohibits kickback payments for referrals to laboratories and reaches all payors, including private insurance. Its safe harbors are narrower than those under the Anti-Kickback Statute.
That gap is the trap. Commission-based compensation to sales personnel can violate EKRA even where 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.
Every laboratory compensation arrangement should be tested against both statutes independently. An arrangement papered to AKS standards is not, for that reason, EKRA compliant.
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 for marketing, management, or consulting services. They create risk when the government characterizes the payments as kickbacks disguised as service fees.
Prosecutors examine three things: whether payments correlate with referral volume, whether the services described were actually performed, and whether the arrangement had a legitimate business purpose independent of the referral relationship. In late 2025, a laboratory agreed to pay $1.635 million to resolve allegations that it paid kickbacks through a sham MSA.
Documentation of services actually rendered is the defense. Contemporaneous deliverables, time records, and fair market value analyses carry far more weight than the agreement’s recitals.
Is COVID-19 Testing Fraud Still Being Prosecuted?
Yes. COVID-19 testing fraud remains an active enforcement category well past the end of the public health emergency, and the applicable statutes of limitations leave pandemic-era conduct exposed for years.
Federal prosecutors continue to charge laboratories that used COVID-19 screening as a pretext to collect patient identifiers and add medically unnecessary panel tests, billed for test kits never requested or delivered, and exploited pandemic-era regulatory flexibilities to submit inflated claims. In late 2025, a laboratory owner pleaded guilty to wire fraud for paying kickbacks to obtain patient information used for fraudulent COVID-19 test kit claims.
Respiratory pathogen panel billing attached to COVID-19 orders remains a specific focus. One Texas laboratory billed more than $79 million for RPP tests that ordering providers never requested.
What Experience Does Armstrong & Bradylyons PLLC Have in Laboratory Fraud Cases?
The firm’s attorneys built federal healthcare fraud cases before they defended them. Scott Armstrong, Drew Bradylyons, and Andrea Savdie tried 17 federal jury trials in healthcare fraud cases at the Healthcare Fraud Unit of DOJ’s Fraud Section, involving over $2.8 billion in alleged false and fraudulent claims. Across all complex fraud matters, the firm’s attorneys have tried 25 federal jury trials.
The laboratory experience is direct and it went to verdict. At DOJ, the firm’s attorneys served as trial counsel in the prosecution of a medical professional who was convicted after a week-long federal jury trial for participating in a scheme that fraudulently billed approximately $192 million for laboratory tests, items, and telemedicine services that were not provided or were medically unnecessary.
The firm’s attorneys also supervised the Healthcare Fraud Unit’s Miami Strike Force, tried complex healthcare fraud cases from the Miami Strike Force, and served as Chief of EDVA’s Financial Crimes and Public Corruption Unit.
That matters because laboratory cases are assembled in a predictable order: analytics identify the outlier, investigators trace the referral chain and compensation, and prosecutors establish intent through cooperators and electronic communications. The firm knows how each link is forged, because its attorneys forged them.
What Triggers a Federal Laboratory Fraud Investigation?
Investigations are triggered by CMS claims data analytics identifying billing outliers, HHS-OIG audits and Work Plan projects, qui tam whistleblower complaints filed by former employees or marketers under the False Claims Act, patient complaints, insurance carrier referrals, and proactive referrals from the Health Care Fraud Data Fusion Center.
Detection is faster than it was. DOJ and CMS have agreed to give the Fraud Division cloud computing space inside the CMS Integrated Data Repository to run analytics and artificial intelligence tools directly against claims data, and the Fusion Center’s Financial Intelligence Review Team now layers financial analysis on top of billing analysis.
Common red flags include unusually high volumes of high-value panel or genetic tests, rapid billing growth, a test mix disproportionate to the patient population, unbundling patterns, and financial relationships with referral sources that track referral volume.
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.
Recent outcomes reflect that range. A Louisiana laboratory owner received 10 years for a cancer genetic testing telemarketing scheme. A Florida laboratory owner pleaded guilty in January 2026 to a $52 million genetic testing scheme built on purchased prescriptions. The United States and three states obtained a $114.5 million judgment in a cancer genetic testing case.
Beyond prison, defendants face restitution, forfeiture, and mandatory exclusion from federal healthcare programs. CMS may revoke Medicare enrollment and the laboratory’s CLIA certificate.
What Happens If CMS Suspends My Laboratory’s Payments or Revokes Its Billing Privileges?
A payment suspension or revocation is an administrative action, not a criminal charge, and it can be imposed on a credible allegation of fraud without any indictment. It is frequently the first visible sign that a criminal investigation exists.
The impact is immediate. Revenue stops while payroll, reagent, instrument, and accreditation costs continue. Revocation carries a re-enrollment bar. CMS suspended an estimated $5.7 billion in suspected fraudulent Medicare payments in 2025 and, in connection with the 2026 Takedown, suspended 1,079 providers and revoked 1,403.
There is an appeal path through reconsideration, an Administrative Law Judge, and the Departmental Appeals Board. Those submissions must be prepared with the parallel criminal investigation in view. Statements made to restore billing privileges can be used to build the criminal case.
Can I Be Charged for Laboratory Tests Ordered Through Telemedicine?
Yes. Telemedicine-generated laboratory orders are among the most heavily prosecuted structures in federal healthcare fraud. Telemedicine is lawful. The government’s theory is that the encounter was a formality used to produce a test order rather than a genuine clinical evaluation.
Investigators examine consultation duration, whether the provider ever spoke with the patient, whether the order was generated before the encounter, whether the beneficiary was solicited by a call center, and whether compensation tracked completed orders. In the District of New Jersey, prosecutors charged operators of a combined telemedicine company, laboratory, and marketing call center with generating orders for medically unnecessary genetic tests, alleging approximately $89 million in claims to Medicare and TRICARE.
At DOJ, the firm’s attorneys served as trial counsel in the prosecution of a medical professional convicted after a week-long federal jury trial in a scheme that fraudulently billed approximately $192 million for laboratory tests, items, and telemedicine services that were not provided or were medically unnecessary. The firm uses that experience to challenge the government’s characterization of compliant remote evaluations as sham consultations.
Can a Laboratory Owner Be Charged Even If Physicians Ordered the Tests?
Yes. A physician’s order does not insulate the laboratory owner. Federal prosecutors use theories of conspiracy and aiding and abetting to charge owners who designed the referral arrangements, paid kickbacks to generate orders, or caused the submission of false claims.
DOJ framed the 2026 Takedown as delivering accountability from doctors’ offices to corporate boardrooms. Where a laboratory paid a physician to order tests, both face charges.
The contested element is knowledge. Prosecutors examine whether the owner knew of, directed, or deliberately avoided knowledge of the arrangement. That is where these cases are won and lost, and the factual record on it should be built from the first day of the engagement.
What Defenses Are Available in a Federal Laboratory Fraud Case?
The available defenses depend on the allegations. The most common are these:
Medical necessity. Independent laboratory medicine and pathology experts can establish that the testing was clinically appropriate and consistent with the ordering physician’s treatment plan.
Billing accuracy. Coding experts can demonstrate compliance with CMS guidance and NCCI edits and contest outlier designations.
Safe harbor and EKRA compliance. Compensation arrangements can be shown to fall within recognized safe harbors or to reflect fair market value for services actually performed.
Lack of intent. Healthcare fraud, AKS, and EKRA all require knowing and willful conduct. Compliance programs, advice of counsel, and legitimate business purpose all bear on that element.
Cross-examining cooperators. Cooperating witnesses testify under plea agreements and sentencing incentives. Those incentives are cross-examination material.
Scott Armstrong and Drew Bradylyons use their federal trial experience as former prosecutors to anticipate the government’s theory and build an evidence-based defense from day one.
Does Armstrong & Bradylyons Handle Laboratory Fraud Cases Nationwide?
Yes. The firm defends individuals in federal laboratory fraud investigations and prosecutions nationwide and can appear in every federal district court in the country.
Laboratory enforcement is genuinely national. The 2026 Takedown brought cases in 56 federal districts across 45 states and territories, prosecuted by nine Health Care Fraud Strike Forces, 56 U.S. Attorney’s Offices, and 45 State Attorneys General’s Offices. Significant laboratory matters have arisen 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, the District of Oregon, the District of Connecticut, the District of Delaware, and the District of South Carolina.
Scott Armstrong and Drew Bradylyons have tried healthcare fraud cases and run investigations in federal courts throughout the country across a combined 25-year DOJ career.