Federal agreement resolves claims over referral commissions paid by California laboratory.
A California laboratory and its owner have agreed to pay $1.25 million to resolve federal allegations involving payments made to marketers in exchange for patient referrals. The settlement involves Lab Genomics LLC, a medical testing facility based in Fountain Valley, California, and its owner, Leena Dalal. The agreement addresses claims that the lab used improper payment arrangements to encourage each outside marketer to direct medical providers toward its testing services. The U.S. Department of Justice (DOJ) alleged that Lab Genomics and Dalal violated the False Claims Act (FCA) by making payments that broke federal rules governing referrals for services covered by government-funded insurance programs between January 2020 and September 2022.
According to the government, the lab paid three independent contractors commissions based on the number and value of referrals they generated. The marketers were allegedly paid to persuade medical providers to order laboratory tests through Lab Genomics or recommend its services to patients. Federal investigators said these arrangements were designed to reward the marketers for bringing in additional testing orders rather than paying them a set amount for their work.
The government also alleged that the lab attempted to conceal the marketer commission arrangements through its billing records. Instead of openly documenting payments based on referral activity, Lab Genomics allegedly used invoices that made the payments appear to be standard flat fees. Officials said the arrangement was structured to make the payments look like ordinary business expenses even though the amounts were tied to referrals.
Federal law prohibits companies from offering or paying money or other benefits to encourage referrals for services covered by Medicare, Medicaid, and other federally funded programs. These rules are intended to prevent financial incentives from influencing medical decisions. Patients are expected to receive testing and treatment recommendations based on their medical needs rather than arrangements that benefit a laboratory or outside marketer.
The Anti-Kickback Statute also affects claims submitted to federal insurance programs. When claims are knowingly connected to prohibited payment arrangements, they may not qualify for government reimbursement. Such claims can also lead to violations of the False Claims Act, which allows the government to seek financial recovery when false or improper claims are submitted for payment.
The case began after two individuals, Sunil Wadhwa and Ken Newton, filed a lawsuit under provisions that allow private citizens to report suspected fraud involving government programs. These cases permit individuals to bring information forward on behalf of the federal government and receive a portion of any money recovered through a settlement or court judgment. As part of the agreement, Wadhwa and Newton will receive $225,000 from the total payment.
The Lab Genomics settlement is not the first federal case involving similar claims against laboratory companies. The government previously reached agreements with Admera Health LLC and NEXT Bio-Research Services LLC, which operated as Next Molecular Analytics. Those cases also involved allegations of improper payments connected to referrals for laboratory testing.
Federal officials said investigations involving government-funded programs will continue as part of broader efforts to identify improper billing, referral arrangements, and other forms of financial misconduct. The DOJ has also expanded its efforts through a new federal task force and a National Fraud Enforcement Division focused on addressing misuse of public funds.
Sources:
California Laboratory and Its Owner Pay $1.25M to Settle Allegations of Kickbacks to Marketers
California Lab Agrees to $1.25 Million Payment
Lab Genomics settles kickback allegations for $1.25 million in California
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