AMARILLO, TX – On February 27, 2026, the Department of Justice (“DOJ”) issued a press announcement stating that a Gastroenterology Practice agreed to pay $4.7M to settle allegations of Kickbacks and Unnecessary Medical Testing Services. The settlement provides valuable lessons to DME suppliers. The press release states:

“Atlanta Gastroenterology Associates located in Atlanta, Georgia, has agreed to pay $4.75 million to resolve allegations that it violated the False Claims Act by receiving kickbacks in exchange for referrals of gastrointestinal pathology services and by performing certain gastrointestinal pathology services that were not medically reasonable or necessary.

The United States alleged that beginning in approximately May 2017, Atlanta Gastroenterology Associates contracted with Advanced Pathology Solutions (APS), a pathology laboratory located in Little Rock, Arkansas, to construct and operate a limited-capacity pathology laboratory in Atlanta Gastroenterology Associates’ office. Atlanta Gastroenterology Associates received various benefits from APS in connection with the setup and ongoing operations of the in-house lab, in which histology technicians prepared and stained specimen sample slides and Atlanta Gastroenterology Associates billed Medicare and other insurers for the technical component of those services. In exchange, Atlanta Gastroenterology Associates agreed to exclusively refer patients to APS, which interpreted the slides and billed for the professional component of the services. The United States alleges that the benefits provided by APS to Atlanta Gastroenterology Associates were unlawful remuneration in exchange for patient referrals.

“Healthcare fraud has negative impacts for taxpayers and patients alike,” said Assistant Attorney General Brett A. Shumate of the Justice Department’s Civil Division. “This settlement reflects the Department’s commitment to protecting taxpayer money and ensuring that healthcare services paid for by for by federal healthcare programs are reasonable, necessary, and free from the influence of kickbacks.”

“As recent headlines across the country have made us all too aware, fraud against the American taxpayer through healthcare fraud is rampant,” said U.S. Attorney Jonathan D. Ross for the Eastern District of Arkansas. “We will continue working with our law enforcement partners to identify and eliminate fraud of every kind wherever we find it and also to seek the recovery of tax dollars that were wrongfully paid.”

“Federal health care programs rely on truthful billing and accurate medical documentation,” said Special Agent in Charge Jason E. Meadows of the U.S. Department of Health and Human Services Office of Inspector General (HHS-OIG) Dallas Regional Office. “This False Claims Act settlement underscores our commitment to safeguarding taxpayer dollars and maintaining public trust by holding providers accountable when they fail to meet those obligations. Providers who induce referrals by paying illegal kickbacks place an unfair burden on these programs, and we remain steadfast in working with our law enforcement partners to identify and address such conduct.”

Additionally, the United States alleges that Atlanta Gastroenterology Associates performed and billed for medically unnecessary special stains using a blanket or reflex ordering process in which special stains were ordered on an automatic basis, without a pathologist first reviewing a routine stain and determining whether additional special stains were needed for the particular patient, and without justification in the medical record for performing additional special stains. Atlanta Gastroenterology Associates and APS terminated their relationship in approximately May 2020.”

There are a number of lessons for DME suppliers:

• Making Quick Money/Making a Lot of Money – When a DME supplier encounters an arrangement that promises unusually fast profits or earnings far above historical norms, it is often a warning sign. These “too good to be true” opportunities frequently collapse, creating significant compliance and financial exposure for the supplier.
• Be Cautious of Marketers/Lead Generation Companies (“LGCs”)/Telehealth Companies – We’ve seen many DME suppliers and other health care providers get into trouble because they trusted marketers, LGCs, or telehealth companies. These groups reach out for one reason: they want a share of the money that flows to providers. They don’t have licenses or accreditation to lose—but you do. When the government comes knocking, the provider is the one on the hook, not the marketer. These companies have pushed everything from diabetic testing supplies to seat lifts, compounded creams, and orthopedic braces, and now they’re pushing RPM through software platforms. The message is straightforward: DME suppliers should be extremely cautious when any marketer, LGC, or telehealth company comes calling.
• Many Roads Lead to the FCA – Most DME suppliers understand the obvious forms of false claims, such as billing for items never delivered or misrepresenting what was provided. Unfortunately, many are unaware that claims tied to arrangements violating the AKS, Stark, the beneficiary inducement statute, or the telephone solicitation statute are also treated as false claims and carry the same level of risk.

• And This is Where Whistleblowers Come In – If a DME supplier is doing something it should not be doing; someone knows about it. That “someone” is normally an employee or ex-employee. Hopefully, the employee will address the problem with the supplier’s compliance department, and the compliance department will resolve it as the law requires. But the employee may hire an attorney who specializes in bringing whistleblower (or “qui tam”) lawsuits against providers/suppliers. In the lawsuit, the whistleblower becomes a “Relator.” The lawsuit is in the name of the Relator “and in the name of the United States.” The whistleblower suit is based on the FCA. The allegations in the lawsuit are that the DME supplier conducted activities that violated one of the above-mentioned statutes and that the resulting claims are “false claims.” Whistleblower lawsuits are civil, not criminal. However, many criminal cases arise from whistleblower lawsuits.

• Criminal Case – Resolve it Quickly – If a DME supplier finds itself the target of a criminal investigation, it needs to proactively work with the Department of Justice (“DOJ”) to resolve the case as quickly as possible. If the planets align just right, the criminal case will be resolved through a civil settlement. If the supplier is unable to convince the DOJ to reach a civil settlement, the supplier should work with the DOJ to develop a plea that, while unpleasant, the supplier can live with. It is much easier for a DME supplier to reach a plea agreement (that the supplier can live with) before an indictment is handed down. The punishment resulting from an agreed criminal plea will normally be much lighter than the punishment handed down after a jury conviction. The odds of being convicted in a federal health care fraud trial are extremely high. And so only in extraordinary circumstances should the DME supplier proceed to trial.
• Civil Case – Resolve it Quickly – The penalties under the FCA are massive. If a DME supplier goes to trial defending a civil whistleblower lawsuit in which the DOJ has intervened (i.e., taken over the case), and if the supplier loses, the judgment will be way more than the supplier can pay. Unless the supplier is sure it has good facts… and has the law on its side… the supplier needs to work proactively at the outset towards a settlement it can live with.

Jacque K. Steelman, Esq., is a member of the Health Care Group at Brown & Fortunato, PC, a law firm with a national healthcare practice based in Texas. She represents pharmacies, infusion companies, HME companies, manufacturers, and other healthcare providers throughout the United States. Steelman can be reached at (972) 684-5789 or [email protected].