The U.S. Department of Health & Human Services’ Office of Inspector General (OIG) has long found laboratory deals with physicians to be inherently suspect. Recent enforcement efforts and settlements highlight the compliance risks created by arrangements between laboratories and referral sources. Last year’s fraud alert regarding payments to referring physicians and the recent HDL and Singulex settlements (see story on page 1) are significant because they send a strong message that labs are a front burner concern for the government, and that they will be subject to increased scrutiny. The OIG has also previously blasted a no-risk lab agreement that would have allowed physician practices to enhance their revenue, in its Advisory Opinion 13-03; prosecuted labs and physicians for unlawful involvement in kickback schemes with labs; and nixed a proposed exclusive contract arrangement that would waive fees for some patients with commercial insurance in exchange for a physician’s other lab business (see Compliance Perspectives on the OIG’s Advisory Opinion 15-04 on page 5). This government scrutiny also serves as a reminder that labs must consider whether the anti-kickback statute is implicated any time they’re making a payment, even arguably if it’s to improve quality or reduce the physician’s burdens, points […]
The U.S. Department of Health & Human Services’ Office of Inspector General (OIG) has long found laboratory deals with physicians to be inherently suspect. Recent enforcement efforts and settlements highlight the compliance risks created by arrangements between laboratories and referral sources. Last year’s fraud alert regarding payments to referring physicians and the recent HDL and Singulex settlements (see story on page 1) are significant because they send a strong message that labs are a front burner concern for the government, and that they will be subject to increased scrutiny. The OIG has also previously blasted a no-risk lab agreement that would have allowed physician practices to enhance their revenue, in its Advisory Opinion 13-03; prosecuted labs and physicians for unlawful involvement in kickback schemes with labs; and nixed a proposed exclusive contract arrangement that would waive fees for some patients with commercial insurance in exchange for a physician’s other lab business (see Compliance Perspectives on the OIG’s Advisory Opinion 15-04 on page 5).
This government scrutiny also serves as a reminder that labs must consider whether the anti-kickback statute is implicated any time they’re making a payment, even arguably if it’s to improve quality or reduce the physician’s burdens, points out attorney Scott Grubman, former assistant U.S. Attorney now with Chilivis, Cochran, Larkins & Bever, LLP, Atlanta, Ga.
“Watch your Ps and Qs. These [deals] are being scrutinized,” warns attorney Brian Flood, with Husch Blackwell in Austin, Texas.
To protect themselves, labs should consider these nine tips:
#1 Analyze any payment relationship with physicians to make sure that it’s legitimate. Don’t enter into a deal before carefully reviewing it and seeking legal counsel. “Look at an arrangement on the front end and see if the structure is okay. You can avoid a lot of heartburn later,” says Grubman. Remember that if just one purpose of the deal is in exchange for patient referrals, that’s enough to violate the anti-kickback law. If the overall arrangement does not make business sense absent the referrals, that’s a huge issue, says Grubman.
“If there’s any question, it’s not worth it. This law is the most serious because of the criminal implications,” he explains.
#2 Review “freebies” to physicians. Labs often give free items to doctors, but not all of them are legally okay, as noted by the seemingly contradictory advisory opinions that the Centers for Medicare & Medicaid Services (CMS) issued in 2013, finding one specimen collection kit a lab handed out lawful because it met an exception to the Stark law prohibiting these handouts but another kit violated the Stark law simply because of the different ways the specimens were collected. Don’t assume that a particular specimen kit or other free item fits within the exception.
#3 If your proposed deal gets a clean bill of health, get that in writing from your attorney. That way you have documentation that you got a deal blessed. “It negates intent,” explains Grubman. Unlike the Stark law, which is a strict liability statute, the anti-kickback law requires that you knew what you were doing was unlawful.
#4 Don’t think that even a small deal or a small lab can fly under the radar. The government is increasingly using data mining to watch for spikes in bills and other changes. “As data [mining] gets more sophisticated, it can get outliers. The government can now pinpoint more granular subjects [such as physicians]. If a nail is sticking out of the floor they will hammer it down,” explains Flood. In fact, as we have reported in GCA, CMS released significant data last April and reportedly intends to do the same again this year. See “Fraud and Abuse Implications of CMS Data Dump,” in the April 2014 issue of G2 Compliance Advisor.
#5 Document the business reasons for the deal. “If the documents only address how much a physician will make, it is hard to say that the intent was to improve care or other reasons,” explains Flood.
#6 Stay away from improper communication. “Don’t let ‘casual speak’ color the deal. Dissuade conversations about [referrals from or perks to doctors]. Don’t let that lie unchallenged,” he adds.
#7 Beware of deals that carve out the federal health programs. The OIG has a “long standing concern” with such arrangements since they increase the likelihood of referrals for and overutilization of services involving Medicare and Medicaid patients even if the deal purports to only involve commercial business. A deal with such a carve-out may ironically cause it to receive greater scrutiny, rather than dodging that audit bullet.
#8 Don’t forget your state law. Many states bar lease, fee-splitting and other arrangements between labs and physicians, even if they don’t involve patient referrals.
#9 Watch for other legal actions that could trigger a government investigation. For instance, Cigna’s lawsuit against HDL for waiving copayments could spark the interest of the OIG or other insurers to investigate the same issue. The routine waiver of copayments, coinsurance and deductibles to induce referrals is also an unlawful kickback.
“Caution is the right advice for the industry,” says Flood.
Takeaway: Make sure your compliance department closely scrutinizes all arrangements between your laboratory and physician referral sources.
