Medicare's lab-test bill for 2024 was smaller than 2019's by volume, but genetic tests now make up 43% of it — up from 18% in 2018. That's partly real medicine, and partly because a small group of people figured out that Medicare would pay four figures for a Q-tip.
In 2018, genetic tests accounted for about 18% of everything Medicare Part B spent on laboratory work. By 2024, they accounted for 43%, according to the HHS Office of Inspector General's January 2026 snapshot. Total Part B lab spending rose from $7.6 billion to $8.4 billion over the same period, while the genetic-test slice of that pie went from roughly $1.4 billion to $3.6 billion — and the number of Medicare enrollees getting any lab test at all fell from 27.7 million to 23.4 million. Fewer patients, much more genetics, vastly more money. A shift that can be explained partly by legitimate clinical progress in oncology, and partly by the fact that a subset of operators spent most of the last decade figuring out that Medicare would pay four-figure sums for a cheek swab.
The story begins with a specific exploit. In the mid-2010s, Medicare started reimbursing a growing menu of molecular-pathology CPT codes — the 81xxx series, the "Multianalyte Assays with Algorithmic Analyses" tier codes in the 81500s, plus a catchall for "unlisted molecular pathology" (81479) — at prices that bore no resemblance to what a lab test historically cost. The average Medicare-paid genetic test in 2021 ran about $666, against roughly $13 for a routine blood-chemistry panel: a 50× spread. Certain Tier-2 codes priced out at $2,000 per test or more. Coverage was fragmented across seven Medicare Administrative Contractors, each with its own local coverage determinations; for many tests there was no national coverage decision and no prior authorization at all. It was an arbitrage, and like most arbitrages that run for a long time, it attracted both earnest clinicians and a parallel industry of people who had previously sold durable medical equipment.
That parallel industry is the subject of this piece.
The mechanics, reconstructed from indictments in at least seven federal districts, are almost embarrassingly standardized. A lab owner — call him the principal — would contract with one or more "marketing" companies. The marketers would stand up a call center, a website, or a booth at a Florida church picnic, and offer Medicare beneficiaries a free "cancer screening" cheek swab. Seniors were approached at health fairs, retirement communities, senior centers, grocery-store parking lots, pharmacies, and car dealerships. HHS-OIG's 2019 fraud alert described the pitch: the swab was free, the paperwork was brief, and the pitch did not mention that genetic testing is not, as a rule, a cancer screening tool for asymptomatic Medicare-age seniors.
The swab was mailed to the lab. But a lab can't bill Medicare without a physician order — so the marketers routed the swab through a telemedicine signature factory. A doctor working from home, typically on contract to a telehealth company with a faintly bureaucratic name, would receive a prepopulated order form and sign it. Dr. Daniel R. Canchola of Flower Mound, Texas was paid roughly $30 per signed order before pleading guilty; he was sentenced to 10 years and one month in 2022. None of the charged telemedicine physicians, DOJ alleges, actually evaluated the patients.
Once signed, the lab submitted claims under codes like 81445, 81455, or 81479, often billing between $6,000 and $12,000 per beneficiary. The lab kept a cut; the marketing company kept a cut (usually on a percentage basis, which is what made the arrangement a kickback); the telemedicine platform kept a cut; and sometimes the money was then laundered through a rural hospital — to which we'll return.
The statutes deployed against this fact pattern are three. The Anti-Kickback Statute (42 U.S.C. §1320a-7b) criminalizes paying for referrals of federally reimbursed health services. The Eliminating Kickbacks in Recovery Act of 2018 (18 U.S.C. §220) — originally written to stop opioid-recovery-home patient brokering — extended similar prohibitions to all clinical laboratories and all payors, including private insurance. The False Claims Act supplies the civil follow-on, with treble damages and whistleblower bounties. The first EKRA appellate decision, U.S. v. Schena (9th Cir., July 11, 2025), held that EKRA reaches payments to marketing intermediaries and that percentage-based marketer compensation can violate the statute where it induces deceptive referrals. This matters: percentage-of-revenue marketing is the economic engine of the whole business.
September 27, 2019 is the date this all went public. DOJ announced what it called the largest health-care fraud scheme involving genetic testing in U.S. history: 35 defendants charged across five federal districts (Southern and Middle Florida, Southern Georgia, Eastern and Middle Louisiana) with roughly $2.1 billion in allegedly fraudulent Medicare billings for cancer genomic testing. CMS's Center for Program Integrity simultaneously took administrative action against entities that had submitted $1.7 billion in claims. Ten medical professionals were among the charged, including nine physicians.
The marquee cases:
Minal Patel, LabSolutions LLC. A federal jury in the Southern District of Florida convicted Patel in 2022 on conspiracy to commit health-care fraud and wire fraud, paying illegal kickbacks, and conspiracy to commit money laundering. DOJ's charging theory: between July 2016 and August 2019, LabSolutions submitted more than $463 million in CGx claims, Medicare paid more than $187 million, and Patel personally received about $21 million. On August 18, 2023 Patel was sentenced to 27 years and ordered to forfeit $187 million, including more than $30 million from bank accounts, a Ferrari, and a Range Rover. DOJ described the case as one of the largest genetic-testing fraud prosecutions ever tried to verdict.
Khalid Ahmed Satary. Satary was indicted in the Eastern District of Louisiana on September 26, 2019; DOJ alleges his network of labs — including Clio Laboratories, Performance Laboratories, Lazarus Services, and GNOS Medical — collectively billed Medicare more than $547 million and that he improperly received approximately $134 million. On December 12, 2022, Satary failed to appear and was declared a fugitive. As of this writing he remains on both the HHS-OIG and FBI fugitive lists; the charges are allegations pending trial.
Mark Schena, Arrayit Corporation. The Sunnyvale microarray company's president was convicted by a federal jury in September 2022 of securities fraud, health-care fraud, paying kickbacks, and conspiracy to commit wire fraud in connection with more than $77 million in claims for medically unnecessary allergy and COVID-19 tests. Judge Edward J. Davila sentenced him to 96 months and $24 million in restitution. The SEC settled civilly with Arrayit Corp. and CEO Rene Schena, who agreed to a three-year officer-and-director bar and a $50,000 penalty without admitting or denying the allegations.
DOJ continued through the Strike Force. Jamie P. McNamara pleaded guilty in the Eastern District of Louisiana to conspiracy to commit health-care fraud for a CGx-and-cardiovascular-genetic scheme that billed Medicare more than $174 million; he was sentenced October 23, 2025 to the statutory maximum of 10 years. Ravitej Reddy, owner of Personalized Genomics, pleaded guilty to billing Medicare over $127 million in a single calendar year, with Medicare paying about $60 million. Marketing operators Paul Wexler and Paul Bleignier were sentenced in November 2025 to four and two years respectively for a $17.3 million scheme; Bleignier received an additional two years after he opened a new lab while the case was pending.
| Defendant / Entity | District | Scale | Status |
|---|---|---|---|
| Minal Patel (LabSolutions) | S.D. Fla. | $463M billed / $187M paid | Convicted; 27 yrs (Aug 2023) |
| Khalid Satary (Clio / Performance / GNOS) | E.D. La. | $547M alleged / $134M alleged | Fugitive since Dec 2022; charges pending |
| Mark Schena (Arrayit Corp.) | N.D. Cal. | $77M | Convicted; 96 mos (Oct 2023) |
| Jamie P. McNamara | E.D. La. | $174M billed / $55M paid | Pleaded guilty; 10 yrs (Oct 2025) |
| Ravitej Reddy (Personalized Genomics) | W.D. Pa. | $127M billed / $60M paid | Pleaded guilty; sentencing pending |
| Keith J. Gray (Axis / Kingdom Health Labs) | N.D. Tex. | $328M alleged / $54M paid | Convicted Feb 2026; sentencing pending |
| Jorge & Ricardo Perez (rural hospital network) | M.D. Fla. | $1.4B billed / ~$400M paid | Convicted June 2022; sentencing pending |
| Dr. Daniel R. Canchola (telemed signer) | N.D. Tex. | $54M claims | Pleaded guilty; 10 yrs 1 mo |
| Wexler / Bleignier (marketers) | various | $17.3M / $5.2M | Sentenced Nov 2025: 4 yrs / 2+2 yrs |
| Corporate FCA settlements — civil, no admission unless noted | |||
| Millennium Health | D. Mass. | $256M (2015) | Civil, no admission — included $10M for genetic tests |
| Progenity, Inc. | S.D.N.Y. / S.D. Cal. | $49M (Jul 2020) | Civil FCA, no admission; 5-yr CIA |
| Natera, Inc. | W.D. Ky. | $11.4M (Mar 2018) | Civil FCA; no admission |
| Genova Diagnostics | W.D.N.C. | up to $43M (2020) | Civil; 5-yr CIA |
| GenomeDx Biosciences | S.D. Cal. | $1.99M (2019) | Civil; Decipher prostate test |
The second exploit is geographic. Medicare reimburses Critical Access Hospitals — rural facilities of 25 beds or fewer — on a cost-plus basis rather than the Clinical Lab Fee Schedule, and many private insurers negotiate even higher in-network rural rates. A tiny hospital's lab can become, on paper, a remarkably profitable billing address. Fraudsters figured this out in 2015.
The exemplar case is U.S. v. Jorge and Ricardo Perez. After a 24-day jury trial, both were convicted in June 2022 on a scheme that billed $1.4 billion for laboratory tests between November 2015 and February 2018, of which approximately $400 million was paid. Four rural hospitals were the named conduits: Campbellton-Graceville Hospital (Florida, 25 beds), Regional General Hospital of Williston (Florida, 40 beds), Chestatee Regional Hospital (Georgia, 49 beds), and Putnam County Memorial Hospital (Missouri, 25 beds, population of its town: 1,790). Three of the four subsequently closed. Per KFF Health News, Perez's broader EmpowerHMS / Hospital Partners empire touched 18 hospitals across 8 states; 12 filed for bankruptcy and 8 closed permanently.
Two caveats worth stating plainly: the Perez scheme was predominantly urine drug testing billed to private insurers, not Medicare CGx specifically; and no HHS-OIG report has yet published a specific percentage of CGx claims routed through Critical Access Hospitals. But the MAC-jurisdiction data is suggestive.
Novitas and First Coast Service Options are the Medicare contractors whose jurisdiction blankets most of Florida, Texas, Louisiana, Pennsylvania, Oklahoma, New Mexico, and the Mid-Atlantic. That is, approximately, the map of charged CGx fraud.
The policy side is less colorful but matters more for going-forward risk. Palmetto GBA's MolDx program, which administers molecular-diagnostic policy for 28 states, is the central actor. Its foundational LCD L36807 requires every molecular test to register for a "DEX Z-Code" before payment, which makes each test traceable. A series of MolDx LCDs tightened coverage through the pandemic. CMS's National Coverage Determination 90.2, finalized January 27, 2020, covers NGS testing for advanced cancer and was expanded to include germline testing for hereditary breast and ovarian cancer.
On the Hill, Senator Chuck Grassley (R-IA) wrote to HHS and CMS on September 26, 2019 — one day before Operation Double Helix — demanding accounting of deterrence steps. The Trump administration issued a Request for Information on laboratory-testing fraud with comments due March 30, 2026, explicitly soliciting regulatory ideas to address genetic-testing fraud.
The K3 differentiator is that the same entities tend to show up across datasets. A partial list of cross-references FraudGraph surfaces, to be pulled and verified in a companion analysis:
entity_master × leie
identifies affiliated entities that should also be blocked from
federal billing but may not yet be.entity_master × ppp against
the Double Helix and Rubber Stamp defendant rosters tests whether this
was a one-off or a pattern.cl_dockets table.CGx is not done, but it is harder than it used to be, so the ecosystem is mutating. Three places to watch.
The first is cardiovascular genetic testing, which has a Tier-2 code suite of its own and is less covered by tightening CGx LCDs. On February 20, 2026, a federal jury in the Northern District of Texas convicted Keith J. Gray — a former NFL player and laboratory owner — on nine counts in a $328 million cardiovascular-genetic scheme operated through Axis Professional Labs and Kingdom Health Laboratory, in which marketers allegedly pressured patients' primary-care physicians to sign pre-filled orders.
The second is pharmacogenomic (PGx) testing, particularly in pain-management and addiction-treatment populations — the Millennium Health archetype — where clinical-utility evidence is thinner than in oncology. DOJ has flagged percentage-based PGx marketing as a continuing concern.
The third is the expanded prenatal and hereditary cancer space (BRCA/HBOC, Lynch syndrome, panels of uncertain significance). NCD 90.2's 2020 expansion to germline testing for HBOC created real clinical value and a new category of adjacent billing to watch. The one-BRCA-test-per-lifetime rule is routinely abused, per law-firm roundups of Q4 2025 enforcement.
All dollar figures and enforcement events are sourced to primary government documents — DOJ Office of Public Affairs press releases, HHS-OIG audit reports (A-09-20-03027, A-09-22-03010, OEI-09-25-00330), the SEC's EDGAR filings (Progenity 8-K, July 2020), and CMS Medicare Coverage Database LCDs — with inline links for every claim. The 2018 and 2024 Part B lab spending totals ($7.6B and $8.4B) and the 18%→43% genetic-test share come directly from OIG OEI-09-25-00330 (January 2026). The four marquee docket numbers (Patel 9:19-cr-80181 flsd; Satary 2:19-cr-00197 laed; Schena 5:20-cr-00425 cand; Gray 3:24-cr-00250 txnd) were verified against FraudGraph's CourtListener-derived docket table. No attempt was made to name or quantify entities that lack public charges, convictions, or FCA settlements. K3 Analytics cross-program linkages (FraudGraph entity resolution against PPP, LEIE, and Open Payments) are described for context but are not yet run at the entity level for this piece; those analyses will follow.