COMPLIANCE GUIDANCE

Compliance Perspectives: Managing Kickback Liability Risks of Specimen Processing Fees

It’s common practice for labs to pay physicians a fee for collecting and processing blood, urine, tissue, and other specimens from the patients they refer to your lab for testing. While this might seem like a normal part of business and practice, it can also get you into big legal trouble.

Kickback Red Flags
The federal Anti-kickback Statute (AKS) and Stark Law ban labs from offering or paying anything of value to physicians to encourage or reward them for referring patients covered by Medicare, Medicaid, and other federal health programs. So, any time a lab pays a fee to a referring physician, it raises a red flag.

The HDL Case
The 2015 Health Diagnostic Laboratory (HDL) case is the poster child for abusive specimen processing and handling fee arrangements. The case began when a whistleblower filed a qui tam lawsuit accusing HDL and its business associate Singulex of paying kickbacks to physicians in the form of processing fees of up to $10 to $17 per test in exchange for orders of medically unnecessary blood tests. HDL then compounded its liability by subsequently billing those ill-gotten tests to Medicare and TRICARE, thereby bringing the False Claims Act into play.

By the time the dust had cleared, HDL paid $47 million and Singulex $1.5 million to settle kickback and false claims charges. And in July 2018, the individual principles of both companies were convicted and fined another $114 million for their role in the scheme.

Kickbacks Don’t Have to Be Deliberate
Those who would deliberately abuse processing and handling fees as a disguise for kickbacks deserve to be prosecuted and punished. The problem is that well-meaning labs—like yours!—can cross the line inadvertently and without intending to.

Thus, for example, in 2005, the OIG issued an Advisory Opinion warning a lab that paying a referring physician a fee of $3 to $6 per patient for collecting specimens from Medicare patients—using blood drawing supplies supplied at no charge by the lab—raised concerns under the AKS.

Keeping Your Specimen Processing Arrangements on the Up and Up
The moral is not to avoid specimen processing fee arrangements with referring physicians. In addition to being clinically effective, such arrangements are perfectly legal as long as you structure them the right way. The good news is that the OIG has explained how to do that.

In 2014, the OIG issued a Special Fraud Alert addressing “Specimen Processing Arrangements,” which the agency defines as those typically involving services such as collecting the blood specimens, centrifuging the specimens, maintaining the specimens at a particular temperature, and packaging the specimens so they’re not damaged during transport.

The Alert lists characteristics that the OIG deems as a suspect arrangement. Bottom Line: Being aware of and diligent in applying the OIG smell test criteria is the key to ensuring your own specimen processing arrangements comply with AKS and Stark restrictions. Instructions: Vet your arrangements by asking the following YES/NO questions about the fees you’re paying. If you can’t answer NO to all of the questions, you have a potential problem and should think twice before proceeding with the arrangement. The more YES responses, the bigger your problem.

Does/Is the specimen processing fee you propose paying to the referring physician:

  • Exceed fair market value?
    YES [ ] NO [ ]
  • Calculated on a per-specimen, per-test, per-patient, or some other method that takes into account the value or volume of referrals?
    YES [ ] NO [ ]
  • Cover services for which payment is also made by a third party, such as Medicare?
    YES [ ] NO [ ]
  • Made directly to the ordering physician rather than to the ordering physician’s group practice that employs the physician and actually bears the cost of collecting and processing the specimen?
    YES [ ] NO [ ]
  • Offered on the condition that the physician order either a specified volume or type of test 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?
    YES [ ] NO [ ]
  • Offered on the condition of a certain number or type of test orders, especially where the tests are duplicative, not medically necessary or not reimbursable?
    YES [ ] NO [ ]
  • Cover services that are actually performed by someone placed in the office by the lab?
    YES [ ] NO [ ]

Final Caveat: One tactic that will not work in managing your liability risks is limiting the payment arrangement to nonfederal health care program patients. The amount paid for the nonfederal program patients could still serve as a financial incentive to refer the federal health care program patients to the lab, warns the OIG.

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