OIG Issues Another Special Fraud Alert Cautioning Labs and Physicians

The latest Special Fraud Alert directed to clinical laboratories issued by the OIG on September 25, 2014, addresses compensation paid by labs to referring physicians and group practices for blood specimen collection, processing, and packaging and for submitting patient data to a registry or database. This Special Fraud Alert is described by the OIG as supplementing prior guidance including the 1994 Special Fraud Alert on Arrangements for the Provision of Clinical Laboratory Services and Advisory Opinion 05-08 , which are specifically referred to in the new Special Fraud Alert. The OIG restated the long-standing concern with labs providing free or below-market goods and services to physician referral sources as well as with paying physicians in excess of fair market value for their services. The Special Fraud Alert is apparently triggered by the OIG’s observation of two specific trends in arrangements between labs and physicians:

• Payment from labs to physicians and physician practices for collecting, processing and packaging specimens; and
• Registry or “observational outcomes databases” established by the lab ostensibly to collect data on the clinical attributes of patients who are often receiving expensive and specialized tests provided by the lab. Physicians are paid by the lab for various activities related to submitting data to the Registry such as answering questions about patients and reviewing Registry reports.

The OIG points out that the Special Fraud Alert applies to both labs and to physicians and physician practices participating in arrangements identified by the OIG as suspect because “the anti-kick statute places criminal liability on both sides of an impermissible ‘kickback’ arrangement.”

Specimen Processing Arrangements. The OIG identified the following characteristics of payments for specimen processing arrangements that may be evidence of unlawful purpose under the anti-kickback statute. The payment:

• Exceeds fair market value for services actually rendered by the party receiving payment;
• Is for services for which payment is also made by a third party, such as Medicare;
• Is made directly to the ordering physician rather than to the ordering physician’s group practice, which may actually bear the cost of collecting and processing the specimen;
• 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 of referrals;
• Is offered on the condition that the physician orders either a specified volume or type of test or test panel, especially if the panel includes duplicative tests (two or more tests that yield the same clinical information but are performed using different methodologies); or
• 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 and paid for by the lab or a third party.

Registry Arrangements. The Registry arrangements appear to be a somewhat new development that can be distinguished from registries established and maintained by various clinical organizations and consortiums to promote and support research. In contrast, the OIG asserts that the Registries established by labs are a disguised means of paying physicians for referrals and do not have a legitimate clinical or research purpose. The hallmarks of what the OIG considers to be “suspect” lab arrangements are:

• The laboratory requires, encourages or recommends that physicians perform the designated tests with a specific frequency, such as four times per year, in order to receive payment or avoid a reduction in payment;
• The lab collects comparative data for the Registry from, and bills for multiple tests that are intended to provide the same clinical information or that otherwise are not reasonable and necessary;
• Compensation is determined on a per–patient or other basis that takes into account the volume or value of referrals;
• Compensation paid to physicians for Registry activities is not fair market value for the physicians’ efforts in collecting and reporting patient data;
• Compensation paid to physicians is not supported by documentation submitted by the physicians in a timely manner memorializing their efforts in Registry activities;
• The lab offers Registry arrangements only for tests (or disease states associated with tests) for which it has obtained patients or that it exclusively performs;
• When a test is performed by multiple labs, the lab with the Registry collects data only from the tests it performs; or
• The tests associated with the Registry arrangement are presented on the lab requisition form in a manner that makes it difficult for the physician to make an independent decision about medical necessity, e.g., the tests are set out in disease-related panels.

This latest Special Fraud Alert serves as a reminder that the OIG continues to scrutinize arrangements between clinical labs and physicians. Both sides of such arrangements should be cautious in entering arrangements where the lab compensates physicians for lab-related activities. Legal analysis should be conducted prior to entering agreements and paying or accepting compensation under such arrangements.

Julie A. Knutson

[1] All alerts, bulletins, advisory opinions and other guidance may be found on the OIG’s website www.oig.hhs.gov under “Compliance.” Adv. Op. 05-08, issued June 3, 2005, concerned a lab’s proposal to provide free blood sample collection supplies to physicians and to pay the physicians to collect the samples. The OIG opined that the arrangement would result in prohibited remuneration under the anti-kickback statute and that the OIG could potentially impose administrative sanctions under sections 1128(b)9&) or 1128A(a)(7).

[2] Note that OIG Advisory Opinions do not address Stark Law which, as a strict liability statute, would also carry significant penalties under a stricter analysis than the anti-kickback statute.

[3] The OIG notes that such legitimate registries are typically approved by Institutional Review Boards.