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How to Reduce Liability Risk for Lab Sales and Marketing

by | Feb 24, 2023 | Compliance Perspectives-lca, Essential, Lab Compliance Advisor

A code of conduct for sales and marketing staff is essential to allow staff to do their jobs while avoiding liability risk.

If your lab gets into fraud and abuse hot water, there’s a pretty good chance it will be the result of either billing or sales. For over three decades, these two operations have accounted for almost all enforcement actions and settlements involving clinical labs. While billing and coding gets tons of attention, sales and marketing tends to fly under the radar. This is a bit of a head scratcher, especially when you consider how many prosecutions against labs start as whistleblower lawsuits originally brought by sales and marketing personnel.

It’s not hard to understand why lab sales and marketing is such a compliance hot spot. Federal and state fraud and kickback laws act as a brake on sales activity, creating a tension between the imperative to sell and comply. Salespeople regard the laws as a hindrance; in turn, compliance and management staff regard the sales and marketing department as cavalier and high-risk. In a sense, both perceptions are right. As compliance manager, it’s incumbent on you to find a way to allow sales staff to do their jobs without exposing your lab to undue liability risk.

Sales & Marketing Regulations

The laws that have the most direct impact on lab sales and marketing are the statutes and regulations that ban kickbacks for referrals of medical services covered by Medicare, Medicaid, and other federal healthcare programs (which we’ll refer to as “Medicare”). The key laws:

    • The Anti-Kickback Statute (AKS), a criminal law that bans providers and suppliers from “knowingly and willfully” offering, paying, soliciting, or receiving prohibited remuneration to induce or to award referrals of lab testing and other medical items or services paid for by Medicare

    • The Stark Law, aka, Physician Self-Referral Law, that bans physicians from referring patients to receive “designated health services” payable by Medicare from entities with which the physician or an immediate family member has a financial relationship, unless an exception applies

  • The Eliminating Kickbacks in Recovery Act (EKRA) that bans knowingly and willfully soliciting or receiving any remuneration in return for referring a patient to a lab, clinical treatment facility, or recovery home; or paying or offering any remuneration to induce a referral of an individual; or in exchange for an individual using the services of a lab, clinical treatment facility, or recovery home

In addition, many states have adopted equivalent kickback laws that are more stringent than their federal counterparts.

These laws are wide reaching and complex. As a result, it’s easy for physicians, lab managers, and even seasoned attorneys to misinterpret them. The errors, false assumptions, and misconceptions often result in violations. Compounding the problem is that Stark and other federal laws, including the False Claims Act, make it illegal for labs to bill Medicare for the services they provide as a result of these illegally “tainted” referrals. Result: Kickback violations cause billing violations.

Impact on Lab Sales and Marketing

The fraud and abuse laws have a direct impact on sales and marketing to the extent that these staffers are the primary point of contact for physicians and referral sources. Accordingly, they’re often asked or naturally inclined for special favors, discounts, and other benefits that may constitute illegal remuneration under the kickback laws. That may include anything from placing free computers and other equipment and personnel in physicians’ offices to offering free specimen collection supplies.

The first thing lab managers and compliance officers must do to manage these liability risks is to recognize that they exist. They must then educate sales and marketing employees about the risks while coming up with ways to ensure they follow strict ground rules when carrying out their job functions. To keep operations on the up and up, you must develop and implement specific compliance policies and procedures, as well as a general written code of conduct for sales and marketing operations.

Implement Sales and Marketing Code of Conduct

The good news is that government guidance can be enormously helpful in executing this strategy. The OIG Compliance Program Guidance for Clinical Laboratories clarifies that lab marketing and sales techniques should be clear and nondeceptive.1 Labs should ensure that physicians understand the billing and testing consequences of the services they order from the lab. Sales and marketing materials and verbal presentations should properly represent the testing and services the lab provides and refrain from making any claims for tests that can’t be substantiated by a valid study or objective third-party peer review. Labs must never represent a test as doing something outside of what the test manufacturer claims about the test’s capabilities and functions.

Sales proposals that involve special pricing, discounts, or other service arrangements must comply with lab policy and be approved by appropriate lab management before proposals are made to a client or prospect. Examples:

    • Labs that offer custom profiles and panels or reflex tests must ensure that ordering physicians understand how to use the tests and order any one or combination of panel and profile tests without also ordering the panel/profile components that the physician deems not medically necessary for the particular patient;

    • Labs that offer or provide ordering physicians in-office phlebotomists, computer connections or equipment, or other free and discounted items or services should have some kind of written agreement or communication laying out strict ground rules and do’s and don’ts of the arrangement; and

  • Labs must have policies for sales and marketing representatives to follow when offering or providing gifts, free food or entertainment, or anything of value to a physician, physician’s spouse, or physician office, including the requirement that dollar value amounts be tracked and that representatives never state or imply that the benefits are a reward or in exchange for referral of lab tests.


You can use the Rules of Conduct for Sales and Marketing posted on the Lab Compliance Advisor webpage as a template to tailor your own rules in accordance with your lab’s specific policies and business model.2


    1. https://oig.hhs.gov/documents/compliance-guidance/806/cpglab.pdf

    1. https://www.g2intelligence.com/model-code-of-conduct-for-laboratory-sales-and-marketing/

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