McDonald Hopkins: Collection and handling payments under scrutiny

McDonald Hopkins

Jane Pine Wood, a specialist in health law and member of McDonald Hopkins, recently sent me the following Healthcare Alert that serves as a reminder the federal government is closely scrutinizing financial arrangements between laboratories and referring physicians.

Her email stated McDonald Hopkins put the alert together because:

[W]e are increasingly encountering situations where the laboratories and the health care providers may run afoul of federal and state fraud and abuse guidelines, particularly with respect to payments made by the laboratories to the health care providers for the collection, handling and/or processing of laboratory specimens that will be referred by the health care providers to the laboratories.

Many thanks to Ms. Wood for making this available to us.


Overview

On June 25, 2014, the Office of Inspector General (OIG) issued a special fraud alert entitled “Laboratory Payments to Referring Physicians.” The alert deals specifically with laboratories paying compensation to physicians and group practices for blood specimen collection, processing, and packaging activities, as well as the submission of patient data to a database or registry.

The Medicare and Medicaid anti-kickback statute is implicated when remuneration is paid in order to induce or reward referrals for any items or services reimbursed by a federal healthcare program. The alert cautions against arrangements that improperly take into account the volume or value of referrals that may induce a physician or physician group to use a particular laboratory or cause overutilization of testing services. The OIG highlights in this special fraud alert that certain arrangements are particularly suspect under the anti-kickback statute, including specimen collection, processing and packaging arrangements, and registry payments.

Risks

The OIG explains the risks associated with arrangements where a physician or physician group is paid by a laboratory for the collection, processing, and/or packaging of specimens. Specimen collection is reimbursed by Medicare only in certain circumstances, including where it is customary practice in the region and for that particular physician to charge for specimen collection separately. There are also separate CPT codes for processing and packaging specimens for transport to a laboratory. Since the laboratory payments to a physician or physician group for these services are often per-specimen or per-patient, the anti-kickback statute is implicated and the OIG cautions laboratories entering into these arrangements to consider, for purposes of determining fair market value, whether or not the physician is already compensated for the activity either through a bundled payment or through payments for overhead expenses. Certain characteristics that the OIG finds to be evidence that the arrangement may be unlawful include if:

  • The payments exceed fair market value, is calculated on a per-specimen or per patient method, or is offered on the condition of a certain number of orders.
  • The physician is already paid for the services by a third party, such as Medicare.
  • The payments go directly to a physician rather than the group practice that actually bears the cost of the services or where the services are performed by someone placed in the office by the laboratory.

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