Special Fraud Alert: Laboratory Payments to Referring Physicians

I. The Anti-Kickback Statute

One purpose of the anti-kickback statute is to protect patients from inappropriate medical referrals or recommendations by health care professionals who may be unduly influenced by financial incentives. Section 1128B(b) of the Social Security Act (the Act) makes it a criminal offense to knowingly and willfully offer, pay, solicit, or receive any remuneration to induce, or in return for, referrals of items or services reimbursable by a Federal health care program. When remuneration is paid purposefully to induce or reward referrals of items or services payable by a Federal health care program, the anti-kickback statute is violated. By its terms, the statute a scribes criminal liability to parties on both sides of an impermissible “kickback” transaction. Violation of the statute constitutes a felony punishable by a maximum fine of $25,000, imprisonment up to 5 years, or both. Conviction will also lead to exclusion from Federal health care programs, including Medicare and Medicaid. OIG may also initiate administrative proceedings to exclude persons from the Federal health care programs or to impose civil money penalties for fraud, kickbacks, and other prohibited activities under sections 1128(b)(7) and 1128A(a)(7) of the Act.

II. Remuneration From Laboratories to Referring Physicians

Arrangements between referring physicians and laboratories historically have been subject to abuse and were the topic of one of the OIG’s earliest Special Fraud Alerts.

1 In that Special Fraud Alert, we stated that, “[w]henever a laboratory offers or gives to a source of referrals anything of value not paid for at fair market value, the inference may be made that the thing of value is offered to induce the referral of business.” More generally, we have, on various occasions, repeated our position that arrangements providing free or below-market goods or services to actual or potential referral sources are suspect and may violate the anti-kickback statute, depending on the circumstances.

2 Likewise, when a laboratory pays a physician more than fair market value for the physician’s services or for services the laboratory does not actually need or for which the physician is otherwise compensated, the anti-kickback statute is implicated. Such payments are suspect under the anti-kickback statute because of the implication that one purpose of the payments is to induce the physician’s Federal health care program referrals. OIG also historically has been concerned with arrangements in which the amounts paid to a referral source take into account the volume or value of business generated by the referral source. Arrangements in which laboratories provide free or below-market goods or services to physicians or make payments to physicians that 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. This is because such transfers of value may induce physicians to order tests from a laboratory that provides them with remuneration, rather than the laboratory that provides the best, most clinically appropriate service. Such transfers of value also may induce physicians to order more laboratory tests than are medically necessary, particularly when the transfers of value are tied to, or take into account, the volume or value of business generated by the physician. We are particularly concerned about these types of arrangements because the choice of laboratory, as well as the decision to order

laboratory tests, typically is made or strongly influenced by the physician, with little or no input from patients. Although physicians may order any tests they believe are appropriate to diagnose and treat their patients, Medicare will pay for laboratory tests only if they meet Medicare coverage criteria and are reasonable and necessary.3

Moreover, claims that include items or services resulting from a violation of the anti-kickback statute are not payable by Medicare and may constitute false claims under the False Claims Act, even if the items or services are medically necessary.4 OIG recognizes that the lawfulness of any particular arrangement under the anti-kickback statute depends on the intent of the parties. Such intent may be evidenced by the arrangement’s characteristics, including its legal structure, its operational safeguards, and the actual conduct of the parties to the arrangement. Nonetheless, we believe the following types of arrangements between laboratories and physicians are suspect under the anti-kickback statute.

A. Blood-Specimen Collection, Processing, and Packaging Arrangements

OIG has become aware of arrangements under which clinical laboratories are providing

remuneration to physicians to collect, process, and package patients’ specimens. This Special Fraud Alert addresses arrangements under which laboratories pay physicians, either directly orindirectly (such as through an arrangement with a marketing or other agent) to collect, process, and package patients’ blood specimens (Specimen Processing Arrangements).5 Specimen Processing Arrangements typically involve payments from laboratories to physicians for certain specified duties, which may include collecting the blood specimens, centrifuging the specimens, maintaining the specimens at a particular temperature, and packaging the specimens so that they are not damaged in transport. Payments under Specimen Processing Arrangements typically are made on a per-specimen or per-patient-encounter basis and often are associated with expensive or specialized tests.Medicare allows the person who collects a specimen to bill Medicare for a nominal specimen collection fee in certain circumstances, including times when the person draws a blood sample through venipuncture (i.e., inserting into a vein a needle with syringe or vacuum tube to draw the specimen).6 Medicare allows such billing only when: (1) it is the accepted and prevailing practice among physicians in the locality to make separate charges for drawing or collecting a specimen and (2) it is the customary practice of the physician performing such services to bill separate charges for drawing or collecting the specimen.7 Only one collection fee is allowed for each type of specimen for each patient encounter, regardless of the number of specimens drawn.8Physicians who satisfy the specimen collection fee criteria and choose to bill Medicare for the specimen collection must use Current Procedural Terminology (CPT) Code 36415, “Routine venipuncture – Collection of venous blood by venipuncture.

OIG has become aware of arrangements under which clinical laboratories are providing

remuneration to physicians to collect, process, and package patients’ specimens. This Special Fraud Alert addresses arrangements under which laboratories pay physicians, either directly or indirectly (such as through an arrangement with a marketing or other agent) to collect, process, and package patients’ blood specimens (Specimen Processing Arrangements).5 Specimen Processing Arrangements typically involve payments from laboratories to physicians for certain

specified duties, which may include collecting the blood specimens, centrifuging the specimens, maintaining the specimens at a particular temperature, and packaging the specimens so that they are not damaged in transport. Payments under Specimen Processing Arrangements typically are made on a per-specimen or per-patient-encounter basis and often are associated with expensive or specialized tests.Medicare allows the person who collects a specimen to bill Medicare for a nominal specimen

collection fee in certain circumstances, including times when the person draws a blood sample through venipuncture (i.e., inserting into a vein a needle with syringe or vacuum tube to draw the specimen).6 Medicare allows such billing only when: (1) it is the accepted and prevailing practice among physicians in the locality to make separate charges for drawing or collecting a specimen and (2) it is the customary practice of the physician performing such services to bill separate charges for drawing or collecting the specimen.7 Only one collection fee is allowed for each type of specimen for each patient encounter, regardless of the number of specimens drawn.8 Physicians who satisfy the specimen collection fee criteria and choose to bill Medicare for the specimen collection must use Current Procedural Terminology (CPT) Code 36415, “Routine venipuncture – Collection of venous blood by venipuncture.

·       * 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.

·         * 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.

OIG’s concerns regarding Specimen Processing Arrangements are not abated when those arrangements apply only to specimens collected from non-Federal health care program patients. Arrangements that “carve out” Federal health care program beneficiaries or business from otherwise questionable arrangements implicate the anti-kickback statute and may violate it by disguising remuneration for Federal health care program business through the payment of amounts purportedly related to non-Federal health care program business. Because physicians typically wish to minimize the number of laboratories to which they refer for reasons of

convenience and administrative efficiency, Specimen Processing Arrangements that carve out Federal health care program business may nevertheless be intended to influence physicians’ referrals of Federal health care program business to the offering laboratories. Finally, because the anti-kickback statute ascribes criminal liability to parties on both sides of an impermissible “kickback” arrangement, physicians who enter into Specimen