Special Fraud Alert Released by OIG Regarding Laboratory Payments to Referring Physicians

Health Law Alert

July 9, 2014
Health Law Alert

On June 25, 2014, the Office of Inspector General of the Department of Health and Human Services (OIG) released a Special Fraud Alert ("Alert") addressing arrangements between clinical laboratories and referring physicians. The Alert provides insight into those payment arrangements which the OIG believes raise enforcement concerns under the federal Anti-Kickback Statute (AKS).

The AKS makes it a criminal offense to knowingly and willfully offer, pay, solicit or receive any remuneration to induce or reward referrals of items or services payable by a federal health care program.  Concerns about the AKS arise when a clinical laboratory pays a referring physician for services.  Whether such an arrangement violates the AKS depends on the intent of the parties. Such intent may be inferred from a number of factors, including the legal structure of the arrangement, its operational safeguards and the conduct of the parties. If even one purpose of the arrangement is to induce or reward referrals, the arrangement violates the AKS. The OIG is particularly concerned about arrangements in which laboratories provide free or below-market goods or services to physicians; make payments to physicians that are not commercially reasonable in the absence of referrals; make payments for services that are duplicative or paid for by another source, such as Medicare; or, make payments as part of a bundled payment or overhead expense paid for by another source, even if that payment does not fully compensate the physician for his or her services.

The Alert highlights two types of arrangements that may be suspect under the AKS: (i) Specimen Collection, Processing and Packaging Arrangements; and (ii) Registry Payments.

Specimen Processing Arrangements

Specimen Processing Arrangements are arrangements in which the physician or his or her agent is paid for collecting, processing or packaging blood specimens. Payments are generally paid on a per-specimen or per-patient encounter basis and are associated with expensive or specialized tests. According to the OIG, Specimen Processing Arrangements may violate the AKS, if they include the following characteristics:

Registry Arrangements

In these types of arrangements, the laboratory establishes, coordinates or maintains a database (directly or through an agent), purportedly to collect data on the attributes of patients who have undergone or may undergo certain laboratory tests performed by the laboratory.  The laboratory pays the physician for gathering or submitting data, answering patient questions, or reviewing registry reports, generally on expensive or specialized tests paid for by federal health care programs.  According to the OIG, Registry Arrangements that may provide evidence of an unlawful purpose may include the following:

Additional Considerations

The OIG is concerned that physicians may be induced to order unnecessary or duplicative tests and to use laboratories that offer payment rather than choosing laboratories on the basis of quality.  In reviewing arrangements between clinical laboratories and referring physicians, it is important to bear in mind the following general principles:

This is a complex area, and we strongly urge that all arrangements be reviewed by knowledgeable health care counsel to ensure compliance with the AKS and any other fraud and abuse laws.

The OIG Special Fraud Alert can be found at: http://oig.hhs.gov/fraud/docs/alertsandbulletins/2014/OIG_SFA_Laboratory_Payments_06252014.pdf

If you have any questions or wish to discuss a particular arrangement, please contact your regular Hinshaw attorney.

This alert has been prepared by Hinshaw & Culbertson LLP to provide information on recent legal developments of interest to our readers. It is not intended to provide legal advice for a specific situation or to create an attorney-client relationship.