The Advanced Pathology Solutions lawsuit is a federal case the Little Rock pathology lab filed against the Department of Health and Human Services and the Centers for Medicare and Medicaid Services in March 2025, challenging a Medicare payment suspension that had frozen more than $9 million in payments to the company. The case settled in June 2026 on terms that have not been made public. It ran alongside a separate $4.75 million False Claims Act settlement paid by one of APS’s client practices over an alleged kickback arrangement involving APS.
Why CMS Suspended APS’s Payments
On July 26, 2024, CMS suspended all Medicare payments to APS through its Unified Program Integrity Contractor, the third-party investigator the agency uses to flag potential fraud. CMS cited “credible allegations of fraud,” pointing to a list of five claims it characterized as billing for medically unnecessary services and a single sentence alleging that APS provided unspecified services with the intent to induce referrals.1UniCourt. Advanced Pathology Solutions PLLC v. US Department of Health and Human Services et al
APS responded on August 16, 2024, arguing the flagged claims were medically justified and its referral relationships complied with federal law. According to the company, CMS never requested additional records, never conducted interviews, and never engaged with the substance of the response. The agency’s only communication was that “the matter continues to be under investigation.”1UniCourt. Advanced Pathology Solutions PLLC v. US Department of Health and Human Services et al
By the time APS sued, the suspension had run 228 days. CMS had withheld more than $9 million for services APS said it had already delivered. Medicare accounted for roughly 40% of the company’s revenue, so the freeze cut deep.1UniCourt. Advanced Pathology Solutions PLLC v. US Department of Health and Human Services et al
What APS Argued in Court
APS filed suit on March 11, 2025, in the United States District Court for the Eastern District of Arkansas. The case, Advanced Pathology Solutions PLLC v. Kennedy (No. 4:25-cv-229-DPM), named HHS Secretary Robert F. Kennedy and the CMS Administrator as defendants in their official capacities. Judge D.P. Marshall Jr. was assigned.2Leagle. Advanced Pathology Solutions PLLC v. Kennedy
The company sued under the Administrative Procedure Act, calling CMS’s conduct “unfair, unlawful, and unconstitutional.” It asked the court either to lift the suspension through injunctive or declaratory relief, or to force CMS to issue a final determination by a fixed deadline so APS could formally challenge any adverse findings. It also sought damages for the financial harm.1UniCourt. Advanced Pathology Solutions PLLC v. US Department of Health and Human Services et al
At the center of the complaint was a due process argument. APS said it had been cut off from its largest revenue source for months without meaningful notice, without a fair opportunity to contest the suspension, and without any indication of when the process might end. The company described the suspension as indefinite, with “no end in sight.”1UniCourt. Advanced Pathology Solutions PLLC v. US Department of Health and Human Services et al
That kind of challenge is difficult ground for any provider. Under federal regulations, CMS can suspend Medicare payments on “credible allegations of fraud” without a formal fraud finding and without prior notice if it believes notice would put Medicare funds at risk.3CMS.gov. CMS Program Integrity Manual No administrative appeal is specifically designed for contesting the suspension itself.4Foley & Lardner LLP. Medicare Payment Suspensions Emerge as a Key Tool in Federal Anti-Fraud Efforts
How the Case Ended
The case moved through more than a year of litigation. On June 9, 2026, Judge Marshall ordered an in-person status conference for June 17, requiring one lawyer from each side to appear in Little Rock.5Justia Dockets. Advanced Pathology Solutions PLLC v. US Department of Health and Human Services et al It never happened. On June 12, 2026, the parties filed a joint notice of settlement, and the court terminated the conference three days later.6PACER Monitor. Advanced Pathology Solutions PLLC v. US Department of Health and Human Services et al The terms of the settlement have not been publicly disclosed.
The Atlanta Gastroenterology Settlement Running in the Background
While APS was litigating its suspension, a separate federal action pointed at the sort of business arrangement that appears to have drawn CMS’s attention. On February 27, 2026, the Department of Justice announced that Atlanta Gastroenterology Associates had agreed to pay $4.75 million to resolve False Claims Act allegations involving an illegal kickback scheme with APS and billing for medically unnecessary testing.7U.S. Department of Justice. Gastroenterology Practice Agrees to Pay $4.75M to Settle Allegations of Kickbacks and Unnecessary Medical Testing Services
According to the government, the arrangement ran from roughly May 2017 to May 2020. APS is alleged to have helped AGA build and operate an in-house pathology lab inside AGA’s offices. AGA employed histology technicians to prepare and stain tissue slides and billed Medicare and other insurers for that work, known as the technical component. In return, AGA sent all its pathology interpretations, the professional component, exclusively to APS, which billed separately for that work.7U.S. Department of Justice. Gastroenterology Practice Agrees to Pay $4.75M to Settle Allegations of Kickbacks and Unnecessary Medical Testing Services
The DOJ called that unlawful remuneration under the Anti-Kickback Statute, which prohibits offering or receiving anything of value in exchange for referrals of services paid by federal healthcare programs. The government also alleged that AGA performed and billed for medically unnecessary special stains through a “blanket or reflex ordering process” that ran additional stains automatically, without a pathologist first reviewing the routine stain to see whether more testing was warranted and without documented justification in the patient’s record.7U.S. Department of Justice. Gastroenterology Practice Agrees to Pay $4.75M to Settle Allegations of Kickbacks and Unnecessary Medical Testing Services AGA ended its relationship with APS around May 2020.8Clinical Lab Products. Gastroenterology Practice Settles False Claims, Kickback, Unnecessary Testing The DOJ settlement notes that the claims are allegations only and that there has been no determination of liability.
The setup described in the AGA settlement closely tracks a service APS still markets. The company advertises a “Gastroenterology Lean Lab” or “TC Lab” program that helps medical practices stand up in-office pathology capabilities, describing it as a way to bring “pathology directly into your practice.”9APS Lab Group. Advanced Pathology Solutions In a September 2023 advisory opinion, the HHS Office of Inspector General flagged a comparable arrangement in which a laboratory operator purchased technical components from other labs, warning it could violate the Anti-Kickback Statute where the operator could perform the work more efficiently in-house, which suggested the arrangement’s purpose was to induce referrals. OIG has long maintained that even fair-market-value payments can violate the statute if one purpose is to induce referrals of federal healthcare program business.10HHS Office of Inspector General. OIG Lab Safe Harbor Regulations and Guidance
Where APS Itself Stands
The $4.75 million was paid by AGA. The DOJ press release names APS as the party alleged to have provided the unlawful remuneration and received the exclusive referrals, but the public record does not show a separate settlement by APS or independent charges against it in that matter. APS has not been formally charged with fraud. The CMS payment suspension was an administrative action based on “credible allegations,” which is a lower threshold than a criminal charge or a civil complaint.1UniCourt. Advanced Pathology Solutions PLLC v. US Department of Health and Human Services et al