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Eight Lab Sales & Marketing Liability Pitfalls to Avoid

by | Feb 25, 2022 | Compliance Perspectives-lca, Essential, Lab Compliance Advisor

How to avoid eight of the most common liability pitfalls when it comes to sales and marketing operations in your lab.

Chances are, if your lab ever runs afoul of health care and fraud abuse laws, it will be the result of some kind of mishap or misunderstanding in your sales and marketing operations. Here’s a look at seven of the most common liability pitfalls and what you should do to avoid them.

Pitfall 1. Misrepresenting Your Products

The exaggeration of product qualities and downplaying of weaknesses that may work for other products is highly problematic for lab tests or equipment. Solution: Make sure your sales staff tell the truth. They must understand exactly what a test can do and sell only that to clients. Practices to avoid: Misrepresenting what a test can do, exaggerating test characteristics or capabilities, and urging doctors to order assays for conditions for which the test hasn’t been proven to be effective.

Pitfall 2. Selling Off-Label

A more serious violation on the misrepresentation side of things is selling off-label. Solution: Kits cleared by the U.S. Food and Drug Administration (FDA) must be sold only for the labeled indications. If the kit is non-FDA cleared kit, it should be sold in conformance with the validated results.

Pitfall 3. Failure to Disclose

Still another form of misrepresentation is covering up or seeking to conceal problems with the product. Solution: Disclose what you know about a test. If it stops performing in accordance with claims, stop making the claims. Disclose what’s happening, select appropriate methods for making such disclosure and keep the information flowing and current.

Pitfall 4. Bundling

One of the most common mistake sales staff make is bundling products with multiple components. Solution: Disclose the contents and CPT codes used to bill for each component of the product, as well as the amount Medicare reimburses for the respective component and total reimbursement for the entire package. Make sure doctors know the alternative tests that may be ordered and their prices. In addition to helping them determine what’s medically necessary, this information will enable doctors to understand the economic consequences of their test-ordering decisions.

Pitfall 5. Buying or Offering to Pay for Referrals

Paying for referrals of tests reimbursed by the government is fraud; it’s also of questionable legality when tests are covered by private payors. Solution: Sales staff must understand that illegal remuneration may include not just cash but just about anything of value, including trips, lavish meals, tickets to sporting or entertainment events, and goods and services provided at less than fair market value. Paying third persons to arrange for test referrals is also illegal under the Anti-Kickback Statute (AKS), and the False Claims Act (FCA) if you subsequently bill Medicare for the ill-gotten tests.

Pitfall 6. Paying for Marketing Leads (Potentially)

Purchasing marketing leads from brokers is legal if it’s a passive transaction, i.e., there’s no correlation between the purchase and the success of the leads— in other words, if it’s a passive transaction. But it raises a red flag when payment is somehow tied to the success of the leads. Solution: Recognize that lead purchasing entails kickback risk and get legal advice before you do it to protect both your lab and the broker.

Pitfall 7. Sales Techniques That Emphasize How Much Doctors Can Earn

Telling physicians how much money they can earn can easily be misunderstood and viewed by the government as a potential inducement. Solution: If you plan to use these techniques, consult with an attorney to ensure you’re not exposing your lab to liability.

Pitfall 8. Requisition Form Irregularities

Requisition forms are a major liability risk to the extent they foster bundling (e.g., via custom panels), unbundling, or ordering of medically unnecessary tests (e.g., via reflex testing). Solution: Don’t use requisition form designs that steer test ordering. Disclose test offerings and price and offer choices. And be sure that test ordering and listing tools are designed for clarity.

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