OIG Issues Advisory Opinion That Exclusive Lab Referrals Arrangements May Be a Kickback

The Department of Health and Human Services (HHS) Office of Inspector General (OIG) issued Advisory Opinion 15-04 stating that a proposed arrangement to provide free laboratory tests for certain physician practice patients could implicate the federal Anti-Kickback Statute (AKS).  The OIG issued the advisory opinion in response to a Requestor, an unnamed multi-regional medical laboratory that provides clinical laboratory, anatomic pathology, and forensic pathology services to hospitals, long-term care facilities, physicians, businesses and government agencies.

The proposal involved entering into exclusive agreements with physician practices to provide all laboratory services for the practices’ patients.  Under the arrangement, the laboratory would waive all fees for those practices’ patients who are enrollees of certain insurance plans that require the patient to use a different laboratory.  The Requestor stated that approximately 70 percent of its physician practice clients have patients who are enrolled in insurance plans that require their enrollees to use a particular laboratory.  Further, the Requester added that the applicable patients do not have federal health care program coverage as their primary insurance, but may carry it as their secondary insurance.  The Requestor stated if they are not a patient’s designated laboratory, the insurance company will not pay them for any testing, even as an out-of-network provider.  The Requestor asserted that this created financial burdens for the physician practices by requiring use of multiple laboratories and did not give physician practices the benefits associated with use of a single laboratory such as ease of communication and consistency of test result reporting.  The net effect of the arrangement would create free laboratory service for certain patients, while all other patients would be billed for services according to a fee schedule or contracted rate.  The Requestor claimed that the arrangement could reduce administrative and financial burdens associated with using multiple laboratories.

The OIG advisory opinion stated that even though no physicians or physician practices would receive direct payments under the proposed arrangement, it nonetheless would amount to an attempt to provide free services in order to secure all business from physician practices.  The OIG deemed this an “inappropriate steering of patients.”  The arrangement would constitute remuneration that would potentially implicate the AKS, as well as potentially violate the prohibition on charging Medicare or state health care programs substantially in excess of the provider’s or supplier usual charges, violation of which could result in administrative sanctions such as program exclusion or civil monetary penalties. Blanket waivers of patient balances can implicate federal or state false claims laws, and several states have specific statutes that prohibit blanket or advance agreements to waive patient balances.  The OIG noted that the Requestor could not counterbalance this conclusion and save the proposal with potential quality or safety improvements or any safeguards to lower the risk of illegal remuneration.

It should be noted that Advisory Opinion 15-04 was issued only to the Requestor and cannot be relied upon by any other individual or entity.