OIG Advisory Opinion Makes Convenience and Efficiency Suspect
Exclusive payer contracts create challenges and hassles for laboratories outside the contract and physicians who do business with those laboratories. A recent Advisory Opinion from the U.S. Department of Health and Human Services’ Office of Inspector General (OIG) addresses free laboratory services and pull-through strategies that developed in response to exclusive contracts. The OIG’s opinion finds potential anti-kickback violations in efforts intended to increase efficiencies in health care delivery. Laboratory compliance officers need to understand what the OIG’s Advisory Opinion could potentially mean for waiver arrangements. The Proposed Arrangement The laboratory requesting the opinion described a proposed arrangement with physicians that would waive laboratory charges for patients insured under an exclusive contract that named another laboratory as the only covered laboratory. That plan allowed the laboratory to service all the physician’s patients, making health care delivery more efficient within the physician practice. The arrangement was motivated by physician preference for dealing with one laboratory for consistent test result reporting (avoiding use of different reference ranges) and “ease of communication”—using one interface for electronically transmitting orders and receiving results, rather than multiple interfaces required when dealing with more than one laboratory. Physicians would need to attest that neither the physicians or […]
Exclusive payer contracts create challenges and hassles for laboratories outside the contract and physicians who do business with those laboratories. A recent Advisory Opinion from the U.S. Department of Health and Human Services’ Office of Inspector General (OIG) addresses free laboratory services and pull-through strategies that developed in response to exclusive contracts. The OIG’s opinion finds potential anti-kickback violations in efforts intended to increase efficiencies in health care delivery. Laboratory compliance officers need to understand what the OIG’s Advisory Opinion could potentially mean for waiver arrangements.
The Proposed Arrangement The laboratory requesting the opinion described a proposed arrangement with physicians that would waive laboratory charges for patients insured under an exclusive contract that named another laboratory as the only covered laboratory. That plan allowed the laboratory to service all the physician’s patients, making health care delivery more efficient within the physician practice. The arrangement was motivated by physician preference for dealing with one laboratory for consistent test result reporting (avoiding use of different reference ranges) and “ease of communication”—using one interface for electronically transmitting orders and receiving results, rather than multiple interfaces required when dealing with more than one laboratory. Physicians would need to attest that neither the physicians or the practice were receiving any financial benefit from the provision of free laboratory services to their patients—including any benefit (or penalty) derived from an incentive plan addressing laboratory utilization. The only item or service or benefit provided from the laboratory to the physician would be the limited-use interface allowing the physician to communicate with the requesting laboratory. The laboratory mentioned that some vendors charged its physician practice clients monthly maintenance fees for the interface and the laboratory wouldn’t pay those fees on behalf of the physicians.
Potential Violations The OIG found this arrangement could violate the anti-kickback statute, which prohibits payment of any remuneration for a referral or recommendation for a service reimbursed by federal health care programs. Violation of that law depends on the parties’ intent (knowing or willful conduct is required) but even if just one purpose for the arrangement is to induce or reward referrals, it can be a violation. The penalties for violations include fines (up to $25,000), imprisonment and exclusion from participating in federal programs. Note that submission of a Medicare claim for payment that resulted from an illegal kickback can also result in penalties under the False Claims Act. Although it conceded that provision of limited use interfaces to the physicians was not remuneration, the OIG was concerned referring physicians received remuneration via the combination of the “convenience of receiving all test results with consistent reference ranges” and the ability to avoid multiple interface maintenance fees that would be paid by the physician practices. The OIG concluded the arrangement “would offer physician practices a means to work solely with the Requestor, reducing administrative and possibly financial burdens associated with using multiple laboratories.” Therefore, the OIG couldn’t “rule out with sufficient confidence the possibility that” remuneration was being offered to induce or reward referrals. The OIG was also concerned that the laboratory would be charging Medicare and Medicaid “substantially more than their usual charges to other payors for the same items or services,” which is grounds for permissive exclusion. The OIG appears to have interpreted the substantially in excess rule in the past to mean that if 50% (or more) of the laboratory’s charges (excluding Medicare and Medicaid charges) are less than what is being charged Medicare, that lower rate being charged may be considered the laboratory’s usual charge. Thus, if half of the laboratory’s charges were waived as described in this proposed arrangement, “the laboratory’s usual charge might be considered zero by the OIG,” explains Maryland health care attorney Robert E. Mazer of Ober Kaler. In this case, the OIG was concerned that close to or more than half of non-federal health care program business was being provided for free because the data submitted indicated 70% of physician clients of the laboratory had patients subject to exclusive contracts and within those physician practices, between 10% and 40% of the patients had exclusive contracts. These numbers caused the OIG to be concerned: “with percentages that high, it is plausible that more than half of the non-Medicare or non-Medicaid patients would be receiving free services, while Medicare and Medicaid would be charged at the regular rate.” This gave rise to a two-tiered pricing structure with “substantial number of patients” getting free services “regardless of financial need.”
Why the Opinion is Significant The OIG’s concern about waiving fees is nothing new. Mazer notes the OIG specifically addressed the issue of such waivers in a 1994 Fraud Alert, yet it doesn’t reference that Alert in the Advisory Opinion. The opinion has caused concern within the industry because of the facts the OIG relied on in finding potential improper remuneration. Mazer highlights the two facts that the OIG found in combination amount to remuneration:
5 Tips for Avoiding Kickback Liability When Waiving Charges With regard to kickback liability, while Mazer isn’t sure if the OIG would “actively pursue these types of cases, particularly if the physician practice isn’t paying the interface maintenance cost,” he cautions that this advisory opinion could “pique the interest of qui tam relators.” Additionally, as to excessive charges, Mazer says to his knowledge “the OIG has never pursued a case based solely on the substantially in excess provision.” But it may not be prudent to ignore this provision. “You still have to do your due diligence,” warns Mazer and examine your charges to determine if there is any potential violation. With that advice in mind, we’ve compiled five tips to help your lab avoid liability for kickbacks or excessive charges due to waiver of fees. #1 Audit your waived charges policies and agreements. As Mazer suggests, do your due diligence. Take this opportunity to review any policies, procedures and agreements that address reduced payment amounts, including waiver of charges. Look for violations of the anti-kickback statute and the substantially in excess provision. #2 Determine usual charges. You will need to calculate how waived charges affect determination of your “usual charge.” As Mazer advises, even though the OIG hasn’t actively pursued cases against providers under the substantially in excess provision, you still need to do your due diligence and review charges to make sure you aren’t in violation. Document the findings of this charge review so you can hopefully dispel OIG concerns if such an issue should ever arise. Unfortunately, as even the OIG conceded in the opinion, there is not a lot of guidance on how to determine your usual charge and compare it to Medicare charges. “A first step may be to compute the volume of tests that have been provided without charge and compare that number to the total volume of tests billed to payors other than Medicare and Medicaid,” suggests Mazer. “As the OIG indicated, if the percentage of free tests is substantially below 50%, then the arrangement should not cause concern under this statutory provision.” “The difficult issue is whether there are other discounted charges that need to be part of the calculation,” he says. “The OIG stated that the substantially in excess provision was not intended to prevent negotiated payment arrangements with private insurers, however, it has not unequivocally stated that such charges can be excluded from the calculation of a hospital’s usual charge.” #3 Look for benefits/remuneration to referral sources. Consider what benefits to referral sources, financial or otherwise, may result from the waiver policy or arrangement. As Mazer explained, the OIG addressed waiver of charges to private plan members in its 1994 Special Fraud Alert and indicated such waivers were permissible as long as the physician practice wasn’t benefitting financially, such as through incentive plans and utilization programs. The advisory opinion indicates that additional types of benefits could potentially be considered remuneration. This is where it gets tricky because the OIG didn’t provide significant explanation of the avoidance of administrative burdens and at what threshold efficiency becomes remuneration. #4 Make sure physicians aren’t getting reimbursed for anything related to the laboratory services. In the Advisory Opinion, the requesting lab was only offering the proposed arrangement to physician clients who sent their patients to the laboratory’s draw stations. The physicians were not drawing the samples themselves. In fact, in a footnote, the OIG noted that the laboratory did have some physician clients who drew the patients’ blood and the laboratory wouldn’t offer the proposed arrangement to those physician clients. This factor is important because if the physicians were drawing the blood samples, then the physician could be getting reimbursed for that service. That could be considered a financial benefit to the physician. So, make sure if you are going to develop a waiver program that no part of the service is reimbursable directly to the physician. #5 Get physician attestation of no benefit. Mazer suggests that laboratories with arrangements involving free services require physicians “sign an attestation that they don’t receive any financial benefit from the free testing, including the elimination of any monthly interface fee.” The arrangement in this case required similar attestations from physicians that they didn’t receive any benefit but didn’t mention such interface fees. So your attestation should include reference to such fees, including the utilization incentives mentioned in the 1994 Fraud Alert as well as a general catchall disclaiming any other financial benefit. But remember, just getting that attestation isn’t a defense if in reality referring physicians are receiving some financial benefit. Source: U.S. Department of Health and Human Services, Office of Inspector General, Advisory Opinion 15-04 (March 18, 2015).
The Proposed Arrangement The laboratory requesting the opinion described a proposed arrangement with physicians that would waive laboratory charges for patients insured under an exclusive contract that named another laboratory as the only covered laboratory. That plan allowed the laboratory to service all the physician’s patients, making health care delivery more efficient within the physician practice. The arrangement was motivated by physician preference for dealing with one laboratory for consistent test result reporting (avoiding use of different reference ranges) and “ease of communication”—using one interface for electronically transmitting orders and receiving results, rather than multiple interfaces required when dealing with more than one laboratory. Physicians would need to attest that neither the physicians or the practice were receiving any financial benefit from the provision of free laboratory services to their patients—including any benefit (or penalty) derived from an incentive plan addressing laboratory utilization. The only item or service or benefit provided from the laboratory to the physician would be the limited-use interface allowing the physician to communicate with the requesting laboratory. The laboratory mentioned that some vendors charged its physician practice clients monthly maintenance fees for the interface and the laboratory wouldn’t pay those fees on behalf of the physicians.
Potential Violations The OIG found this arrangement could violate the anti-kickback statute, which prohibits payment of any remuneration for a referral or recommendation for a service reimbursed by federal health care programs. Violation of that law depends on the parties’ intent (knowing or willful conduct is required) but even if just one purpose for the arrangement is to induce or reward referrals, it can be a violation. The penalties for violations include fines (up to $25,000), imprisonment and exclusion from participating in federal programs. Note that submission of a Medicare claim for payment that resulted from an illegal kickback can also result in penalties under the False Claims Act. Although it conceded that provision of limited use interfaces to the physicians was not remuneration, the OIG was concerned referring physicians received remuneration via the combination of the “convenience of receiving all test results with consistent reference ranges” and the ability to avoid multiple interface maintenance fees that would be paid by the physician practices. The OIG concluded the arrangement “would offer physician practices a means to work solely with the Requestor, reducing administrative and possibly financial burdens associated with using multiple laboratories.” Therefore, the OIG couldn’t “rule out with sufficient confidence the possibility that” remuneration was being offered to induce or reward referrals. The OIG was also concerned that the laboratory would be charging Medicare and Medicaid “substantially more than their usual charges to other payors for the same items or services,” which is grounds for permissive exclusion. The OIG appears to have interpreted the substantially in excess rule in the past to mean that if 50% (or more) of the laboratory’s charges (excluding Medicare and Medicaid charges) are less than what is being charged Medicare, that lower rate being charged may be considered the laboratory’s usual charge. Thus, if half of the laboratory’s charges were waived as described in this proposed arrangement, “the laboratory’s usual charge might be considered zero by the OIG,” explains Maryland health care attorney Robert E. Mazer of Ober Kaler. In this case, the OIG was concerned that close to or more than half of non-federal health care program business was being provided for free because the data submitted indicated 70% of physician clients of the laboratory had patients subject to exclusive contracts and within those physician practices, between 10% and 40% of the patients had exclusive contracts. These numbers caused the OIG to be concerned: “with percentages that high, it is plausible that more than half of the non-Medicare or non-Medicaid patients would be receiving free services, while Medicare and Medicaid would be charged at the regular rate.” This gave rise to a two-tiered pricing structure with “substantial number of patients” getting free services “regardless of financial need.”
Why the Opinion is Significant The OIG’s concern about waiving fees is nothing new. Mazer notes the OIG specifically addressed the issue of such waivers in a 1994 Fraud Alert, yet it doesn’t reference that Alert in the Advisory Opinion. The opinion has caused concern within the industry because of the facts the OIG relied on in finding potential improper remuneration. Mazer highlights the two facts that the OIG found in combination amount to remuneration:
- “it is more convenient, more efficient, for the physician practice to use one laboratory” and
- “elimination of interface maintenance fees that would be paid by the physician practices.”
5 Tips for Avoiding Kickback Liability When Waiving Charges With regard to kickback liability, while Mazer isn’t sure if the OIG would “actively pursue these types of cases, particularly if the physician practice isn’t paying the interface maintenance cost,” he cautions that this advisory opinion could “pique the interest of qui tam relators.” Additionally, as to excessive charges, Mazer says to his knowledge “the OIG has never pursued a case based solely on the substantially in excess provision.” But it may not be prudent to ignore this provision. “You still have to do your due diligence,” warns Mazer and examine your charges to determine if there is any potential violation. With that advice in mind, we’ve compiled five tips to help your lab avoid liability for kickbacks or excessive charges due to waiver of fees. #1 Audit your waived charges policies and agreements. As Mazer suggests, do your due diligence. Take this opportunity to review any policies, procedures and agreements that address reduced payment amounts, including waiver of charges. Look for violations of the anti-kickback statute and the substantially in excess provision. #2 Determine usual charges. You will need to calculate how waived charges affect determination of your “usual charge.” As Mazer advises, even though the OIG hasn’t actively pursued cases against providers under the substantially in excess provision, you still need to do your due diligence and review charges to make sure you aren’t in violation. Document the findings of this charge review so you can hopefully dispel OIG concerns if such an issue should ever arise. Unfortunately, as even the OIG conceded in the opinion, there is not a lot of guidance on how to determine your usual charge and compare it to Medicare charges. “A first step may be to compute the volume of tests that have been provided without charge and compare that number to the total volume of tests billed to payors other than Medicare and Medicaid,” suggests Mazer. “As the OIG indicated, if the percentage of free tests is substantially below 50%, then the arrangement should not cause concern under this statutory provision.” “The difficult issue is whether there are other discounted charges that need to be part of the calculation,” he says. “The OIG stated that the substantially in excess provision was not intended to prevent negotiated payment arrangements with private insurers, however, it has not unequivocally stated that such charges can be excluded from the calculation of a hospital’s usual charge.” #3 Look for benefits/remuneration to referral sources. Consider what benefits to referral sources, financial or otherwise, may result from the waiver policy or arrangement. As Mazer explained, the OIG addressed waiver of charges to private plan members in its 1994 Special Fraud Alert and indicated such waivers were permissible as long as the physician practice wasn’t benefitting financially, such as through incentive plans and utilization programs. The advisory opinion indicates that additional types of benefits could potentially be considered remuneration. This is where it gets tricky because the OIG didn’t provide significant explanation of the avoidance of administrative burdens and at what threshold efficiency becomes remuneration. #4 Make sure physicians aren’t getting reimbursed for anything related to the laboratory services. In the Advisory Opinion, the requesting lab was only offering the proposed arrangement to physician clients who sent their patients to the laboratory’s draw stations. The physicians were not drawing the samples themselves. In fact, in a footnote, the OIG noted that the laboratory did have some physician clients who drew the patients’ blood and the laboratory wouldn’t offer the proposed arrangement to those physician clients. This factor is important because if the physicians were drawing the blood samples, then the physician could be getting reimbursed for that service. That could be considered a financial benefit to the physician. So, make sure if you are going to develop a waiver program that no part of the service is reimbursable directly to the physician. #5 Get physician attestation of no benefit. Mazer suggests that laboratories with arrangements involving free services require physicians “sign an attestation that they don’t receive any financial benefit from the free testing, including the elimination of any monthly interface fee.” The arrangement in this case required similar attestations from physicians that they didn’t receive any benefit but didn’t mention such interface fees. So your attestation should include reference to such fees, including the utilization incentives mentioned in the 1994 Fraud Alert as well as a general catchall disclaiming any other financial benefit. But remember, just getting that attestation isn’t a defense if in reality referring physicians are receiving some financial benefit. Source: U.S. Department of Health and Human Services, Office of Inspector General, Advisory Opinion 15-04 (March 18, 2015).
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