Chesterfield County lab settles with DOJ in alleged kickback scheme

Chester-based clinical laboratory Next Bio-Research Services has agreed to pay at least $758,000 to settle False Claims Act allegations that it paid illegal kickbacks to physicians and independent marketers to secure laboratory test referrals.

The settlement resolves accusations made under the False Claims Act, though there has been no determination of liability.

U.S. Department of Justice said last week that Next, doing business as Next Molecular Analytics, allegedly paid doctors in Texas and Arkansas thousands of dollars in kickbacks, disguised as consulting and medical director fees that were actually intended to induce the doctors to order the company’s laboratory tests, which were billed to federally funded health care programs like Medicaid, Medicare and Tricare. The DOJ also alleged that Next paid commissions to independent contractor marketers based on the volume and value of referrals they secured from providers.

The settlement agreement outlines the government’s contention that the kickbacks were paid by independent contractor marketers working on Next’s behalf. The government alleges that California-based OC Genetic Consultants arranged for other Next contractors — including Texas-based BeauMed Consultants and South Carolina-based Ralston Health Group — to make monthly payments to physicians. The federal government argues that Next failed to exercise sufficient oversight and paid the contractors commissions that violated federal law.

The agreement specifies that the contractors made payments to one physician from January to March 2020, and to another physician from August 2020 through September 2021.

Next President Thomas Reynolds told Virginia Business in an email that the company has not admitted to any wrongdoing as part of the settlement and that the company had contracted with these third parties to market its services “in good faith.”

“The government contended that more than four years ago, certain third-party marketers made payments to doctors who referred testing services to Next,” Reynolds said. “Such payments were explicitly prohibited by Next’s contracts with its third-party marketers. Next stopped using third parties to market our services in 2022. While we strongly disagree with the allegation that Next was aware of or involved in any misconduct, we are pleased to put this matter behind us so that we can continue serving the best interests of our clients with state-of-the-art testing services.”

The federal anti-kickback statute prohibits offering, paying, soliciting or receiving compensation to induce referrals for services covered by Medicare, Medicaid and other federally funded health care programs.

“Physicians should make decisions based the best interests of their patients, not their own personal financial interests,” U.S. Attorney Eric Grant for the Eastern District of California said in a statement. “This settlement demonstrates my office’s commitment to taking all appropriate action to prevent improper inducements that can corrupt the integrity of physician-patient relationships.”

The allegations were first raised in a 2020 lawsuit filed by Sunil Wadhwa and Ken Newton under the whistleblower provisions of the False Claims Act, which allows private parties to sue on behalf of the government and receive a share of any recovery. The DOJ says that Wadhwa and Newton will receive $113,700 of the proceeds from the settlement.

In 2024, the DOJ settled related allegations for $1.5 million with the company’s national sales director and two contractor marketing firms, OCGC and Ralston Health Group.

Under the agreement, Next will pay $758,000 initially, with the potential for additional amounts if certain financial contingencies occur. Next has agreed to cooperate with the ongoing investigations and litigation against other participants in the alleged schemes.

“We are a small group of scientists providing laboratory testing services for pediatric cancer patients as well as nursing homes,” Reynolds said in his email. “Next has been in business for 10 years proudly servicing our community. We fully cooperated with DOJ throughout this process and will continue to do so if asked.”