Referring Clinical Lab Services Under the “In Office Ancillary” Exception

Physician referrals for clinical laboratory services are a common focus of federal regulatory and enforcement actions. Numerous statutes and their implementing regulations, including the Stark Law, Anti-Kickback Statute (AKS), and the Eliminating Kickbacks in Recovery Act (EKRA), may be implicated where a physician refers clinical lab services to an entity in which the physician has a financial interest. However, the “in-office ancillary” exception to the Stark Law provides an important exception.

The Physician Self-Referral Law, often referred to as the Stark Law, prohibits “physicians” (generally including MDs, DOs, dentists, optometrists, and chiropractors) from referring patients to receive “designated health services” payable by Medicare or Medicaid from entities with which the physician or an immediate family member has a financial relationship, unless an exception applies. Financial relationships include both compensation and ownership or investment interests. Designated health services include clinical laboratory services, PT and OT, DME, some imaging services, and several other services. Some of the most common exceptions to the Stark Law include the in-office ancillary exception, fair market value compensation, and bona fide employment relationships. CMS has also recently implemented exceptions related to value-based arrangements.

“In Office Ancillary” services are an exception to the Stark Law. Generally, under the “in office ancillary” exception, the Stark Law does not apply to services that (1) are performed by the referring physician, another physician in the same group practice, or an individual supervised by the referring physicians or another physician in the same group practice; (2) are performed in the same building as the referring physician or their group practice offers services or in another centralized location; and (3) are billed by the performing physician, the supervising physician, their group practice, or a subsidiary that is wholly owned by the group practice.

Under this exception, if all regulatory requirements are met, a physician in a group practice may generally refer clinical lab services to a clinical lab that is wholly owned by the physician’s group practice. Under this arrangement, the clinical lab may also generally bill under its own billing number. However, it is important to note that there are many regulatory requirements that must be satisfied, such as restrictions on the location that the group practice can use for the clinical lab services. Further, “group practice” has a specific and complex definition, and not all physician practices or entities will meet it. An experienced healthcare attorney can assist health care providers in understanding these requirements and in structuring arrangements under the Stark Law, AKS, and EKRA.

For over 35 years, Wachler & Associates has represented healthcare providers and suppliers nationwide in a variety of health law matters, and our attorneys can assist providers and suppliers in understanding billing and payment arrangements. If you or your healthcare entity has any questions pertaining to healthcare compliance, please contact an experienced healthcare attorney  at 248-544-0888 or wapc@wachler.com