Indiana Laboratory Settles $9 Million False Claims Case Over COVID-19 Testing

In a significant healthcare fraud settlement, Indianapolis-based Patients Choice Laboratories (PCL) has agreed to pay more than $9.6 million to the state of Indiana to resolve allegations of fraudulent Medicare billing practices related to COVID-19 and infectious disease testing. The laboratory maintains it committed no wrongdoing despite the settlement.

According to the U.S. Department of Justice (DOJ), PCL allegedly submitted improper claims to Medicare for respiratory pathogen panels (RPPs) between December 2020 and May 2022. These tests were either medically unnecessary or obtained through illegal kickback arrangements, federal prosecutors claim.

The case centers on PCL’s government contract to perform COVID-19 testing in long-term care facilities throughout Indiana. While the company was specifically compensated for this service, investigators found that PCL repurposed the same patient specimens to bill Medicare separately for RPPs that patients didn’t need. In some instances, the DOJ alleges the laboratory billed Medicare for RPP tests without even conducting the contracted COVID-19 testing.

“This type of double-dipping scheme takes advantage of both taxpayers and vulnerable patients,” said a healthcare fraud expert who requested anonymity. “The pandemic created unprecedented demand for testing, but also opportunities for improper billing practices that regulators are now addressing.”

The investigation further revealed that PCL violated the Anti-Kickback Statute through a sophisticated referral network. The company allegedly paid commissions and fees to secure test referrals later billed to Medicare. One particularly troubling arrangement involved PCL paying an infection prevention company $5,000 monthly for what was labeled as “marketing and management services” in long-term care facilities.

Federal investigators determined this arrangement was actually a disguised payment system for test referrals. Between December 2020 and May 2022, PCL paid this unnamed infection prevention company approximately $1.86 million. These referrals resulted in PCL billing Medicare over $6 million, highlighting the lucrative nature of the alleged scheme.

The DOJ also discovered that PCL contracted with independent sales representatives to promote its testing services to healthcare providers across the region. These representatives received percentage-based commissions from the revenue generated by the tests they facilitated, totaling at least $372,000 during the investigation period.

“Kickback arrangements that drive unnecessary testing waste taxpayer dollars and undermine the integrity of our healthcare system,” said Tom Wheeler, U.S. Attorney for the Southern District of Indiana. “This settlement reflects our commitment to holding accountable those who seek to profit at the expense of federal healthcare programs and the patients they serve.”

The settlement comes amid increased federal scrutiny of laboratories that may have exploited the COVID-19 pandemic for financial gain. Since 2020, the DOJ has recovered billions in settlements related to healthcare fraud, with diagnostic testing emerging as a particular area of concern.

Healthcare compliance experts note that laboratories face strict regulations regarding billing practices and referral relationships. The Anti-Kickback Statute specifically prohibits offering, paying, soliciting, or receiving anything of value to induce referrals for services covered by federal healthcare programs.

While PCL denies wrongdoing, the substantial settlement amount suggests prosecutors had assembled compelling evidence. The resolution allows the company to avoid potentially costly litigation and the uncertainty of a trial, while enabling the government to recoup alleged losses to taxpayers.

The case highlights ongoing challenges in healthcare oversight, particularly during public health emergencies when normal procedural safeguards may be relaxed to facilitate rapid response. As pandemic-related fraud investigations continue nationwide, industry observers expect additional settlements in the diagnostic testing sector.

Medicare fraud impacts not only government budgets but also threatens program sustainability and potentially compromises patient care through unnecessary testing and distorted medical decision-making.