Some clinical laboratories have collected hundreds of millions of dollars from Medicare while using a strategy that is now under regulatory scrutiny: They paid doctors who sent patients’ blood for testing a fee for drawing the blood to be tested. According to a report in the Wall Street Journal, for some physician practices, payments totaled several thousand dollars a week. The practice is now under regulatory scrutiny as a potential “kickback” which would be unlawful under federal law.
At the heart of the current controversy is Health Diagnostic Laboratory Inc, a compnay that transformed itself from a startupin late 2008 into a major lab with $383 million in 2013 revenues, 41% of that from Medicare. Until late June, HDL paid $20 per blood sample to most doctors ordering its tests – more than other such labs paid. Other labs under investigation include Quest’s Berkeley HeartLab, Singulex Inc., Boston Heart Diagnostics Corp. and Atherotech Diagnostics Lab. Quest says Berkeley ended payments of $7.50 to $11.50 in 2011 when Quest bought Berkeley. HDL, Singulex, Boston and Atherotech say they stopped payments after a Special Fraud Alert on June 25 from the Department of Health and Human Services, which warned that such remittances presented “a substantial risk of fraud and abuse under the anti-kickback statute.” The fraud alert is part of an investigation the health agency’s Office of Inspector General is conducting with the Justice Department into doctor payments by HDL and several other labs specializing in cardiac-biomarker testing, people familiar with the investigation say.
According to the alert “This Special Fraud Alert addresses compensation paid by laboratories to referring physicians and physician group practices (collectively, physicians) for blood specimen collection, processing, and packaging, and for submitting patient data to a registry or database. OIG has issued a number of guidance documents and advisory opinions addressing the general subject of remuneration offered and paid by laboratories to referring physicians, including the 1994 Special Fraud Alert on Arrangements for the Provision of Clinical Laboratory Services, the OIG Compliance Program Guidance for Clinical Laboratories, and Advisory Opinion 05-08. In these and other documents, we have repeatedly emphasized that providing free or below-market goods or services to a physician who is a source of referrals, or paying such a physician more than fair market value for his or her services, could constitute illegal remuneration under the anti-kickback statute. This Special Fraud Alert supplements these prior guidance documents and advisory opinions and describes two specific trends OIG has identified involving transfers of value from laboratories to physicians that we believe present a substantial risk of fraud and abuse under the anti-kickback statute.”
The Special Fraud Alert describes two specific trends that present a substantial risk of fraud and abuse: Specimen Processing Arrangements and Registry Arrangements. According to the OIG, suspect Processing Arrangements typically involve payments from laboratories to physicians for certain specified duties, which may include collecting the blood specimens, centrifuging the specimens, maintaining the specimens at a particular temperature, and packaging the specimens so that they are not damaged in transport. The OIG also raised concerns with arrangements under which clinical laboratories pay physicians to collect and package patients’ swabs or urine specimens or provide free or below-market point of care urine testing cups to health care providers who use the cups to perform billable in-office testing.
The Special Fraud Alert also addresses suspect Registry Arrangements, whether they are referred to as “registries” or “observational outcomes databases” or by other terminology. Payments are made for establishing, coordinating, or maintaining databases, either directly or through an agent, purportedly to collect data on the demographics, presentation, diagnosis, treatment, outcomes, or other attributes of patients who had tests performed by the offering laboratories. Although Registry Arrangements take various forms, they typically involve payments from laboratories to physicians for certain specified duties, including submitting patient data to be incorporated into the Registry, answering patient questions about the Registry, and reviewing Registry reports. Under this scheme yhe laboratory requires, encourages, or recommends that physicians who enter into Registry Arrangements perform the tests with a stated frequency (e.g., four times per year). Compensation paid to physicians is on a per-patient or other basis that takes into account the value or volume of referrals.
Singulex says it paid $10, saying such fees were “a long-standing industry wide practice,” before the “government clarified their view.” Boston says it paid $15 and thought the practice lawful before the alert. Boston and Singulex didn’t include a $3 draw fee. Berkeley did include the $3, as did Atherotech, which says it paid $10, declining further comment.
It seems clear that the workers’ compensation community should also scrutinize the financial relationships between treating or evaluating physicians and the clinical laboratories they use. Financial payment seems to be a wide spread practice.