OIG Issues Special Fraud Alert on Lab/Physician Arrangements

July 1, 2014Articles

The Office of the Inspector General (“OIG”) has issued another Special Fraud Alert, this time specifically targeting a recent trend in arrangements between laboratories and physicians. The alert describes two types of arrangements that may violate the Anti-Kickback Statute.

The Anti-Kickback Statute1 prohibits the knowing or willing solicitation, receipt, offer, or payment of any remuneration in return for or to induce referrals of federally reimbursed health care items and services. Remuneration is broadly interpreted to include anything of value and is illegal even if inducing referrals is not the primary purpose. Violation of the Anti-Kickback Statute is a felony punishable by imprisonment, fine, and exclusion from the Medicaid and Medicare programs.

The latest alert first focuses on “Specimen Processing Arrangements,” when laboratories arrange to pay physicians to collect, process, or package blood specimens. It also notes that similar arrangements for the collection and processing of specimens other than blood, i.e. buccal swabs or urine samples, may also violate the anti-kickback prohibition.

The alert provides a familiar list of factors that make Specimen Processing Arrangements particularly prone to violating the Anti-Kickback Statute. For instance, payments can easily exceed the fair market rate for the services provided, because either the costs are minimal and not typically billed separately or are part of a bundled billing code, for which physicians or practice groups are already reimbursed. Additionally, the arrangements are often calculated on a per-specimen basis, or otherwise take into account the volume of referrals. Finally, Specimen Processing Arrangements sometimes claim to reimburse physicians for services actually performed by a phlebotomist placed at the physician’s office by the laboratory.

Secondly, the alert describes “Registry Arrangements” whereby laboratories pay physicians for specified duties, such as entering patient data into a registry for research purposes. Once again, such arrangements are suspicious as the compensation paid to physicians can easily exceed the fair-market value of the services provided. These arrangements also sometimes take into account the volume of the physician’s referrals, either by calculating the payment on a per-test basis, or else by basing eligibility to participate on the anticipated volume of a physician’s referrals. Specific to Registry Arrangements, the OIG notes that it is particularly suspicious of registries that only request data for tests that the laboratory itself performs or for which the laboratory owns a patent on the test.

According to the OIG, these characteristics indicate the intent of the laboratory to induce referrals from the physician. The fraud alert further reminds the health care community that these Anti-Kickback Statute concerns cannot be effectively addressed by carving out federal health care program beneficiaries. With specific regard to laboratories, the OIG believes carve-outs are ineffective because physicians prefer to minimize the number of laboratories they use, making it likely that physicians will choose the private-pay inducing laboratory even for federally reimbursed services that are not included in the inducement relationship.

The OIG stresses that it is not just the laboratories who engage in Specimen Processing and Registry Arrangements that face consequences. Physicians who enter into such arrangements are also at risk, and should analyze them carefully to ensure they do not violate the Anti-Kickback Statute. 

View the Special Fraud Alert here »

142 U.S.C. § 1320a-7b(b)