The Office of the Inspector General (OIG) for the Department of Health and Human Services recently issued a Special Fraud Alert regarding laboratory payments to referring physicians. The Special Fraud Alert reaffirms OIG’s long-standing position that the anti-kickback statute is violated when a clinical laboratory pays a physician for services or provides anything of benefit to the physician, if even one purpose of the payment or benefit is to induce referrals of federal health care program business.

In addition, the OIG addresses two evolving targets: arrangements that “carve out” federal health care programs with the hope of avoiding the federal anti-kickback statute, as well as registry arrangements. This notice should serve as a warning to laboratories using such arrangements to examine their practices and consider whether they should be restructured. The release supplements previous guidance and advisory opinions on the topic, including the 1994 Special Fraud Alert, the OIG Compliance Program Guidance for Clinical Laboratories, and OIG Advisory Opinion No. 05-08 (June 6, 2005).

Blood-Specimen Collection, Processing, and Packaging Arrangements

Certain clinical laboratories that offer diagnostic testing do not have free-standing sites where a patient can have his or her blood drawn and sent to the laboratory for testing. In these situations, the referring physician must collect, process, and prepare the specimen for shipment to the clinical laboratory. The services required of the physician's office 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 (Specimen Processing Arrangements). The OIG states that certain characteristics of a Specimen Processing Arrangement may evidence the requisite intent to violate the anti-kickback statute. Such evidence might 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 third parties include Medicare; OIG states that Medicare reimburses physicians for process and handling services through a bundled payment.)
  • 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 conditioned on a specified volume of tests or test panel, especially if the panel includes duplicative tests
  • Payment made to the physician or group practice, even though the specimen collection is performed by an in-office phlebotomist

Perhaps most informative is the OIG’s caution that Specimen Processing Arrangements that carve out federal health care program beneficiaries from a questionable arrangement might still violate the anti-kickback statute if they are merely an attempt to disguise payment for federal health care business. Noting that physicians tend to send all of their tests to one lab for convenience and administrative efficiency, the OIG believes that physicians may still be tempted to refer federal health care program business to the offering laboratories. This is not the first time that the OIG has warned that carve-out arrangements may be at risk under the anti-kickback statute. (See OIG Adv. Op. No. 12-06 (May 25, 2012) and OIG Adv. Op. No. 13-03 (June 7, 2013)).

Registry Payments

The OIG also addresses the practice of some clinical laboratories in establishing, coordinating, and maintaining a database of the demographics, presentation, diagnosis, treatment, outcomes, and other characteristics of patients that have undergone certain tests by the clinical laboratory. The clinical laboratory pays the physician for collecting and reviewing data and answering patient questions (Registry Arrangements).

The OIG states that Registry Arrangements may effectively induce physicians to order medically unnecessary or duplicative testing, or to refer to laboratories that offer Registry Arrangements in lieu of more clinically superior laboratories. The OIG sets forth a list of some of the characteristics that might be evidence of an unlawful purpose, such as:

  • A certain testing frequency is required to be eligible for Registry Arrangements.
  • Multiple tests are ordered to compile comparative data on a patient.
  • Compensation is on a per-patient basis, varies with the volume or value of referrals, or is not fair market value for the services.
  • Documentation of the services provided is lacking.
  • Registry Arrangements are only offered for proprietary tests or disease states associated with those tests.
  • Tests are presented in a panel format on a requisition form, making it difficult for the physician to make an independent decision about which tests are medically necessary.

With this Special Fraud Alert, the OIG has signaled that these arrangements will enjoy intense scrutiny and that the government views these them as "inherently suspect." Clinical laboratories utilizing these arrangements should take a close look at any payments to referring providers. If the arrangement does not already fit within an anti-kickback safe-harbor, the laboratory should seek counsel on how to restructure such arrangements in light of the Special Fraud Alert.

Attorneys in Ballard Spahr’s Health Care Group represent clients across the health care industry, including clinical laboratories, pharmacies, hospitals, long-term care facilities, insurance companies, and pharmaceutical manufacturers. Our attorneys counsel clients on regulatory, compliance, transactional, financing, benefits and compensation, and labor and employment matters.

The firm’s White Collar Defense/Internal Investigations Group has experience defending companies in highly regulated industries such as health care against government enforcement actions. Our attorneys handle virtually every type of criminal case, including health care fraud.

For more information, please contact Jean C. Hemphill at 215.864.8539 or hemphill@ballardspahr.com or Beth Moskow-Schnoll at 302.252.4447 or moskowb@ballardspahr.com.


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