Health Law Daily Wrap Up, QUI TAM (WHISTLEBLOWER SUITS)—D.N.J.: Court grants motion to dismiss COVID-19 testing false claims action, (May 1, 2026)

By Sara Cracau, J.D.

A district court granted a motion to dismiss a false claims action as the complaint failed to sufficiently allege that the defendants knew the claims were false.

A federal district court in New Jersey has granted the motion to dismiss of various providers of laboratory services and a taxi service in a false claims action arising from alleged violations of the federal False Claims Act (FCA) finding that even though there may have been a showing that the offending parties accepted kickbacks, that did not necessarily allege that they knew that the claims were false. The action involved allegations of filing false claims for employee COVID-19 testing under the uninsured program when such employees had coverage through their employers. The court found that the amended complaint failed to adequately plead that the moving parties acted knowingly because the amended complaint lacked any specific and non-conclusory information regarding the moving parties’ roles in the alleged scheme (U.S. ex rel. McKinsey v. Lab Elite, LLC, No. 21-20528 (D.N.J. Apr. 22, 2026)).

Alleged scheme. Providers of laboratory services allegedly approached employers to convince them to partner with a particular laboratory to provide COVID-19 testing to their employees and explained to the employers that testing would come to “zero cost to the employer, the employee, and the employee’s insurance” and the charge for the testing would be covered by federal funding. These providers did not indicate that funding would come from the federal COVID-19 Claims Reimbursement to Health Care Providers and Facilities for Testing, Treatment, and Vaccine Administration for the Uninsured Program as employees being tested were insured by their employers and, therefore, did not qualify for reimbursement under the uninsured program.

The amended complaint alleged that the providers knew this fact and sought to conceal it from their clients. The providers encouraged employees to mark on the program’s order forms that they had no insurance. The lab partner performed the tests and submitted claims to the uninsured program with the accompanying mandatory attestations which were designed to confirm compliance. The lab partner submitted claims through the Health Resources and Services Administration’s portal seeking $206,041,945 in reimbursement and received $83,578,387.89. The funds were thereafter allegedly distributed in the form of kickbacks to the various providers. One of the parties against whom the action was brought sought to recruit the relator to join the alleged scheme and emphasized his willingness to pay kickbacks in exchange for referring employers to the lab partner, citing a check worth $390,805 sent to a transportation service as evidence of the potential profits to be gained from the relator’s participation in the alleged scheme.

The relator alleged that the providers conspired to (1) submit claims to the government seeking reimbursement for medical services that were provided in return for illegal kickbacks; (2) submit claims for medical services that were billed but not actually provided; and (3) submit claims for medical services provided to patients who were not eligible to receive federal reimbursement. The providers and transportation service filed a motion to dismiss.

FCA. The court granted the providers’ motion to dismiss finding that although the amended complaint may have adequately alleged that the various providers and transportation service accepted kickbacks, it did not necessarily allege that they knew the claims were false. The FCA imposes liability on parties other than “actual presenters” so if a non-presenting party’s conduct is a “substantial factor” in causing another to file a false claim, that non-presenting party may be found to have caused the filing. In addition, claims that are submitted in violation of the Anti-Kickback Statute (AKS) are deemed fraudulent for purposes of the second element of the FCA. Finally, a relator must allege that the defendants “knowingly and willingly solicited or received remuneration in return for, or to induce, referrals to a person or entity for services covered by [any] federally funded healthcare program.” The FCA does not require “proof of specific intent to defraud” but, rather, knowledge may be shown by actual knowledge, deliberate indifference, or reckless disregard for the truth. For purposes of the pleading stage, “a showing that leads to a strong inference that Defendant knew of the [scheme]” will suffice.

The court found that the amended complaint failed to adequately plead that the moving parties acted knowingly for the purposes of the FCA because the amended complaint lacked any specific and non-conclusory information regarding the moving parties’ roles in the alleged scheme. Furthermore, it did not provide a strong inference that a number of the providers or the transportation service had actual knowledge of the scheme, were deliberately indifferent to it, or demonstrated reckless disregard towards the scheme’s existence. The court rejected the various arguments put forth by the relator to satisfy Rule 12(b)(6). The relator’s argument failed to include any reference to the moving parties. In addition, the argument that the amended complaint supported the reasonable inference that the moving parties knew the referrals sent to the lab partner were being submitted to the uninsured program for reimbursement similarly failed because it relied on the conduct of the other providers and their conduct was not mentioned. Alleging an AKS violation in the amended complaint did not cure the failure to show knowledge of the falsity of the claims because it did not show that the providers knowingly caused the submission of a false claim to the United States.

The case is No. 21-20528.

Judge: Martini, W.

Attorneys: Achchana Ranasinghe (Brown LLC) for the U.S. Daniella Gordon (McCarter & English LLP) for Lab Elite LLC.

Companies: Lab Elite LLC

Cases: CaseDecisions Covid19 FCANews GeneralNews LaboratoryNews QuiTamNews NewJerseyNews