Regional Laboratory
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The Office of Inspector General (OIG) was established by Congress in 1976 to identify and eliminate fraud and abuse in both the Medicare and Medicaid programs. Over the past twenty-two years the OIG has evolved into a very powerful law enforcement agency within the Department of Health and Human Services. The OIG carries out its mission through a very sophisticated program of audits, inspections and investigations.
One of the major statutes that involves both physicians in their office practices and clinical laboratories is the Medicare and Medicaid anti-kickback statute. Among its provisions, the anti-kickback legislation penalizes anyone who knowingly and willfully solicits, receives offers or pays remuneration in cash or in kind to induce:
A. Referring an individual to a person or entity for the furnishing, or arranging for the furnishing, of any item or service payable under the Medicare or Medicaid programs; or
B. Purchasing, leasing or ordering, or arranging for or recommending purchasing, leasing or ordering, any good, facility, service, or item payable under the Medicare or Medicaid programs.
How does the anti-kickback statute specifically relate to arrangements between a physician’s office and an outside laboratory used by that office?
Whenever a laboratory offers or gives to a source of referrals anything of value not paid for at fair market value, the inference is made that the thing of value is offered to induce the referral of business. The same is true whenever a referral source solicits or receives anything of value from the laboratory.
There are six major areas that the OIG considers when reviewing relationships between physicians and laboratories.
1. Providing of phlebotomy services to physicians
Where permitted by State law, a laboratory may make available to a physician’s office a phlebotomist who collects specimens from patients for testing by the outside laboratory. While the mere placement of a laboratory employee in the physician’s office would not necessarily serve as an inducement prohibited by the anti-kickback statute, the statute is implicated when the phlebotomist performs additional tasks that are normally the responsibility of the physician’s office staff. These tasks can include, but are not limited to, taking vital signs or other nursing functions, testing for the physician’s office laboratory or performing clerical services.
Where the phlebotomist performs clerical or medical functions not directly related to the collection or processing of laboratory specimens, a strong inference arises that he or she is providing a benefit in return for the physician’s referrals to the laboratory. In such a case, the physician, the phlebotomist, and the laboratory may have exposure under the anti-kickback statute. This analysis applies equally to the placement of phlebotomists in other health care settings, including nursing homes.
2. Waiving charges to managed care patients
Managed care plans often require a physician to exclusively use the laboratory with which the plan has a negotiated contract. The physician, however, may use a different laboratory and may wish to continue to use that laboratory for non-managed care patients. In order to retain the physician as a client the laboratory that does not have the managed care contract may agree to perform the managed care testing free of charge.
Under the terms of many managed care contracts, a provider receives a bonus or other payment if utilization of ancillary services, such as laboratory testing, is kept below a particular level. Other managed care plans impose financial penalties if the provider’s utilization of services exceeds pre-established levels. When the laboratory agrees to write off charges for the physician’s managed care work, the physician may realize a financial benefit from the managed care plan created by the appearance that utilization of tests has been reduced.
In cases where the provision of free testing results in a benefit to the physician, the anti-kickback statute is implicated.
3. Providing free laboratory testing to physicians, their families and their employees
Laboratories can no longer provide professional courtesy to physicians, their families or office employees.
4. Providing computers, fax machines, telephones and other equipment to a physician unless such equipment is integral to, and exclusively used for the performance of the outside laboratory’s work.
5. Providing free pick-up and disposal of bio-hazardous waste that is unrelated to the collection of specimens for the outside laboratory.
6. Laboratory pricing at renal dialysis centers
This is a specific statute related to patients with end stage renal disease and the way in which that Medicare program covers and pays for laboratory testing for those patients. Further information on this specific statute can be obtained through the RLA at 1-800-580-7114.
With new resources provided under the Kennedy-Kassebaum bill and the high priority assigned to health-care fraud by the Dept. of Justice, it is not surprising that the number of audits and investigations has increased more than seven fold over the past two years. More than 4000 civil health care matters were opened by the OIG and Justice Dept. last year alone. Where these agencies suspect arrangements such as these exist, they will investigate and under administrative law there is an affirmative duty for compliance which must be demonstrated. In other words, the physician and laboratory are in effect presumed guilty and must prove innocence.