Stark and Anti-Kickback Issues Expected to Increase for Laboratories in 2015

Health care experts and attorneys predict 2015 will be a significant year for Health and Human Services Office of Inspector General (OIG) investigations of physician self-referral (Stark) and Anti-Kickback Statute (AKS) violations. The primary drivers of these cases are the significant False Claims Act and Civil Monetary Penalty awards that can be achieved by the government either in court or at the settlement table.   Recently, private health insurance giants Aetna and Cigna have entered the fray by filing lawsuits against some laboratories claiming Stark and AKS violations, seeking the return of millions of dollars in alleged overpayments. The lawsuits assert overpayments were caused by referrals that were allegedly induced though kickbacks in the form of bribes or sham agreements. Experts also expect Medicaid and Medicare managed care organizations will join the party. Aetna Health Inc. and Aetna Life Insurance Co. recently filed a civil complaint in New Jersey’s Camden County Superior Court against Biodiagnostic Laboratory Services, three of its owners, and several physicians. As we have reported here in G2 Compliance Advisor and other G2 publications, various individuals have admitted in guilty pleas that they received bribes in exchange for referring specimens to the lab and ordering unnecessary tests. In fact, the Department of Justice just announced as we went to press a 36^th guilty plea relating to this case.   In another case, Health Diagnostic Laboratory, Inc.. is being sued by Cigna Health and Life Insurance for $84 million. HDL is under a federal investigation for allegedly paying physicians to refer tests via specimen handling and collection fees. In Cigna’s suit, HDL is accused of “gaming the healthcare system by submitting grossly inflated, phantom ‘charges’ to Cigna that do not reflect the actual amount HDL bills patients.”   The media has also entered the arena. Fed by a massive release of Medicare claims data by the Centers for Medicare and Medicaid Services (CMS) last April, the Wall Street Journal has reported front page stories about seemingly outrageous payments to physicians and others.   Laboratories have numerous interactions with physicians who refer tests to them. Many of these interactions have both Stark and AKS implications. Laboratories and other providers are at a significantly greater risk today than ever before for legal problems related to a Stark and AKS violation, and the false claims that can stem from such violations.   Laboratories Can Defend Themselves Laboratories have complicated relationships with their referral sources that have Stark and AKS implications. The relationships with the laboratory’s referral sources are chiefly the domain of the sales and marketing departments and business development. The medical director and other technical laboratory staff may be involved but the efforts are most often driven by sales and marketing. Compliance officers need to monitor these relationships.   The laboratory risk areas related to Stark and AKS include:

• Lease or rental of space from a physician or other entity;
• Lease or rental of equipment from a physician, particularly if the physician uses the equipment to provide a service for which they receive a financial benefit or direct payment;
• Providing computers, printers, or fax machines in a physician office or paying for an interface for that equipment;
• Placing employees to perform phlebotomy services in a physician office;
• Contracting for a professional or personal service with a physician;
• Providing certain supplies for free to physicians offices or other referral sources;
• Providing education and training for physicians or other referral sources if the education is not regarding compliance or regulatory information, particularly if the education benefits the physician in some way;
• Providing nonmonetary gifts or items of value to a physician;
• Providing electronic test results or interfaces for the physician’s electronic health record .

  If the compliance officer believes the laboratory may be involved in a situation implicating this risk area, it is critical that the situation is reviewed by a person with a thorough understanding of the Stark and Anti-Kickback laws and regulations.   Lease or Rental of Space and/or Equipment Lease or rental of space from a physician directly, or in a building that is owned by physicians is most often space primarily used to provide phlebotomy services. If the space leased or rented is owned by physicians or another entity that may refer to, or control referrals to, the laboratory, the compliance officer must make certain the arrangement complies with the appropriate criteria of an AKS safe harbor and, if applicable, the Stark exception. Generally, these criteria require a written agreement for at least one year, payment set at fair market value without adjustment for value or volume of referrals, and the arrangement must be commercially reasonable. A lease or rental of equipment must meet the same general requirements.   Placing Computers in Physician Offices Placing items such as computers, printers, or fax machines in a physician office for free is allowed as long as the computer, printer, or fax machine is used solely for ordering laboratory tests or receiving laboratory results from the laboratory that placed it. The laboratory may pay for an interface to the office as long as the payment is not made directly to the physician or to an entity the physician owns. The contract and all payments should be made to an independent vendor and the relationship should be with the laboratory, not the physician or entity involved.   Laboratory Employees in a Physician Office Laboratories can place employees in a physician office to perform phlebotomy services for the patients of that physician or group as long as the laboratory employee does not perform any duties that normally would be performed by the physician's office staff. If the laboratory pays rent for the space the phlebotomist uses, the Stark exception and/or the AKS safe harbor for rental of space would apply. One important criterion is that the arrangement must be commercially reasonable even if no referrals are received from that physician.   Personal or Professional Services Laboratories might pay a physician to perform a service or services on their behalf, such as providing oversight of a stat lab, participating in a registry, completing a services survey or providing education for other physicians about using a laboratory service or test. If they are a referring physician, the arrangement must meet another AKS safe harbor or Stark exception for personal services, which imposes many of the same criteria as mentioned above for space and equipment rentals. For example, there must be a written agreement for at least one year, payment at fair market value without adjustment for value or volume of referrals, and the arrangement must be commercially reasonable. Note that the laboratory must monitor the activity to ensure the physician is actually performing the contracted services.   Providing Free Blood Collection Supplies A laboratory is allowed to provide supplies that are used solely to collect, process, store, and transport samples to the laboratory that provided the supplies. The laboratory should avoid providing supplies that have multiple uses, particularly if one of the multiple uses benefits the physician, such as sharps containers and needles and syringes because it is too difficult to make certain they will only be used for lab purposes. The lab should not provide free surgical supplies or other items that might be included in a bundled payment, such as an evaluation and management (E & M) service or the composite payment for end-stage renal disease facilities.   Providing Education and Training for Physicians Laboratories should only provide education and training to a physician office staff if it is specific to the services provided by the laboratory. It should not provide training or education for something that benefits the physician in any way, such as coding for E & M services. The laboratory may provide compliance-related training and education as long as the training meets the requirements of the Stark exception for such training. Training that physicians normally would have to pay for and would receive continuing education credit for under state licensing rules is not considered compliance training.   Nonmonetary Gifts or Entertainment Valuable items or gifts should never be provided to a physician if they are provided in exchange for the referral of laboratory tests. In addition, the Stark regulations set a specific dollar amount on the value of such nonmonetary gifts or entertainment starting with $300.00 and increasing yearly based on an inflation factor for the Consumer Price Index. The laboratory must track the provision of such items and make certain it does not exceed the amount allowed. If the laboratory does accidently exceed the allowance, it may remedy the situation by having the physician return the nonmonetary item within a prescribed time period. If the laboratory fails to remedy, it is not permitted to file claims for tests ordered by the physician and it must return any reimbursements received during the period the violation existed. Cash and cash equivalents such as gift certificates are never allowed.   Reducing the Risk Laboratories can take steps to reduce the risk associated with financial arrangements with its physicians and referral sources. Here is a list of steps a lab can take to help mitigate those risks:

• Written policies and procedures that cover each of the risk areas discussed in this article are necessary and should be in plain language and sufficient detail to avoid misunderstandings.
• All employees who are authorized to discuss or negotiate the types of arrangements discussed above, and all supervisor and executive-level employees, should be thoroughly trained on the laws and regulations specifically as they apply to the laboratory.
• All arrangements in which payment is made to a physician or referral source must have a written agreement that meets the requirements of the Stark law or the AKS and must be evaluated against an objective measure to determine fair market value.
• Monetary payments to a physician or referral source must be approved by the compliance officer or an officer of the company other than the individual responsible for the arrangement or relationship.
• The laboratory must have a system in place to track the amount of nonmonetary compensation spent on physicians for gifts and entertainment.
• When a question arises concerning these laws and regulations, the compliance officer should provide a written response to ensure there is no misunderstanding. If the compliance officer is not sure how to answer the question, he or she should seek competent consulting or legal advice before answering.
• The laboratory must set up a system of audits and monitors specifically for the laboratory's relationships with its referral sources.

  Conclusions The requirements of Stark and the AKS are complex. It is imperative that the laboratory compliance officer maintain a current understanding of these laws and their regulations as well as current compliance guidance or make sure he or she has direct access to legal counsel. That counsel must be familiar not only with these federal laws but also the statutes in the states where a laboratory does business, because states can have their own self-referral and kickback laws.   Compliance officers also need to audit all contractual arrangements with physicians and make sure all leases and other contracts are current and are being implemented as drafted. Remember, for Stark, letting a contract expire by accident can be as big a problem as if the contract was intentionally not renewed. As part of the audit, review all policies that govern arrangements such as placement of computers and employees in physician offices. Check to make sure the laboratory’s nonmonetary compensation program is up to date and operating as it should. Finally, it would not be inappropriate to create a new training program specifically using recent cases involving laboratories for all executives, directors, managers, and supervisors.