Many physicians and other healthcare providers refer a high volume of patient specimens to third party clinical laboratories every day. The Office of the Inspector General (OIG) for the U.S. Department of Health and Human Services recently issued a Special Fraud Alert that addresses these relationship between labs and physicians.
The OIG’s Alert focuses on laboratories that may be violating the Federal Anti-Kickback Statute (AKS) in an effort to win business from referring physicians. OIG’s chief concern is that physicians will do business with the lab that pays the most, rather than the best lab, and that physicians will order tests that are not medically necessary, particularly if the payment arrangement is tied to the number of referred tests.
The OIG focused on two types of arrangements that they fear pose a substantial risk of fraud and abuse, including (1) specimen collection and processing, and (2) registry arrangements.
Blood-Specimen Collection, Processing, and Packaging Arrangements (OIG notes this also applies to urine specimen and buccal swabs)
Physicians’ offices often collect, process, and ship patient specimens to clinical laboratories that offer diagnostic testing. The process for storing and shipping this sensitive material may include centrifuging the specimen, keeping it at a certain temperature, and packaging the specimen. Some diagnostic laboratories enter into arrangements with physicians to compensate them for the time and effort involved in this process. The OIG alert states that certain characteristics of a specimen processing arrangement may violate the anti-kickback statute.
Medicare already reimburses physicians for processing and packaging specimens for transport to a clinical laboratory through a bundled payment, so the OIG is concerned about the potential that physicians will be paid twice. For example, if the physician already receives a payment from Medicare, additional payments may demonstrate intent to violate the Anti-Kickback Statute, even if those payments are "fair market value."
OIG's specific factors include:
- Payment that exceeds fair market value for services actually rendered by a physician;
- Payment for services that are covered by a third party, such as Medicare;
- Payment made on a per-specimen basis for more than one specimen collected in a single patient encounter, or on a per-test, per-patient, or other basis that takes into account the volume or value of referrals;
- Payment is offered on the condition that the physician order either a specified volume or type of tests or test panel, especially if the panel includes duplicative tests (e.g., two or more tests performed using different methodologies that are intended to provide the same clinical information), or tests that otherwise are not reasonable and necessary or reimbursable.
- Payment is made to the physician or the physician’s group practice, despite the fact that the specimen processing is actually being performed by a phlebotomist placed in the physician’s office by the laboratory or a third party.
Second, the OIG focuses on a scenario in which laboratories establish databases to collect data on patients who have undergone or who may undergo certain tests performed by the laboratories, known as "registries" or "observational outcomes databases." OIG notes that these registry arrangements may have legitimate purposes to advance clinical research or provide other benefits, but often involve payments from the laboratories to the physicians for duties such as submitting data, answering patient questions, or reviewing reports.
“Registry Arrangements may induce physicians to order medically unnecessary or duplicative tests, including duplicative tests performed for the purpose of obtaining comparative data, and to order those tests from laboratories that offer Registry Arrangements in lieu of other, potentially clinically superior, laboratories,” OIG states.
The Special Fraud Alert provides several examples of characteristics of a registry arrangement that may signal a kickback agreement, including where:
- The laboratory requires, encourages, or recommends that physicians who enter into Registry Arrangements perform the tests with a stated frequency (e.g., four times per year) to be eligible to receive, or to not receive a reduction in, compensation.
- The laboratory collects comparative data for the Registry from, and bills for, multiple tests that may be duplicative (e.g., two or more tests performed using different methodologies that are intended to provide the same clinical information) or that otherwise are not reasonable and necessary.
- Compensation paid to physicians pursuant to Registry Arrangements is on a per-patient or other basis that takes into account the value or volume of referrals.
- Compensation paid to physicians pursuant to Registry Arrangements is not fair market value for the physicians’ efforts in collecting and reporting patient data.
- Compensation paid to physicians pursuant to Registry Arrangements is not supported by documentation.
- The laboratory offers Registry Arrangements only for tests (or disease states associated with tests) for which it has obtained patents or that it exclusively performs.
- When a test is performed by multiple laboratories, the laboratory collects data only from the tests it performs.
- The tests associated with the Registry Arrangement are presented on the offering laboratory’s requisition in a manner that makes it more difficult for the ordering physician to make an independent medical necessity decision with regard to each test for which the laboratory will bill (e.g., disease-related panels).
Some final notes, worth considering:
First, by releasing this Fraud Alert, the OIG has signaled that it views these referral arrangements as "inherently suspect."
Second, perhaps most notably in its alert, the OIG cautioned that even arrangements performed on non-Federal healthcare program (FHCP) patients are not in the clear. The OIG has addressed this before in what they deem impermissible “swapping arrangements.” Accordingly, compensation for specimen collection or data registry services for non-FHCP patients may be scrutinized by the OIG as “disguised” remuneration for FHCP business.
Third, as noted above, referral arrangements do not have to be in cash to qualify as illegal remuneration under the AKS. Labs could offer free or reduced-price supplies or other in-kind benefits.
Finally, if the arrangement violates the AKS, both parties to the transaction are criminally liable. An arrangement that violates the AKS may also violate the False Claims Act.