On June 25, 2014, the U.S. Department of Health and Human Services Office of the Inspector General (“OIG”) released aSpecial Fraud Alert addressing Laboratory Payments to Referring Physicians. The Special Fraud Alert supplements the OIG’s previous guidance, dating back to the 1994 fraud alert and the Advisory Opinion 05-08, regarding its concerns that remuneration offered by clinical laboratories to referring physicians which involve providing free or below-market goods or that involve payments which are not “commercially reasonable in the absence of Federal health care program referrals, potentially raise four major concerns typically associated with kickbacks – corruption of medical judgment, overutilization, increased costs to the Federal health care programs and beneficiaries, and unfair competition.” The OIG is particularly concerned because the ordering of laboratory tests is typically made by a physician, and these types of arrangements may induce the physician to order more tests, especially if the remuneration paid to the physician is somehow tied to the number of referred tests.

In this Special Fraud Alert, the OIG focuses on two trends which it has identified as presenting a “substantial risk of fraud and abuse” under the federal Anti-Kickback Statute (“AKS”). The first trend is payments to physicians to collect, process and package patients’ blood specimens (“Specimen Processing Arrangements”). The second trend is payments to physicians for the performance of certain duties, typically involving data collection and reporting services, in connection with the clinical lab’s operation of a registry database (“Registry Payments”). The Special Fraud Alert provides a list of characteristics of each of these arrangements which may evidence the unlawful intent under the AKS.

Specimen Processing Arrangements

Specimen Processing Arrangements are generally those which involve payments from a laboratory to a physician for certain duties including collecting blood specimens, centrifuging and storing the specimens, and packaging the specimens for transport. In these Specimen Processing Arrangements, the payments are typically structured as a “per-specimen” or “per-patient-encounter” payment. The OIG listed the following characteristics, which if present in a Specimen Processing Arrangement, may be indicia of unlawful purpose under the AKS:

  • Payment exceeds fair market value for services actually rendered by the party receiving the payment;
  • 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 (Medicare reimburses only one specimen collection fee even if more than one specimens is drawn);
  • 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; or
  • 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.

While the Special Fraud Alert focuses on blood specimens, the OIG’s guidance can be extended to other specimen processing arrangements. Moreover, in reference to the above practices, the OIG made a point to restate its concerns with “carve out” arrangements. Specifically, the OIG stated that arrangements which do not include Federal health care program patients may implicate the AKS because the payments for non-federal health care program business may be disguised remuneration for the Federal health care program business.

Registry Arrangements

Registry Arrangements involve labs that have established or are maintaining databases or registries which collect patient demographic and clinical information on patients who have undergone, or may undergo, certain tests offered by the lab. The purpose of these registries is generally the promotion of clinical research and knowledge-sharing for the treatment of these patients. Typically, the tests involved in Registry Arrangements are specialized and expensive. The physicians’ duties range from submission of patient data, answering patient questions about the Registry, and reviewing Registry reports. In addition to its concern that participation in Registry Arrangements may influence a physician to order medically unnecessary tests, the OIG is also concerned that the referral will be made to the lab participating in the Registry Arrangements, in lieu of referring to a clinically superior lab. The OIG listed the following characteristics, which if present in a Registry Arrangement, may be indicia of unlawful purpose under the AKS:

  • The lab requires, encourages or recommends that physicians who enter into Registry Arrangements 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 lab 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 is on a per-patient or other basis that takes into account the value or volume of referrals;
  • Compensation paid to physicians 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 the physicians’ efforts;
  • The lab 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 lab’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); or
  • The lab enters into Registry Arrangements only with a subset of physicians who have been chosen based on past, current or anticipated referral patterns.

The OIG also commented claims that a Registry is intended to advance and support clinical research, even if such claim includes an IRB, is not “sufficient to disprove unlawful intent.” Finally, as with Specimen Processing Arrangements, the OIG restated its concerns with “carve-out” arrangements in the context of Registry Arrangements.

General Points of Consideration

The OIG reiterates its long-standing concern about payments from laboratories to referring physicians, specifically, and more generally about any type of payment arrangement structured as a “per-click” fee taking into account the volume or value of referrals of Federal health care program business. Extending the OIG’s guidance in the Special Fraud Alert beyond lab arrangements, it is important to note that the OIG restated its concerns about selecting business partners on the basis of past or anticipated referral patterns. Finally, with its discussion regarding “carve-out” relationships, the OIG again took an opportunity to reiterate its position that these types of relationships may be disguised payments for federal health care program business which does implicate the AKS.