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More thoughts on recent exclusive laboratory arrangement ruling from OIG

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OIG HHSLast week I published a summary of Advisory Opinion 15-04 from the Office of the Inspector General (OIG) for the Department of Health and Human Services put together by Mr. Lee Dilworth, Chief Legal and Administrative Officer of American Pathology Partners.  In that Opinion, the OIG ruled a lab which chooses to not bill for laboratory services provided to out-of-network patients with a commercial insurance plan that requires the insured to exclusively use a different lab could be violating the federal Anti-Kickback Statute (AKS).

I found the ruling to be very interesting, and of course potentially problematic for some laboratories, so I reached out to Jane Pine Wood, a specialist in health law and member of McDonald Hopkins, and Mr. Mick Raich, founder and president of Vachette Pathology, for their views on the matter.  They were both more than happy to provide me with their opinions. In addition, Mr. Dilworth kindly expanded on his original comments.  With permission, their comments are below.

Jane Pine Wood

This is on the heels of significantly increased focus on waivers or reductions of out of network balances, particularly by private payors.  Both CIGNA and Aetna have sent letters to laboratory clients of mine refusing to make payment until the clients have presented evidence of collection of McDonald Hopkinsthe full out of network balance from the patient.  That’s a real game changer.  It’s one thing to assume the business risk of periodic reductions of patient balances or adopting an internal policy of less aggressive billing and collection efforts.  It’s quite different if the payor refuses to pay the laboratory a penny until it has been presented evidence of the collection of the full balance owed by the patient.

The rationale in the opinion is a bit surprising given that the OIG approved the implementation of a laboratory interface last year in OIG Advisory Opinion 14-03.  Obviously “intent” plays a key role in the OIG’s analysis, but the reference to the interface in the new opinion is unexpected.

Mick Raich

The rules are simple.  You must make an attempt to bill.  If not then things get real muddy.  The bottom line is that the OIG could make a huge statement by actually punishing more of these labs.

VachetteIs this problematic for small labs?  Yes of course.  I get calls all the time about this.  Everyone knows a lab that is doing this and that is suspect but the punishments are few and far between so…many labs do this and just wait it out hoping that no one will notice.

My advice—Always make an attempt to bill, if you write off a bill make sure you have a good reason for it, like a stated financial hardship.

Not billing is just as bad as over billing.

Lee Dilworth

The OIG has long said that reducing a referring physician’s overhead expenses is no different analytically than paying the physician outright, so the OIG’s conclusion here is not surprising.  Nevertheless, I think applying that concept to these facts raises more questions than it answers.

AP2 logoWhat the OIG said is that a reduction in a physician’s EMR maintenance fees based on having fewer interfaces running into the physician’s EMR constitutes “remuneration” when combined with the added convenience and efficiency of using only one lab.  Remuneration is illegal under the AKS only when it’s given, received, offered or requested in exchange for referrals of government payer patients.  So that gets to motive, and that’s where I see a bit of a disconnect between theory and real life.

From the labs’ standpoint, many labs would say that all they are trying to do is to provide one-stop service to physician clients, who ask for that all the time, and that they never even thought of doing this as a means to relieve those clients of incremental EMR expense.  They are just meeting a market need, which is what sales folks try to do every day.

From the physicians’ standpoint, they are simply trying to run their practices more efficiently and reduce unneeded tasks and overhead, akin to eliminating duplicative telephone lines they no longer need.  That’s their motive, and it never occurred to them to connect that goal to referring Medicare patients anywhere.  They are just trying to streamline, like good business folks do every day.

Talking about “convenience” and “efficiency” as potential remuneration is also worrisome, as it begins a slippery slope.  Many health law practitioners have long advised that remuneration must have a quantifiable value to be of concern.  Many labs employ couriers who pick up lab samples from physician offices.  Is picking up three times a day, instead of one or two times, now potentially remuneration rather than simply good client service?  Where is the line to be drawn?


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