An Arkansas pathology lab and its owners agreed to pay $30 million to resolve federal allegations that their business model turned physician referrals and add-on testing into a taxpayer-funded billing pipeline.
The settlement covers Advanced Pathology Solutions PLLC, APS MSO LLC, and current and former owners Kevin Hannah, Donell Burkett, and Daniel Hunter Pledger. According to the Justice Department, APS operated “lean labs” with gastroenterology practices across the country and allegedly provided financial benefits to those practices in exchange for exclusive referrals of pathology specimens to APS’s North Little Rock laboratory.
Federal prosecutors also alleged APS caused special stains and confirmatory testing to be ordered automatically before a pathologist determined whether the tests were medically necessary.
In essence, the government alleged extra testing was built into the process first, while medical necessity came second.
The settlement also resolves claims that APS and CEO Kevin Hannah paid volume-based commissions to Richard Sorgnard to induce referrals for epidermal nerve fiber density testing. The United States contended the commissions equaled 4% of collections from referred ENFD testing.
The case originated from three whistleblower lawsuits filed under the False Claims Act. As part of the resolution, APS entered into a five-year Corporate Integrity Agreement with HHS-OIG requiring compliance reforms, training, auditing, and review of physician referral relationships.
For Find Corporate Waste, the settlement shows how federal health care fraud can hide inside ordinary-looking referral networks, lab protocols, and billing defaults. When financial incentives shape where specimens go and testing is added before necessity is established, taxpayers are left paying for a system designed around revenue rather than care.
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