OIG’s New Fraud Alert: Improper Payments From Labs to Docs

The Office of the Inspector General (OIG) of the U.S. Department of Health and Human Services (HHS) released a special fraud alert (Alert) in June concerning suspect arrangements between laboratories and physicians that raise Anti-Kickback statute (AKS) concerns.

Specimen Processing Arrangements

In this newly published Alert, the OIG discusses two compensation arrangements between laboratories and physicians. The first arrangement concerns payments made by laboratories to physicians for services related to the collection, processing and packaging of patients’ specimens, termed  “Specimen Processing Arrangements” by the OIG.

The OIG is zeroing in on such arrangements between laboratories and referring physicians because Medicare already reimburses physicians for specimen collection, packaging and processing. For example, Medicare pays a specimen collection fee of $5 for samples collected from individuals in skilled nursing facilities and for specimen collected by laboratories on behalf of home health agencies. Medicare also pays a specimen collection fee of $3 for all other samples. Additional payments from laboratories to referring physicians, says the OIG, has the potential of inducing referral sources to order more tests or order unnecessary tests thus increasing costs to the Federal health care system.

By statute, whether an AKS violation occurs depends on the intent of the parties. However, the OIG considers the statute violated even if only one purpose of the payment is to induce or reward referrals of the Federal health care program business. “This is true,” noted the OIG in the Alert, “regardless of whether the payment is fair market value for services rendered.” If, however, a payment exceeds fair market value or is for a service for which the physician is reimbursed by a third party, then, according to the OIG, the probability that the payment is for an illegitimate purpose is increased.

Other hallmarks of payments for an illegitimate purposes, advises the OIG, include payments to a physician despite a laboratory’s phlebotomist performing specimen collection at the physician’s office or payments made directly to a physician rather than to the group practice. According to the OIG, analogous arrangements could also implicate AKS concerns. For example, laboratories paying physicians to collect and package buccal swabs or urine specimens and laboratories that provide free or below market value point-of-care urine testing cups to providers who use cups to perform billable in-office testing, could raise similar AKS concerns.

Registry Arrangements

The second questionable practice addressed in the OIG’s Alert  is “Registry Arrangements,” payments made by laboratories to physicians for duties such as submitting patient data to be incorporated into Registries, answering patient questions about a Registry, and reviewing Registry reports. According to the OIG, such databases are being established — either directly or through an agent — for purportedly research purposes that promote treatment and provide physicians with clinical knowledge for patients with similar disease profiles, as well as provide other benefits to physicians.

Such Registry Arrangements concern the OIG because they may induce physicians to order medically unnecessary or duplicative tests, including duplicative tests performed for the purpose of obtaining comparative data, or induce physicians to order those tests from laboratories that offer Registry Arrangements instead of other, potentially superior laboratories.

The OIG provided examples of certain problematic Registry Arrangements. They included, for example, laboratories that require, encourage or recommend physicians who enter into Registry Arrangements to perform tests with a stated frequency, compensating physicians on a per-patient basis (or other basis that takes into account the value or volume of referrals), laboratory collecting comparative data for the Registry and billing for multiple tests that may be duplicative, or compensating physicians above fair market value for the physician’s efforts in collecting and reporting data, or other similar arrangements. Another questionable practice is presenting a referring physician with requisition forms that make it more difficult for the ordering physician to exercise independent medical necessity judgment with regard to each test for which the laboratory will bill. This latter practice has long concerned the government (See OIG’s Compliance Program Guidance for Clinical Laboratories (August 24, 1998, 63 FR 45076)).

Carve-Outs Still a No-No

The OIG again reminded stakeholders of its long-standing position that arrangements seeking to “carve out” the Specimen Processing Arrangements or the Registry Arrangements to apply only to non-Federal health care program patients are frowned upon. Such arrangements may “implicate the anti-kickback statute and may violate it by disguising remuneration for Federal health care program business through the payment of amounts purportedly related to non-Federal health care program business.”

Penalties for AKS Violation

The AKS is a criminal statute that carries with it, in addition to fines, the possibility of imprisonment. The OIG can also impose administrative remedies, including exclusion from the Medicare program and civil money penalties. Since the AKS applies to both sides of an arrangement, the lesson for parties is to carefully scrutinize any such arrangements before signing on the dotted line.

If you have questions about the OIG, the special fraud alert, a specific arrangement or have other legal questions, please contact us here.