OIG Issues Special Fraud Alert: Lab Payments to Referring Physicians

July 23, 2014

Physicians who maintain financial arrangements with laboratories to which they refer should be aware of a new special fraud alert.

Physicians who maintain financial arrangements with laboratories to which they refer should be aware of a new special fraud alert issued by the Office of Inspector General (OIG) on June 25. The OIG’s alert identified two arrangements that could constitute illegal remuneration under the anti-kickback statute (AKS): (1) Blood-specimen collection, processing, and packaging arrangements, and (2) registry arrangements.
   
Blood specimen collection, processing, and packaging arrangements
Specimen processing arrangements are arrangements where clinical laboratories provide payments to physicians to collect, process, and package patients’ specimens.  In certain circumstances, Medicare allows for these types of arrangements in consideration for a nominal specimen collection fee.  Billing of this kind is acceptable under a twofold test: (1) it is the accepted and prevailing practice among physicians in the locality to make separate charges for drawing or collecting a specimen, and (2) it is customary practice of the physician performing such services to bill separate charges for drawing or collecting the specimen.  Nevertheless, OIG’s alert raised the issue of appropriate payments in these situations.

Here are some arrangements that may be problematic:
• Payment exceeds fair market value for services actually rendered by the party receiving the payment.
• Payment is for a service for which payment is already made by a third party, such as Medicare.
• Payment is made directly to the ordering physician rather than the group practice, which may bear the actual cost of collecting and processing the specimen.
• Payment is made per-specimen, 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, including duplicative tests, or tests that otherwise are not reasonable and necessary or reimbursable.
• Payment is made to physician or the physician’s group practice, despite the fact that specimen processing is performed by the laboratory or a third-party phlebotomist.

Registry arrangements
Clinical laboratories are also establishing registry arrangements by collecting data on the demographics, presentation, diagnosis, treatment, outcomes, or other attributes of patients who have undergone, or who may undergo, certain tests. Typically, registry arrangements involve payments from laboratories to physicians for certain specified duties, including submitting patient data into the registry, answering patient questions about the registry, and reviewing registry reports.

Although AKS does not prohibit laboratories from engaging in legitimate research activities, OIG is skeptical of arrangements that may induce physicians to order medically unnecessary and duplicative tests.

Here are some possible arrangements that may evidence unlawful purposes:
• The laboratory requires, encourages, or recommends that physicians who enter into registry arrangements perform the tests with a stated frequency to be eligible to receive compensation or to avoid a reduction in compensation.
• The laboratory collects comparative data for the registry from, and bills for, multiple tests that may be duplicative or that otherwise are not reasonable and necessary.
• Pursuant to registry arrangements, compensation paid to physicians is on a per-patient or other basis that takes into account the value or volume of referrals.
• Pursuant to registry arrangements, compensation paid to physicians is not fair-market value for the physicians’ efforts in collecting and reporting patient data.
• Pursuant to registry arrangements, compensation paid to physicians is not supported by properly submitted documentation, memorializing the physicians’ efforts.
• The laboratory offers registry arrangements only for test for which it has obtained patents or that it exclusively performs.
• The tests associated with the registry arrangement are offered by the laboratory in a manner that makes it difficult for the physician to make an independent medical necessity decision. (e.g., disease-related panels).

In its alert, the OIG cautioned that even arrangements performed on non-Federal healthcare program patients are not above review. Therefore, physicians that engage in the arrangements described above with labs to which they refer any patients should check with counsel to ensure compliance.