Negative OIG Advisory Opinion Regarding Exclusive Arrangements Between Labs and Physician Practices

Written By Nate Trexler

On March 25, the Department of Health and Human Services Office of Inspector General (“OIG”) released Advisory Opinion 15-04 in which it concluded that an exclusive arrangement between a laboratory (“Requestor Lab”) and physician practices could generate prohibited remuneration under the anti-kickback statute.  Furthermore, the OIG concluded that the proposed arrangement could violate the prohibition on charging Federal health care programs substantially in excess of usual charges, for which a provider may be excluded from participation in Federal health care programs.
 

The Requestor Lab proposed to enter into agreements with physician practices to provide all laboratory services for the practices’ patients and waive all the fees where Requestor Lab is out-of-network.  According to the Requestor Lab, some physician practices desire to work with a single laboratory “for ease of communication and consistency in the reporting of test results.”  For example, different laboratories utilize different methods of reporting test results and require different interfaces for reporting tests to the lab.  However, some patients’ insurers require the use of a specific lab and will not reimburse any other lab under out-of-network benefits (“Exclusive Plans”).

Under the proposed arrangement, where a test is ordered for an Exclusive Plan patient, the Requestor Lab would not charge the patient, physician practice, or secondary insurer for the test.  The laboratory would bill all other patients not under an Exclusive Plan, including Federal health care program beneficiaries.  The Requestor Lab stated that neither the physician nor the practice would receive any financial benefit from the laboratory’s provision of services at no charge to the patients with Exclusive Plans.  The physicians would not draw the samples, and thus could not bill for the blood draw or the testing.  The Requestor Lab would provide a free limited-use EMR interface for submitting orders and receiving results, which the OIG had previously determined is not remuneration under the anti-kickback statute.

The OIG concluded that the proposed arrangement could potentially generate prohibited remuneration under the anti-kickback statute.  Even though the Requestor Lab certified that physicians and physician practices would receive no financial benefit, the OIG concluded that a combination of factors would amount to remuneration to the physicians in exchange for their referrals for services to the Requestor Lab.  The OIG found that the Requestor Lab would reduce administrative and possibly financial burdens (e.g., electronic record interface fees) associated with using multiple laboratories, and, as such, the OIG could not conclude that there was no possibility that the laboratory was not offering remuneration to induce the referral of Federal health care program business.

In addition to the anti-kickback statute analysis, the OIG noted that it has the authority to exclude providers from participation in Federal health care programs that it concludes have submitted or caused to be submitted bills or requests for payment to Medicare or Medicaid containing charges for items or services furnished “substantially in excess” of usual charges, unless good cause is shown.  The OIG concluded that the proposed arrangement could result in a two-tiered pricing structure, where a substantial number of patients (those insured by Exclusive Plans) would receive services for free, regardless of financial need, and where other patients, including Federal health care program beneficiaries, would be charged.  The OIG noted that the only reason for the proposed arrangement was to remove the obstacle that prevented the physician practices from referring all laboratory business to the laboratory.  While the OIG could not conclude whether the laboratory would violate the substantially in excess provision, it opined that the risk was too high to grant the arrangement prospective immunity under the advisory opinion.

Advisory Opinion 15-04 continues the OIG’s long-standing skepticism of physician-laboratory arrangements.

HHS Office of Inspector General Fraud and Abuse Focus: FY 2015 Work Plan

Written By Nathan Trexler

Each year, the Office of Inspector General (“OIG”) at the Department of Health and Human Services announces the agency’s new and continuing initiatives to combat health care fraud and abuse.  The annual OIG Work Plan helps health care providers understand new, and some recurring, areas that the OIG believes are key in the fight to protect the federal fisc.  We have previously discussed such key initiatives to help Delaware providers identify and focus on potential areas of compliance risk before issues arise (2012, 2013, 2014).

The OIG released its FY 2015 Work Plan on October 31, and our review has revealed some key initiatives:

Physicians and other Practitioners:

• Anesthesia services and payments for personally performed services.  The OIG plans to review Part B claims for personally performed anesthesia services to determine whether claims met Medicare requirements and to determine whether services reported with the “AA” service code modifier met Medicare requirements.
• Ophthalmologist inappropriate and questionable billing.  In 2010, Medicare allowed more than $6.8 billion for services provided by ophthalmologists.  The OIG will review claims data to identify potentially inappropriate and questionable billing for services during calendar year 2012.
• Physician place-of-service coding errors.  The OIG will review coding on Part B claims for services performed in ASCs and hospital outpatient departments.  The OIG has previously determined that physicians are not always correctly coding nonfacility places of services, which may result in higher payments.
• Chiropractic services.  The OIG announced its continued intentions related to chiropractic services.  The agency previously discovered inappropriate payments and will continue its review to determine whether payments for chiropractic services were claimed in accordance with Medicare requirements.  The OIG has identified one example of a chiropractor with a 93% error rate and inappropriate Medicare payments of nearly $700,000.  The OIG plans to make recommendations to reduce Medicare vulnerabilities with respect to chiropractic services.
• Diagnostic Radiology.  The OIG will review high-cost diagnostic radiology tests to determine medical necessity and the extent to which utilization has increased.
• Independent clinical lab billing requirements.  The OIG plans to review Medicare payments to independent labs to determine compliance with billing requirements, and use the results to identify clinical labs that routinely submit improper claims in order to identify overpayments for recoupment.

Hospitals

• New inpatient admission criteria.  The OIG will continue to focus on how the two-midnight rule is impacting hospital billing and examine the variability among hospitals.
• Oversight of provider-based status.  Since provider-based status allows facilities to bill as hospital outpatient departments, it can result in high Medicare payments for services furnished at the facility and may increase beneficiary coinsurance liability.  The OIG will determine whether provider-based facilities are meeting CMS criteria.
• Inpatient claims for mechanical ventilation.  The OIG will review Medicare payments for inpatient claims with certain MS-DRG assignments that require mechanical ventilation.  The purpose of the review is to determine whether hospitals’ DRG assignments and Medicare payments were appropriate.

Hospice and Home Health   

• Hospices in assisted living facilities and hospice general inpatient care.  The OIG continues to scrutinize hospice billings, which are also a focus for False Claims Act relators, and will review the use of hospice general inpatient care to determine whether the level of care is being misused.
• Home health prospective payment system requirements.  Prior OIG work found that one in four home health agencies had questionable billing and CMS has designated newly enrolling agencies as high-risk providers.  With that in mind, the OIG will continue to review and scrutinize HHA documentation to determine whether it supports claims paid by Medicare.