OIG Issues Special Fraud Alert Regarding Potentially Unlawful Laboratory Payments to Referring Physicians

On June 25, 2014, the U.S. Department of Health and Human Services Office of Inspector General (OIG) released a Special Fraud Alert (the Alert) regarding two kinds of compensation arrangements between clinical laboratories and referring physicians. The two arrangement types addressed by the Alert involve compensation paid by clinical laboratories to physicians for (1) blood-specimen collection, processing, and packaging and (2) submitting patient data to a registry or database. In the Alert, OIG recognized that these types of arrangements between physicians and labs create a considerable risk of fraud and abuse in violation of the Anti-Kickback Statute.

The specimen processing arrangements involve laboratories paying physicians to collect, process, and package patients’ blood specimens. The OIG noted that these arrangements are typically made on a per-specimen or per-patient-encounter basis. In the Alert, the OIG discussed that physicians are already allowed to bill Medicare a specimen collection fee and for processing and packaging specimens for transport.
As noted by the OIG, the Anti-Kickback Statute prohibits a laboratory from knowingly and willfully paying physicians for services if even one purpose of the payment is to induce or reward referrals. Although the Anti-Kickback Statute is intent-based, the OIG stated, “the probability that a payment is for an illegitimate purpose is increased, however, if a payment exceeds fair market value or it is for a service for which the physician is paid by a third party, including Medicare.”

In the Alert, OIG noted several characteristics of specimen processing arrangements that may be evidence of unlawful arrangements. Some examples are:

• Payment exceeds fair market value for services actually rendered by the party receiving the payment.
• Payment is for services for which payment is also made by a third party, such as Medicare.
• Payment is made directly to the ordering physician rather than to the ordering physician’s group practice, which may bear the cost of collecting and processing the specimen.
• Payment is made on a per-specimen basis for more than one specimen collected during 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.

OIG also discussed registry arrangements that may violate the Anti-Kickback Statute. Registry arrangements typically involve labs paying physicians for services such as submitting patient information to the registry and reviewing registry reports. OIG acknowledged that payment for such services may be permissible. However, the Alert emphasized that such registry arrangements could encourage physicians to order unessecary or duplicative tests, or to order tests from labs that offer registry arrangements instead of other labs which may offer clinically superior services.

The Alert noted many characteristics registry arrangements that may be evidence of unlawful activity including, but not limited to, the following:

• 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.

In light of the Special Fraud Alert, clinical laboratories and physicians should reassess their relationships and business arrangements to ensure compliance with all fraud and abuse laws. Wachler & Associates healthcare attorneys regularly counsel providers regarding the Anti-Kickback Statute, Stark Law and other federal and state fraud and abuse laws. If you or your healthcare entity have any questions regarding the Anti-Kickback Statute or Stark Law, or wish to have your arrangement reviewed by our experienced attorneys, please contact our health care lawyers at 248-544-0888 or wapc@wachler.com.