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On June 25, 2014, the Office of Inspector General (OIG) issued a special fraud alert entitled “Laboratory Payments to Referring Physicians” which deals specifically with laboratories paying compensation to physicians and group practices for blood specimen collection, processing and packaging activities, as well as the submission of patient data to a database or registry.

The anti-kickback statute is implicated when remuneration is paid in order to induce or reward referrals for any items or services reimbursed by a federal health care program. The alert cautions against arrangements that improperly take into account the volume or value of referrals and that may induce a physician or physician group to use a particular laboratory or cause overutilization of testing services. The OIG highlights in this special fraud alert that certain arrangements are particularly suspect under the anti-kickback statute, including specimen collection, processing and packaging arrangements and registry payments. 

Specimen collection and processing

The OIG explains the risks associated with arrangements where a physician or physician group is paid by a laboratory for the collection, processing and/or packaging of specimens. Specimen collection is reimbursed by Medicare only in certain circumstances, including where is customary practice in the region and for that particular physician to charge for specimen collection separately. There are also separate CPT codes for processing and packaging specimens for transport to a laboratory. Since the laboratory payments to a physician or physician group for these services are often per-specimen or per-patient, the anti-kickback statute is implicated and the OIG cautions laboratories entering into these arrangements to consider, for purposes of determining fair market value, whether or not the physician is already compensated for the activity either through a bundled payment or through payments for overhead expenses. Certain characteristics that the OIG finds to be evidence that the arrangement may be unlawful include if:

  • The payments exceed fair market value, is calculated on a per-specimen or per-patient method, or is offered on the condition of a certain number of orders
  • The physician is already paid for the services by a third party, such as Medicare
  • The payments go directly to a physician rather than the group practice that actually bears the cost of the services or where the services are performed by someone placed in the office by the laboratory

Registry payments

Clinical laboratories have been getting involved more frequently in setting up and maintaining registries that collect patient data related to laboratory testing. The OIG states that there is the potential for improper arrangements in this context when the physicians or physician groups are paid to submit data into the registry which induces the physicians to order unnecessary or duplicative tests to submit more data to the registry. Certain characteristics that the OIG considers potentially unlawful include if:

  • The laboratory requires a certain number of tests in order to receive payment
  • The compensation is paid per-patient or in a manner that takes into account the volume or value of referrals, is not fair market value for the services rendered, or is not supported by documentation evidencing efforts
  • The research is limited to the laboratory's proprietary tests or only to the laboratory's patients
  • The physicians selected to participate in the registry are high volume referrers

Research activities like registries are not always improper and can be intended to promote and support clinical research and treatment, but appropriate documentation, including the review and approval of an Institutional Review Board, is important to document the lawful intent of the research.

The OIG noted that merely carving out Federal health care programs from these arrangements does not remove the risk because physicians typically minimize the number of laboratories they refer patients to in order to be more efficient or for convenience, so the arrangement may be intended to induce referrals even if Federal health care programs are carved out.

This latest fraud alert highlights the OIG’s suspicion of financial relationships between laboratories and physicians that involve either the provision of free or discounted goods or services or payments of more than fair market value for services. It is noted particularly that the relationship between a laboratory and a physician or physician group is of concern particularly because there is typically no input from patients in the selection of laboratories for tests. It is important when considering relationships between laboratories and physicians or physician groups to take into account the guidance from the OIG regarding areas of concern and to structure the arrangement in a way that complies with federal and state fraud and abuse laws.

For more information, please contact one of the attorneys listed below.

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