The $328M Genetic Testing Scam: How Medicare Became an ATM for Fake Labs

Published February 21, 2026 · OpenMedicare Investigation

The Playbook

The scheme was elegant in its simplicity. Gray owned two labs — Axis Professional Labs and Kingdom Health Laboratory — that billed Medicare for "medically unnecessary genetic tests designed to evaluate the risk of various cardiovascular diseases." The tests were real. The medical necessity was not.

Here's how it worked:

1. Recruit patients. Marketers would seek out Medicare beneficiaries — often at health fairs, senior centers, or through telemarketing — and collect their personal information and DNA samples (usually a cheek swab).
2. "Doctor chase." Once they had a patient's name, they'd find out who their primary care doctor was and pressure the physician into signing off on genetic test orders.
3. Bill Medicare. The labs would submit claims for expensive cardiovascular genetic panels — often $10,000+ per test — that the patient didn't need and the doctor barely reviewed.
4. Pay kickbacks. The marketers and referring doctors received illegal kickbacks, disguised as "marketing hours," "software expenses," or fake loans.

Medicare paid roughly $54 million of the $328 million billed. Gray was convicted of conspiracy, five counts of violating the Anti-Kickback Statute, and three counts of money laundering. He faces up to 10 years on each count.

A Pattern, Not an Anomaly

Genetic testing fraud has become one of the DOJ's top enforcement priorities. The pattern is nearly identical across dozens of prosecuted cases:

• 2019 "Operation Double Helix" — DOJ charged 35 defendants in $2.1 billion genetic testing fraud, the largest healthcare fraud enforcement action at the time
• 2020 National Takedown — Additional genetic testing fraud charges as part of the $6 billion, 345-defendant sweep
• 2025 National Takedown — $14.6 billion in fraud charged against 324 defendants, with genetic testing still featuring prominently

The common thread: Labs that bill astronomical amounts for tests that patients never asked for, doctors never meaningfully ordered, and whose results were rarely — if ever — used to change patient care.

What the Data Shows

In our Medicare data (2014-2023), laboratory billing shows some of the most extreme outliers in the entire dataset. Clinical laboratories consistently appear on our Enhanced Watchlist, often with:

• Extremely high code concentration (billing the same genetic test codes repeatedly)
• Massive patient volumes that suggest marketing-driven recruitment
• Geographic clustering in fraud hotspots like South Florida, Texas, and Southern California
• Sudden billing spikes — labs that appear out of nowhere billing millions

Our top lab by total payments — Exact Sciences Laboratories in Wisconsin — billed over $299 million across our dataset. But Exact Sciences is a legitimate publicly-traded company (maker of the Cologuard test). The suspicious labs are the ones you've never heard of, billing tens of millions from strip-mall locations.

Kaiser's $556M Settlement: Fraud at Scale

The same week as Gray's conviction, another massive Medicare fraud case made headlines. Kaiser Permanente is suing its own insurers for $95 million to offset a $556 million settlement in a whistleblower case alleging Kaiser systematically inflated patient diagnoses to boost Medicare Advantage payments.

The cases couldn't be more different in sophistication — Gray running a kickback scheme through Texas labs, Kaiser allegedly pressuring physicians to add unsupported diagnoses at one of America's largest healthcare systems. But they point to the same fundamental problem: Medicare's fee-for-service model creates financial incentives to bill more, not better.

The Bigger Picture

Medicare's Office of Inspector General estimates that improper payments cost the program over $50 billion annually. Genetic testing fraud alone has produced billions in false claims. And for every scheme that gets prosecuted, how many are still running?

That's exactly the question our "Still Out There" analysis tries to answer — using machine learning trained on confirmed fraudsters to find providers who match the same billing patterns.

Keith Gray will likely go to prison. But as long as Medicare pays labs $10,000 for a cheek swab without verifying medical necessity, the next Keith Gray is already setting up shop.