Wall Street Journal Article Illustrates Increased Compliance Risks for Labs

Health care fraud, waste, and abuse, and their impact on health care costs and patient care, is a very public issue in 2014 as several clinical laboratories found out the hard way when the Wall Street Journal (WSJ) recently named them in an article about the federal anti-kickback laws. This article’s intent is to highlight the compliance risks that laboratories now face as the government improves its ability to detect fraud and abuse in health care, primarily as a result of data mining expertise and the public release of health care claims and quality information. Brief Background The WSJ article focused on one laboratory in Virginia, Health Diagnostic Laboratory Inc. (HDL), but named several others, that paid physicians who sent blood samples to their laboratory for testing. The fees were said to cover the cost of collecting the blood sample or, as in the case of HDL, to cover the costs of processing and handling those samples. Some of the labs, including HDL, said they believed it was a long-standing, industrywide practice, but that is not necessarily the case. Most labs, including the nation’s largest labs, do not routinely pay such fees. Other labs named in the story were Quest’s Berkeley HeartLab, Singulex Inc., Boston Heart Diagnostics Corp., and Atherotech Diagnostics Lab. It should be noted that according to the story, Berkeley HeartLab stopped paying the fees after it was purchased by Quest Diagnostics. The Government View The government sees the fees as suspect and meant to provide a financial incentive to refer tests to the lab paying the fees. The WSJ article says the labs are under investigation by the Department of Health and Human Services Office of Inspector General (OIG) and the Justice Department but did not elaborate on the investigation, saying only that the agencies declined to comment. As part of that investigation, the OIG issued a special advisory opinion on June 25 that provided guidance to the industry indicating such payments “present a substantial risk of fraud and abuse under the anti-kickback statute.” According to the CEO of HDL, Tonya Mallory, the fraud alert is new guidance and HDL stopped the payments shortly after it was issued. The other labs also stopped the payments. While Mallory repeatedly says that HDL has done nothing wrong and says it will vigorously defend itself if formal charges are made, the damage may already have been done through the reputational harm generated by the article. In a Sept. 23 updated WSJ article, Mallory reportedly resigned. HDL will be led by its co-founder, Joe McConnell, formerly a Mayo Clinic scientist, going forward. Mallory will remain on the board of directors and serve as an adviser to McConnell. Some Data Released Available Through CMS The article cites specific data that it implies raises questions about HDL’s practices and motives. Some of the data and statistics used in the story are taken directly from data CMS made public last April. A hyperlink embedded in the article takes the reader to a series of spreadsheets specific to HDL showing billing and reimbursements for most, if not all, of its tests. Here are a few examples:

• HDL received 64 percent of all Medicare payments for its top nine tests;
• For one procedure, a method code for an electrophoretic procedure, HDL received 93 percent of all the money Medicare paid for that procedure in all of 2012 for all labs;
• The electrophoresis procedure earned HDL $11.9 million in 2012 while the total for all other labs combined was $850,000; and
• HDL received $139 million in Medicare payments in 2012.

Another issue for HDL described in the article concerns the performance of a new test designed to measure a patient’s sensitivity to the blood thinner Plavix. The test was performed on samples previously stored by HDL. After concerns were raised by employees of HDL saying it was inappropriate to perform so many of them when the test has limited application, the article alleges that Mallory instructed that the tests be performed anyway as long as there was a physician order for it. How Is the Article Viewed by a Laboratory Compliance Professional? If HDL is truly under investigation by the government, there are a variety of issues it may face beyond the anti-kickback issues for the processing and handling fees it pays its referral sources. First, let’s consider those fees in light of the Stark regulations. Stark would consider the fees remuneration. If a lab is paying remuneration to a physician who refers to it, the payments must fit within a Stark exception and meet all the criteria for that exception, not the least of which is fair market value (FMV) for the services. HDL says it is paying FMV, but when compared to the fees other labs named in the article are paying, it is paying more than any of them. In an investigation, HDL would be required to show exactly how it determined the FMV for the service. In the article, there is no mention of written agreements between HDL and each of the referral sources, which is the first criteria for both the anti-kickback statute safe harbor and the Stark exception covering payments. We don’t know whether HDL had those agreements in place, but if there are no written agreements, both laws have been violated. Another practice that raises flags for a compliance professional is that HDL promotes the use of custom panels and profiles, a practice that most labs have shied away from since the publication of the OIG’s compliance guidance for labs in the Federal Register in August 1998. HDL makes no mention of physician acknowledgements for the custom panels. Physician acknowledgements are considered essential if a lab offers any custom panels to its clients. What Can Labs Do to Defend Themselves Understand that under the current enforcement climate, anything your lab does has greater potential to be discovered than at any time in its history. For several years, laboratory consultants and billing and compliance experts have been pointing to data mining as one of the more important issues facing laboratories and other providers in the future, and the future may well be here. The HDL story, still unfolding, is a perfect example of the consequences of transparency in provider pricing and billing, and the effects of data mining and analysis. It has all of the key elements of such a case, including a media story in a national newspaper and a government investigation likely based in part on data mining and analysis techniques. Labs need to fight fire with fire. They should do their own comparative data audit using the 2012 Medicare provider utilization and payment data provided by Medicare at www.cms.gov (look under “Research, Statistics, Data & Systems”). The first step is to find the information on your own lab. You will have to know the name used to identify your lab to find your data. Once the data is located, prepare a spreadsheet of just your data. The spreadsheets you will be comparing to are the sheets where data is aggregated for all providers. Look for anything that makes your lab standout from the aggregate data. Labs should also include some kind of data mining or data review of their claims as a routine component of their auditing and monitoring plan. Takeaway: Government auditors and investigators are becoming increasingly more sophisticated in their use of claims data to identify problem providers and suppliers. It is up to the provider community to develop their own data analysis techniques to keep up and detect potential problems before the government does.