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OIG Issues Special Fraud Alert Concerning Laboratory Payments to Referring Physicians

June 25, 2014 | No Comments
Posted by Beth Christian

Earlier today, the OIG issued a Special Fraud Alert concerning laboratory payments to referring physicians.  The OIG identified 2 different types of payment arrangements that may be viewed as problematic under the Anti-Kickback law: blood specimen collection, processing and packaging arrangements and registry payments.

The OIG described specimen processing arrangements as payments from laboratories to physicians for certain specified duties, which may include blood specimen collection and centrifuging, maintaining the specimens at a particular temperature, and packaging the specimens so that they are not damaged in transport. The OIG indicated that payments are typically made to referring physicians on a per-specimen or per-patient-encounter basis, and often are associated with expensive or specialized tests.  The concern raised by the OIG is that since Medicare (and other third party payors) allow nominal payments in certain circumstances for specimen collection and for processing and packaging specimens for transport to a laboratory, payment by the laboratory to the physician amounts to unlawful remuneration because the physician is effectively being paid twice for the same work.  The OIG also raised concerns that such payments may be made in amounts which exceed fair market value, although the OIG cautioned that such payments may be suspect if one purpose of the arrangement is to induce or reward referrals of Federal health care program business “regardless of whether the payment is fair market value for services rendered.”

The OIG identified the following characteristics specimen processing arrangements that may be suspect:

  • Payment exceeds fair market value for services actually rendered by the party receiving the payment.
  • The payment is for services for which payment is also made by a third party, such as Medicare.
  • Payment is made directly to the ordering physician rather than to the ordering physician’s group practice, which may bear the cost of collecting and processing the specimen.
  • Payment is made on a per-specimen basis for more than one specimen collected during a single patient encounter or on a per-test, per-patient, or other basis that takes into account the volume or value of referrals.
  • Payment is offered on the condition that the physician order either a specified volume or type of tests or test panel, especially if the panel includes duplicative tests (e.g., two or more tests performed using different methodologies that are intended to provide the same clinical information), or tests that otherwise are not reasonable and necessary or reimbursable.
  • Payment is made to the physician or the physician’s group practice, despite the fact that the specimen processing is actually being performed by a phlebotomist placed in the physician’s office by the laboratory or a third party.

The OIG also noted that payment arrangements can be problematic even if they are structured to carve out work performed on specimens from non-Federal health care program beneficiaries.

The OIG also raised concerns about payments for registry maintenance and observational outcomes databases.  Under these arrangements, which often involve patients presenting with specific disease profiles, laboratories pay a physician for certain specified duties, including submitting patient data to be incorporated into the registry, answering patient questions about the registry, and reviewing registry reports. While the OIG found that such payments may be appropriate in certain limited circumstances, such payments may induce physicians to order medically unnecessary or duplicative tests, including duplicative tests performed for the purpose of obtaining comparative data, and to order those tests from laboratories that offer registry arrangements in lieu of other, potentially clinically superior, laboratories.

The OIG identified the following as being characteristics of potentially suspect registry arrangements:

  • The laboratory requires, encourages, or recommends that physicians who enter into registry arrangements to perform the tests with a stated frequency (e.g., four times per year) to be eligible to receive, or to not receive a reduction in, compensation.
  • The laboratory collects comparative data for the registry from, and bills for, multiple tests that may be duplicative (e.g., two or more tests performed using different methodologies that are intended to provide the same clinical information) or that otherwise are not reasonable and necessary.
  • Compensation paid to physicians pursuant to registry arrangements is on a per patient or other basis that takes into account the value or volume of referrals.
  • Compensation paid to physicians pursuant to registry arrangements is not fair market value for the physicians’ efforts in collecting and reporting patient data.
  • Compensation paid to physicians pursuant to registry arrangements is not supported by documentation, submitted by the physicians in a timely manner, memorializing the physicians’ efforts.
  • The laboratory offers registry arrangements only for tests (or disease states associated with tests) for which it has obtained patents or that it exclusively performs.
  • When a test is performed by multiple laboratories, the laboratory collects data only from the tests it performs.
  • The tests associated with the registry arrangement are presented on the offering laboratory’s requisition in a manner that makes it more difficult for the ordering physician to make an independent medical necessity decision with regard to each test for which the laboratory will bill (e.g., disease-related panels).

The OIG found that concerns also arise when a physician is selected to collect data for a registry on the basis of their prior or anticipated referrals, rather than their specialty, sub-specialty or other relevant attribute.  The OIG also noted that “Even legitimate actions taken to substantiate such claims, including, for example, retaining an independent Institutional Review Board to develop study protocols and participation guidelines, will not protect a registry arrangement if one purpose of the arrangement is to induce or reward referrals.”

The laboratory market is a very competitive one.  The issuance of the referenced Special Fraud Alert, as well as recent large scale investigations and criminal indictments involving laboratory and physician relationships (including the Biodiagnostic Laboratory Services LLC investigation here in New Jersey: demonstrates that the OIG has turned an increased focus on relationships between laboratories and physicians.


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