Office of the Inspector General says no to laboratory EHR fee kickbacks


The Office of the Inspector General (OIG) for the Department of Health and Human Services was recently asked to assess whether a business arrangement between a clinical laboratory, an electronic health record vendor (EHR) and referring physicians violates the federal anti-kickback statute.

Some of you may be thinking “Wait, I thought laboratories could no longer provide kickbacks with EHRs as of January 1, 2014.”

That is correct insomuch as labs can no longer donate an EHR to referring physicians, clinics, etc.  But the question before the OIG was whether a laboratory can legally pay EHR fees that would normally be incurred by referring physicians.

To help explain this issue, I once again asked Mr. Lee Dilworth, Chief Legal and Administrative Officer of American Pathology Partners, to summarize the OIG’s Opinion.

And just as with an earlier OIG Advisory Opinion, Mr. Dilworth readily agreed to help and put together a very nice summary, which is below.

Many thanks to Mr. Dilworth for taking the time to do this.


On April 8, 2014, the OIG posted Advisory Opinion 14-03 which should be of interest to any pathology lab receiving test orders and transmitting test results via electronic interfaces with clients.  EHR and interface vendors should also be interested.

Here, the OIG found that the payment arrangement for an interface involved “potentially problematic financial incentives” presenting “more than a minimal risk” of fraud and abuse under the Federal anti-kickback statute (AKS).  Readers should note that the AKS is a federal criminal statute that subjects both parties involved to potential hefty fines, imprisonment and exclusion from Medicare and Medicaid.

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CMS and OIG have submitted final rules on EHR donation to White House

OMB logo

This is a very brief post just to remind people the final rules on whether laboratories will be exempted from being able to donate electronic health records (EHRs) to clinicians starting in January 2014 are due out very soon.

Way back in April of this year I wrote about how the Office of the Inspector General for Health and Human Services (OIG) and the Centers for Medicare and Medicaid Services (CMS) had both proposed extending the exception to the Stark law and the safe harbor provision of the Anti-Kickback Statute that allow donation of electronic health records (EHR) until December 31, 2016.

The Stark exception and the safe harbor provision were originally scheduled to sunset on December 31, 2013.

At the same time, it was announced OIG and CMS were strongly considering removing clinical laboratories from the list of protected donors because of concerns of fraud and abuse.

Folks in pathology and laboratory medicine were strongly encouraged to submit comments to both CMS and OIG and ask them to remove labs from the list.  Many thanks to those of you who did.

We’ll soon find out whether those comments did any good.

Mr. Lee Dilworth, EVP and Chief Legal & Administrative Officer of American Pathology Partners, Inc., was kind enough to let me know CMS and OIG both submitted their final EHR rules to the White House Office of Management and Budget (OMB) last week.

According to the Hall Render law firm, submission of the rules to OMB represents the final stage in the rule making process.

It is rumored both CMS and OIG recommended extending the Stark exception and safe harbor provision for three more years, but no one I have talked to knows whether labs will be carved out in the final rules.

Mr. Dilworth told me he expects the final rules to be released at the end of November or perhaps the first week of December.  I will definitely report on them when they become available.

I should note these rules are distinct from the final rule for the Physician Fee Schedule/Clinical Laboratory Fee Schedule, which is also due out before the end of the month.

Laboratory electronic health record donation runs afoul of Massachusetts law

Mass Path

The Department of Public Health for the state of Massachusetts has issued a ruling on electronic health record (EHR) donations by laboratories that says state law would be violated if a laboratory were to do so.

The Massachusetts Society of Pathologists (MSP), in conjunction with the College of American Pathologists (CAP), wrote a letter to the MA Department of Public Health in March 2013 stating the two groups were concerned laboratories “may be using EHR donations as an improper inducement for physician practices to refer patients” and that EHR donations may influence the behavior of referring physicians.

MSP and CAP also said these donations may lead to the use of laboratories that are not optimal for patient care as well as overutilization of services.  The letter further went on to cite current MA law and questioned whether EHR donations by laboratories are permissible.

The response from the state of Massachusetts succinctly states it would indeed be a violation of state law for a laboratory to donate an EHR to a referring physician.

According to the most recent edition of CAP STATLINE, this decision makes Massachusetts the ninth state (New York, New Jersey, Missouri, Connecticut, Pennsylvania, Tennessee, Washington and West Virginia are the others) to formally clarify its state law is more restrictive than current federal law regarding EHR donation by laboratories.

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Washington state legislature upholds laboratory EHR donation prohibition


Just a very quick post about the most recent CAP STATLINE (April 25, 2013 edition), which has a nice article on a bill recently passed by the Washington state legislature that upholds the state Attorney General’s 2012 opinion that clinical laboratories may not donate electronic health records (EHR).

Apparently the Washington State Hospital Association (WSHA) wanted the entire AG opinion overturned, presumably because hospitals would not be asked to provide as many EHR kickbacks if labs were able to donate as well.

The WSHA’s attempt was opposed by both the CAP and the Washington State Society of Pathologists (WSSP); kudos to them both.  I am very pleased we have not lost any ground on the EHR issue.

The bill was unanimously passed in both the Senate and the House, indicating this was a very common sense item of business.

The full text of the bill is here.

The record of the path the bill took through the legislature, including vote tallies and roll calls, is here.

In case anyone is interested, the AG’s 2012 opinion is here.

Now is our chance to speak out against EHR donations


The Office of the Inspector General for Health and Human Services (OIG) and the Centers for Medicare and Medicaid Services (CMS) have officially proposed extending the exception to the Stark law and the safe harbor provision of the Anti-Kickback Statute that would allow donation of electronic health records (EHR) until December 31, 2016.

While I first experienced a feeling of dread upon hearing this news, I was heartened when I learned the federal government is strongly considering excluding ancillary service providers (including laboratories) from being able to donate EHRs because of the risk of fraud and abuse associated with the practice.

A couple of readers sent me emails about this very issue over the last couple of days:

I, like you, am a private practice pathologist whose practice gets accosted by large commercial laboratories trying to poach our outpatient referral business by trading EHR donations for their AP business.

As recent news has announced, CMS will very likely extend the sunset date past 12-31-2013 for the Stark Law and Anti-kickback Statute (AKS) exceptions and safe harbors regarding EHR donations.  I have found the proposed rules regarding this extension (attached) interesting reading.  The two rules, recently published in the Federal Register, are mostly similar, one from CMS regarding the Stark Law exception … and the other from the OIG regarding the AKS safe harbor.  It is clear to me that the sunset provisions for these donations will be extended for at least 3-5 years, and the reasoning for giving an exception or safe harbor in the first place is incorporated in the discussion of the proposed rules.

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Support growing to continue clinician kickbacks via EHR donation


Rep. Jim McDermott

Rep. Jim McDermott

Congressman Jim McDermott (D-WA) has written a letter to the Office of the Inspector General (OIG) of the Department of Health and Human Services (HHS), asking the safe harbor provision for electronic health record (EHR) donation to be extended.

I first wrote about this issue a couple of weeks ago after Dr. Paul Googe informed me the Tennessee attorney general had rendered an opinion that clinical laboratories in his state may not donate an EHR to a clinician office.

Normally the federal government would correctly consider such a donation by a laboratory to a clinician office to be an illegal kickback, but it nonetheless allows EHR donations thanks to a “safe harbor” provision in the Anti-Kickback Statute.

This provision is set to expire on December 31, 2013, but unfortunately for small clinical laboratories, support is growing to extend the provision according to Health Law and Policy Matters by the Mintz Levin law firm.

In addition to Congressman McDermott, Health Law and Policy Matters reports both CMS and OIG for HHS have submitted proposed rules to the Office of Management and Budget that likely seek to extend the safe harbor.

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Pathology Reimbursement Challenges and Solutions to Stay Competitive

In an effort to cut national healthcare costs, a number of changes have been put in place that will negatively affect laboratory reimbursement – and as a result, laboratory profits. Three major changes are occurring – the expiration of the TC Grandfather Clause, changes in Molecular Pathology CPT Codes from the Clinical Laboratory Fee Schedule to the Physician Fee Schedule, and an overall decrease in clinical laboratory payments.

Pathologist Productivity Dashboard

Pathologist Productivity Dashboard

With these reimbursement cuts, it is essential for clinical & anatomic pathology labs to adopt solutions that allow for quick access to the quality, operational, clinical, and financial data they need to make winning decisions. A proactive approach to lab management is essential to ensure the future success of your laboratory.

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TC Grandfather Clause Expiration
On June 30, 2012, the TC Grandfather Clause expired. This Clause affects hospitals that outsource the technical component of some pathology services to a third party laboratory. The third party laboratory subsequently bills Medicare directly for the pathology services performed. Because the TC Grandfather Clause expired, hospitals must bill Medicare directly, resulting in the laboratories billing the hospitals. In addition, the Technical Component of code 88305, the most commonly ordered surgical pathology code, has experienced a 52% reduction.

The bottom line is that laboratories or pathology practices that provide TC Services for hospital patients now need to negotiate with hospitals for reimbursement levels for their TC Services. This may or may not result in lower reimbursement rates for pathology laboratories and practices, depending on the results of negotiations with their hospital clients.

Molecular Pathology CPT Code Changes
The Center for Medicare & Medicaid Services (CMS) has also proposed changes to the Physician Fee Schedule (PFS) for CY 2013, in particular to payment for molecular pathology services. For the last twenty years, CMS has reimbursed clinical laboratories for molecular pathology tests under the Clinical Laboratory Fee Schedule (CLFS). CMS is proposing adding new codes to describe molecular pathology tests and shifting some of those tests to the PFS.

Molecular pathology tests often require a degree of interpretation, which is typically performed by a Ph.D. geneticist – not a physician. In some cases (approximately 20%), a pathologist may add interpretation. If the molecular pathology test CPT is shifted to the PFS from the CLFS, a certain amount of reimbursement is shifted from the laboratory to physicians, even if the physicians are not involved in actually interpreting the test (only ordering it). The American Clinical Laboratory Association (ACLA) conducted a survey and found that approximately 80% of services did not require a physician interpretation.

It should be pointed out that the molecular pathology tests represented by the new CPT codes are not new tests – only the codes are new. CMS states: “Molecular pathology tests are currently billed using a combination of longstanding CPT codes that describe each of the various steps required to perform a given test. This billing method is called ‘stacking’ because different ‘stacks’ of codes are billed depending on the components of the fundamental test. Currently, all of the stacking codes are paid through the CLFS.” But they will be replaced as of January 1, 2013 with more specific codes, which will require that CMS determine how to pay for these new codes.

Clinical Lab Payment Rates
These major changes coincide with an overall change in clinical laboratory payment rates. Effective January 1, 2013, there was a 2.95% rate cut in clinical laboratory payments. It is expected to save Medicare $2.7 billion over 10 years. This cut was part of the Affordable Care Act (ACA). There is also the possibility of another 2% cut as part of federal budget balancing. Together, these have the potential to total a 23% decrease in laboratory fee cuts over 10 years. READ MORE….

Register for a Quick Demo Here! 

Tennessee attorney general says no to laboratory EHR donations

TN Attorney General Robert E. Cooper, Jr.

TN Attorney General
Robert E. Cooper, Jr.

Dr. Paul Googe, a dermatopathologist in Tennessee was kind enough to send me this very recent opinion from the TN Attorney General’s office on electronic health record (EHR) donations involving laboratories.  I would like to sincerely thank Dr. Googe for taking the time to reach out to me on this matter.

EHR donation has always been on my radar but I have not written about it much.  It has been on my radar because in many (if not all) instances, the donation of an EHR (or a substantially significant portion of one) by a laboratory to a clinician’s office reeks of a kickback, at least to me.

Neither side will admit to an explicit arrangement (albeit an unwritten one) that requires the clinician to send specimens to the laboratory donating the EHR, but, amazingly enough, clinicians manage to do just that.

In fact, my laboratory just lost a sizable contract to an out-of-state lab that was willing to donate an EHR to the referring clinicians.  The clinicians didn’t care at all about the quality of pathology services we had provided their patients; they simply wanted a free EHR.

According to Dr. Googe:

The EMR donations have been a big marketing ploy by labs including Dianon, Claris, D-Path,  ProPath, Aurora, Dermpath Diagnostics (I just sent you an advertisement email- free iPads, too!). I think the GU and GI specialty labs have been doing it, too.

EMR vendors have been telling potential purchasers to “ask their lab to pay for it”.  This has happened to me, and it is quite threatening to face the loss of referrals by not making a donation.

It is a real problem for the little guys, like me.

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