North Little Rock lab pays $30M to settle "unnecessary medical testing" allegations
KATV, By Andrew Mobley, June 18, 2026
LITTLE ROCK (KATV) – Advanced Pathology Solutions, a laboratory headquartered in North Little Rock, has agreed in a settlement to pay $30 million to the federal government to resolve allegations that it created a business model based on kickbacks and incentivizing fraudulent claims.
Federal attorneys say APS and its owners not only gave kickbacks to doctors to refer patients to their lab, but also implemented policies to order extra, unnecessary tests that were billable to Medicare.
The federal government became involved in 2020 after a whistleblower brought the allegations to light.
"There was a civil case that was filed in 2020 that had allegations going back to 2015. And so that matter worked and ultimately resulted in a referral to our office," said Jonathan Ross, U.S. Attorney for the Eastern District of Arkansas.
Advanced Pathology Solutions set up limited-purpose laboratories known as "lean labs" within gastroenterology clinics around the country. The arrangement allowed clinics to prepare biopsy specimens, a service they could bill for. In exchange for this and other benefits, clinics allegedly agreed to exclusively refer their patients to APS.
"It had dozens of laboratories across the country that wound up entering into this relationship with APS," Ross said.
According to emails quoted in the federal government's complaint against the North Little Rock laboratory, APS Director of Pathology Nancy Davis instructed other APS pathologists to find medical literature that could justify unnecessary additional testing, regardless of how minimal the justification was. When one pathologist asked Davis what to do if they determined a test was not justified, she responded, "We are just finding evidence to justify what we do. So don't do that."
Charts included in the federal complaint show that clinics participating in the APS lean labs model saw claims increase sharply after adopting the arrangement.
"That's a good indicator of the connection between what was previously medically unnecessary testing that has been agreed upon by the two entities this time to just make as much money as we can make. We don't care. We're just going to power through and get as many tests as we can get done," Ross told KATV.
The U.S. Department of Health and Human Services suspended Medicare payments to APS in 2024 amid a federal investigation.
"Those payments are held in escrow until all this investigation is resolved, but at least it basically stops the bleeding," Ross said. "The bottom line is if someone approaches your medical industry business with a new business model that says, 'we're going to be able to make a lot more money if we start doing business this way instead of that way,' you should run, not walk from that opportunity."
As part of the settlement, APS must enter into a five-year Corporate Integrity Agreement with the U.S. Department of Health and Human Services Office of Inspector General. The agreement includes increased compliance oversight, audits, employee training and reviews of physician referral relationships.
Medicare payments to Advanced Pathology Solutions will resume in the near future once the settlement takes effect.
The claims resolved by the settlement are allegations only, and there has been no determination of liability. The case against APS was civil, not criminal.
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