OIG Advises that Exclusive Lab Referral Arrangement May be a Kickback

The Department of Health and Human Services Office of Inspector General (OIG) released an advisory opinion (No. 15-04) today that states a proposed arrangement to provide free laboratory tests for certain patients of associated physician practices could implicate the federal anti-kickback law.

An unnamed multi-regional medical laboratory (the “Requestor”) submitted the request to OIG. The Requestor provides clinical laboratory, anatomic pathology, and forensic pathology services to hospitals, long-term care and assisted living facilities, physicians, businesses, and government agencies. The Requestor stated that a high number of its clients have patients whose insurance will pay only for a particular lab company that may not be the Requestor in many instances. If the Requestor is not the patient’s designated laboratory, the insurance company will not pay the Requestor for any testing, even as an out-of-network provider. According to the Requestor, this is not convenient for the physician practices, which desire to work with a single laboratory for ease of communication and consistency in reporting of test results.

Under the proposed arrangement, the Requestor would enter into exclusive agreements with the physician practices to provide all laboratory services required by the patients, regardless of the patients’ health plan coverage. If the Requestor is not a designated laboratory by an individual’s health insurance, the Requestor would not bill that patient, the physician practice, the insurance company, or any other provider. In effect, the laboratory service would be free for that individual. For all other patients, the Requestor would bill all services according to a fee schedule or contracted rate.

Though no physicians or physician practices would receive direct payments under the proposed arrangement, OIG nonetheless stated that it would amount to remuneration and thus would potentially implicate the federal anti-kickback law. By allowing a physician practice to work with a single laboratory, the Requestor would be easing administrative and financial burdens associated with using multiple laboratories. For example, the physician practice would no longer need to maintain multiple electronic medical record interfaces (or pay the associated monthly maintenance fees) and would experience efficiency gains as a result of the proposed arrangement.

In the end, OIG concluded the proposed arrangement was an attempt to provide free services to a group of patients in order to secure all business from physician practices. OIG saw it as an “inappropriate steering of patients.” Fatally, the Requestor could not counterbalance this conclusion and save the plan with potential quality or safety improvements or any safeguards to lower the risk of illegal remuneration.

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