$6M DOJ Settlement Highlights Ongoing False Claims Act Scrutiny Of Laboratory Kickbacks

In September 2025, the Department of Justice ("DOJ") announced a $4.2 million settlement with the former CEO of True Health Diagnostics, LLC ("True Health"), Christopher Grottenthaler, as well as a $1.8 million settlement with various marketing professionals and physicians to resolve allegations under the Anti-Kickback Statute and False Claims Act. Grottenhaler was accused of working with various marketers to make payments to physicians through management service organizations purportedly providing True Health with administrative and consulting services. According to the lawsuit, however, these services were merely a guise to provide physicians with renumerations in exchange for laboratory referrals. Grottenthaler allegedly allowed the kickback arrangements to continue even after receiving internal warnings that the scheme was fraudulent.

DOJ officials working on the case explained that such practices, in addition to wasting taxpayer dollars, are damaging to patient trust and wellbeing. For example, when a physician orders a laboratory test because they are being paid for referring patients, the claim is no longer based on independent medical judgment. The government does not reimburse claims obtained through such kickbacks.

What are Laboratory Kickbacks?

Laboratory kickbacks refer to the practice of labs or marketers providing financial incentives or other benefits to physicians in exchange for referring patients for testing. These benefits can be disguised as consulting fees, investment returns, or, as in the True Health case, management service organization payments.

Laboratory kickbacks are illegal under the Anti-Kickback Statute ("AKS"), 42 U.S.C. § 1320a–7b(b), a federal statute that makes it a crime to offer, pay, solicit, or receive any form of remuneration tied to services or referrals for services covered by federal healthcare programs including Medicare, Medicaid, or TRICARE. The AKS was enacted by Congress in 1972 in an attempt to protect federal healthcare programs from fraud and ensure medical decisions are made to prioritize patient well-being over financial gain.

False Claims Act Liability through the AKS

While the AKS itself carries criminal penalties, it can also lead to liability under the False Claims Act ("FCA), 31 U.S.C. §§ 3729–373. When a referral or service is influenced by an illegal kickback, the medical decision has been influenced by a financial incentive, and any claim arising from that referral or service submitted to a federal healthcare program is "tainted." The FCA provides an enforcement mechanism for AKS violations by allowing the government (or private citizens) to pursue liability when those tainted claims are submitted to federal healthcare programs for payment.

This legal theory has enabled the DOJ to successfully pursue civil recoveries for fraud against government programs. As the FCA provides for damages three times the amount of the false claims themselves, these recoveries can often be quite substantial. Private whistleblowers (known as relators) who come forward with information about fraud and bring suits on behalf of the government can share in any ultimate recovery.

Legal Consequences of AKS and FCA Violations

As the True Health settlement highlights, people and entities involved in illegal laboratory kickbacks face serious consequences. Civil liability under the AKS and FCA can result in substantial financial penalties and can even lead to criminal fines or imprisonment. Individuals found to have violated these statutes may also be prohibited from participating in federal healthcare programs, which can effectively end medical careers or healthcare businesses. Beyond legal and financial consequences, involvement in kickback schemes undermines professional reputations and erodes patient trust.

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