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OIG Special Fraud Alert Highlights Problems with Laboratory Payments to Physicians

July 22, 2014

On June 25, 2014, the U.S. Department of Health and Human Services Office of Inspector General (OIG) released a Special Fraud Alert addressing compensation offered and paid by laboratories to referring physicians for (i) blood specimen collection, processing and packaging arrangements, and (ii) submitting patient data to a registry or database.

Payment for Blood Specimen Collection, Processing and Packaging Arrangements

In the Special Fraud Alert, the OIG reports that it has become aware of arrangements where laboratories pay physicians, either directly or indirectly, to collect, process, and package patients’ blood specimens. Payments typically are made on a “per-specimen” or “per-patient” encounter basis and are commonly associated with expensive or specialized tests. The OIG is concerned that physicians are receiving double payment for these services. Double payment occurs when a physician is paid by a laboratory and is paid by a third party such as Medicare through receipt of a specimen collection fee or a bundled payment for the service. The OIG believes that these arrangements give rise to an inference of the parties’ intent to violate the federal Anti-Kickback Statute even if the payment reflects fair market value. Other characteristics of suspicious arrangements include:

  • Payments that exceed fair market value for services actually rendered by the party receiving payment;
  • Payment made directly to the ordering physician rather than the physician’s group practice, which may bear the cost of collecting and processing the specimen;
  • Payment 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 conditioned on the physician ordering a specified volume or type of tests or test panel, especially if the panel includes duplicative tests that are not reasonable, and necessary or reimbursable; and
  • Payment made to the physician or to 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.

Payments for Submitting Patient Data to a Registry or Database

Second, the OIG reports that it has become aware of arrangements where laboratories are establishing, coordinating, or maintaining databases, either directly or through an agent, that collect and maintain demographics, diagnosis, treatment, outcomes or other attributes of patients who have undergone certain tests offered by the laboratory. The laboratory pays referring physicians for submitting patient data to the registry, answering patient questions about the registry and reviewing registry reports.

The OIG is concerned that such registry arrangements may induce physicians to order medically unnecessary or duplicative tests or to order tests only from laboratories that offer registries that pay for data submissions, responding to patient questions and reviewing registry reports. Other characteristics of suspicious arrangements include:

  • 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 avoid a reduction in compensation;
  • The laboratory collects comparative data for the registry from, and bills for, multiple tests that may be duplicative or not reasonable and necessary;
  • Compensation paid to physicians is on a per-patient or other basis that takes into account the value or volume of referrals;
  • Compensation paid to physicians is not consistent with fair market value for the physician’s effort in collecting and reporting patient data;
  • Compensation paid to physicians is not supported by documentation, submitted by the physicians in a timely manner, memorializing the physician’s efforts;
  • The laboratory offers the registry only for tests for which it has obtained patents or tests that the laboratory exclusively performs;
  • The laboratory only collects data from the tests it performs when a test is performed by multiple laboratories; and
  • Laboratories presenting tests in a way that makes it more difficult for ordering physicians to make an independent medical necessity decision with regard to each test for which the laboratory will bill (e.g., disease-related panels).

“Carving Out” Federal Health Care Program Beneficiaries

The Special Fraud Alert highlights that these arrangements may constitute a violation of the Anti-Kickback Statute even when payments only apply to the specimens collected from non-Federal health care program patients. “Carving out” Federal health care beneficiaries or businesses from such arrangements may be viewed by the OIG as a “disguised” remuneration for Federal health care program business through the payment of amounts supposedly related to non-Federal health care program business.

Click here for a complete copy of the Special Fraud Alert.

Any payment arrangement with a laboratory for services similar to those described in the Special Fraud Alert should be reviewed carefully, and as needed, revised or terminated. If you have any concerns or questions about an arrangement with a laboratory, please contact a Honigman Health Care attorney.