In January 2026, the Department of Justice announced that Clinical Laboratory LTD Holding LLC, formerly known as Labtech Diagnostics LLC, and its founder and CEO, Joseph Labash, agreed to pay at least $6.8 million to resolve False Claims Act allegations involving illegal kickbacks to physicians. The settlement brought total civil recoveries related to Labtech to more than $11.5 million, including amounts recovered separately from nine doctors whose referral relationships with the lab were also found to violate the law.
In addition to the civil settlement, Labtech pleaded guilty to five criminal counts of offering and paying healthcare kickbacks in violation of the Anti-Kickback Statute. The case is one of several recent enforcement actions targeting laboratory fraud, a category of Medicare abuse that has generated consistent DOJ attention in recent years.
How Laboratory Fraud Works
Diagnostic laboratories bill Medicare directly for the tests they perform on patient samples, which are referred by physicians and other healthcare providers. That billing structure creates two distinct opportunities for fraud: labs can pay physicians to generate referrals for tests that may not be medically warranted, and labs can bill for tests that were never ordered, never performed, or performed incorrectly.
The Labtech case illustrates the referral-driven version of this problem. From August 2018 through November 2021, Labtech and its CEO allegedly paid kickbacks to physicians disguised as payments for office space rental, phlebotomy services, and toxicology services, with falsified contracts and fabricated square footage and hours to obscure the true nature of the payments.
In at least one instance, payments were hand-delivered as money orders. In another, the lab provided a free pain management practice to a healthcare provider in exchange for drug testing referrals. Every test referred through those arrangements and billed to Medicare was a false claim, because claims tainted by kickbacks are ineligible for reimbursement under federal law, regardless of whether the underlying test had clinical value.
The second category, billing for tests that are unnecessary or never performed, follows a different pattern but is equally well-documented in enforcement actions. Laboratories have been found to:
- Order and bill for large panels of tests when only one or two specific tests were clinically indicated
- Bill for tests using specimens that were never collected or that were insufficient for the test performed
- Submit claims for tests ordered by physicians who had no meaningful involvement in the patient’s care and whose credentials were used without authorization
- Fabricate test results or alter quality control records to conceal that equipment was not functioning properly
- Bill for the highest-complexity version of a test when a simpler, lower-reimbursed version was performed
The Labtech complaint also alleged that the laboratory failed to accurately calibrate and perform quality controls on its testing equipment, raising questions not just about billing accuracy but about the reliability of the results Medicare was paying for.
Relevant Laws
The False Claims Act covers any false or fraudulent claim submitted to a federal healthcare program. In the laboratory context, this includes claims for tests that were medically unnecessary, tests billed at a higher complexity level than performed, and test referred through a kickback arrangement. The Anti-Kickback Statute separately prohibits payments intended to induce referrals of patients covered by Medicare or Medicaid. When a laboratory submits a claim that resulted from a kickback, that claim violates both statutes simultaneously.
The government can recover up to three times the amount it was improperly paid, and each individual false claim carries its own per-claim penalty. In laboratory cases, where a single referral relationship might generate hundreds or thousands of test claims over several years, those figures accumulate quickly. The Labtech investigation ultimately ensnared not just the lab and its founder, but nine separate physicians whose participation in the kickback scheme made their referrals unlawful.
Who Is in a Position to Report Lab Fraud
Laboratory fraud schemes involve multiple participants and leave traces across billing records, contracts, and internal communications. The people most likely to have direct knowledge of a scheme are often those working within the laboratory or in the physician practices that refer to it.
Individuals who may have relevant information include:
- Laboratory employees who are aware that tests are billed without corresponding specimens, or that quality control failures are concealed from regulators
- Billing staff who recognize that codes submitted do not match the tests performed, or that panel sizes are inflated beyond what physicians ordered
- Sales and marketing staff who participate in or witness payments to physicians disguised as consulting fees, rental payments, or service agreements
- Physicians or their office staff who receive payments from a laboratory in connection with test referrals and recognize that those arrangements may not comply with the law
- Compliance personnel who raise concerns internally about referral arrangements or billing patterns and are overruled
A qui tam lawsuit under the False Claims Act allows any of these individuals to file a case on behalf of the federal government.
Speak With a Whistleblower Attorney
If you have knowledge of a laboratory paying physicians for referrals, billing for tests that were not performed or not medically necessary, or manipulating documentation to support inflated claims, you may have the basis for a False Claims Act case. A whistleblower attorney at Keller Grover can evaluate your situation and advise you on your options. Contact our legal team today to discuss what you know and what legal protections may be available to you.