OIG Issues Special Fraud Alert Focusing on Laboratory Payments to Referring Physicians

By: Stephen H. Siegel, Esq.

On June 25, 2014, the HHS- Office of Inspector General (“OIG”) issued its “Special Fraud Alert: Laboratory Payments to Referring Physicians.” The OIG focused on blood-specimen collection, processing, and packaging arrangements, as well as so-called registry payments.  In addition, the OIG provided guidance that is relevant to all compensation arrangements involving parties in the healthcare industry.


The OIG expressed its concern that “clinical laboratories are providing remuneration to physicians to collect, process and package patients” blood and other specimens.  The Medicare program “allows the person who collects a specimen to bill … a nominal collection fee in certain circumstances.”  However, Medicare limits its payment for these services to “one collection fee … for each type of specimen for each patient encounter, regardless of the number of specimens drawn”, under CPT code 99000.


This Special Fraud Alert restated the OIG’s long-held position that the Kickback Prohibition is violated “if even one purpose of the payment is to induce or reward referrals for Federal health care program business.  This is true regardless of whether the payment is fair market value for services rendered.”  It then went on to identify a number of characteristics that may be indicia of a prohibited laboratory referral arrangement.


Certain laboratories are either coordinating or establishing databases for the purpose of collecting demographic and other information regarding the “diagnosis, treatment, outcomes or other attributes of patients who have undergone, or who may undergo certain tests performed by the offering laboratory.”  In the Special Fraud Alert, the OIG identified a number of practices involving registry arrangements that this agency views as suspicious. 


In this Special Fraud Alert the OIG went out of its way to address “carve out” arrangements, i.e., those compensation relationships that purport to remove Medicare, Medicaid or any other Federal health care program from what would otherwise be viewed as an otherwise potential Kickback Prohibition.  At least two points should be noted regarding OIG’s position.  First, simply because a particular business/compensation arrangement excludes Federal health care program beneficiaries/recipients, that does not mean the Kickback Prohibition or the Stark Law can be ignored in evaluating the related legal risk.  Second, there is still the issue of complying with state laws, such as the Florida Patient Brokering Act, Patient Self-Referral Act and Health Care Clinic Act, that must be considered whenever parties in the healthcare industry enter into compensation arrangements that involve the referral of patients or business. Please click here to view the OIG “Special Fraud Alert: Laboratory Payments to Referring Physicians.”

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