The settlement resolves claims that Advanced Pathology Solutions provided illegal incentives to gastroenterology practices and performed unnecessary medical testing.
Advanced Pathology Solutions PLLC (APS), an anatomic pathology laboratory based in North Little Rock, Arkansas, and its owners have agreed to pay $30 million to the US to resolve allegations of unlawful kickbacks and medically unnecessary testing, according to the Department of Justice.
The settlement includes APS, its management services organization APS MSO LLC, and owners Kevin Hannah, Donell Burkett, and Daniel Hunter Pledger. The agreement addresses allegations that the laboratory violated the False Claims Act between 2015 and 2022, adding to a list of recent federal enforcement actions such as when the US settled a genetic testing fraud case against a laboratory owner.
Allegations of Illegal Incentives
The government alleged that APS established “lean labs” within gastroenterology practices across the country. These limited-purpose laboratories allowed the practices to bill for preparing and staining biopsy specimen slides. In exchange for these benefits, the practices allegedly agreed to refer their patients exclusively to APS for interpretation and review—a setup that echoes a previous case where a gastroenterology practice paid $4.75 million to settle kickback and unnecessary testing allegations.
The Department of Justice alleged these arrangements were improper financial relationships designed to induce practices to steer patients toward the laboratory.
“Healthcare referrals must be based on the best decision for patients, not the influence of kickbacks,” says Brett A. Shumate, assistant attorney general of the Department of Justice Civil Division, in a release.
Unnecessary Medical Testing
The settlement also resolves allegations that APS submitted claims for testing that was not medically necessary. According to the Department of Justice, APS directed personnel in the “lean labs” to automatically order special stains before a pathologist reviewed routine tests to determine if additional work was required.
By following this protocol, the laboratory allegedly ordered tests that were ineligible for Medicare coverage or reimbursement. The government further alleged that APS ordered unnecessary “confirmatory” immunohistochemical testing on patient samples.
Additionally, the agreement resolves claims that APS and CEO Kevin Hannah provided volume-based commission payments to an individual to induce referrals for epidermal nerve fiber density testing between 2018 and 2020. This arrangement allegedly violated the Anti-Kickback Statute, marking another instance in which a lab CEO and physicians paid millions to settle kickback allegations.
Compliance and Oversight
In connection with the settlement, APS has entered into a five-year Corporate Integrity Agreement with the Department of Health and Human Services Office of Inspector General. The agreement requires the laboratory to implement a compliance program, new training requirements, and a review of physician referral relationships.
“Kickbacks and medically unnecessary testing don’t just violate the law—they endanger patients and drain critical federal health care funds,” says Scott J. Lampert, acting deputy inspector general for investigations of the Department of Health and Human Services Office of Inspector General, in a release.
The settlement follows three whistleblower lawsuits filed under the qui tam provisions of the False Claims Act. The claims resolved by the settlement are allegations only, and there has been no determination of liability.
