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Laboratory Specimen Collection Arrangements with Contract Hospitals - OIG Advisory Opinion 22-09

Introduction

On April 28, 2022, the Department of Health and Human Services, Office of Inspector General (“OIG”) published an Advisory Opinion[1] in which it evaluated a proposed arrangement where a network of clinical laboratories (the “Requestor”) would compensate hospitals (each a “Contract Hospital”) for specimen collection, processing, and handling services (“Collection Services”) for laboratory tests furnished by the Requestor (the “Proposed Arrangement”). The OIG concluded that the Proposed Arrangement would generate prohibited remuneration under the federal Anti-Kickback Statute (“AKS”) if the requisite intent were present.  This is due to both the possibility that the proposed per-patient-encounter fee would be used to induce or reward referrals to Requestor and the associated risk of improperly steering patients to Requestor.

Summary of Advisory Opinion 22-09

The Requestor, a network of clinical laboratories, including locations that engage in Collection Services, sought OIG approval to contract with Contract Hospitals where Requestor would pay the Contract Hospitals on a per-patient-encounter basis for Collection Services that would then be sent to Requestor for testing. Requestor would bill insurance programs, including federal healthcare programs (e.g., Medicare and Medicaid), for the subsequent testing. The Collection Services would be performed by a hospital-engaged phlebotomist at the Contract Hospital. Compensation would be paid only with respect to individuals who present with orders for testing and who are not inpatients or registered outpatients of the Contract Hospital.  The Contract Hospital would have the opportunity to choose to which laboratory it would send the specimens for testing for any order not specifying a particular laboratory. 

The Proposed Arrangement

The Requestor certified to all of the following with respect to the Proposed Arrangement: 

  • It would be set out in a writing signed by the parties;
  • It would cover all of the services to be provided, which would not exceed those that are reasonably necessary to accomplish a reasonable business purpose;
  • It would be for a term of at least 1 year;
  • The per-patient-encounter fee would be consistent with fair market value in an arm’s-length transaction;
  • Contract Hospitals would be prohibited from separately billing any payors or patients for the Collection Services; and
  • Contract Hospitals would represent that none of their employed/contracted physicians or affiliated practices would be required to refer to Requestor and such would not receive renumeration from the Contract Hospitals for any referrals to the Requestor.

Law and Analysis 

The AKS is a federal law that prohibits an individual from knowingly and willfully soliciting or receiving, or offering or paying, any remuneration (i.e. kickback, bribe, or rebate), directly or indirectly, overtly or covertly, in cash or in kind, in return for referring an individual to a person for the furnishing or arranging for the furnishing of any item or service for which payment may be made in whole or in part under a federal health care program.[2] The statute has been interpreted to cover any arrangement where one purpose of the remuneration is to induce referrals for items or services reimbursable by a federal health care program.[3] The OIG has created several safe harbors to provide protection to certain arrangements that meet the conditions set forth in an applicable safe harbor. 

The OIG concluded the Proposed Arrangement would implicate the AKS because it would involve payments from a laboratory to a hospital that is in a position to make referrals to the laboratory and to arrange for the laboratory to furnish services that may be paid for by a federal health care program. The OIG provided the following analysis: 

  • For orders in which a laboratory is not specified, the Contract Hospital could refer specimens from that individual to Requestor for reimbursable testing.
  • Because of the per-patient encounter fee, the Contract Hospitals have a financial incentive to direct any specimens to Requestor for the furnishing of laboratory services.
  • The personal services and management contracts and outcomes-based payment safe harbors are not available because the per-patient-encounter fee would take into account the volume or value of referrals or other business generated for which payment may be made in whole or in part under a federal health care program.
  • The proposed safeguards would not overcome the risk of inappropriate steering to Requestor given the financial incentive inherent to a per-patient-encounter compensation methodology. 

Further, the OIG noted the Proposed Arrangement warrants scrutiny because laboratory services are susceptible to increased risk of steering referrals, and the arrangement involves a “per-click” fee structure, which is inherently reflective of the volume or value of referrals or business otherwise generated between parties.  In summary, the Proposed Arrangement would pose more than a minimal risk of fraud and abuse under the AKS because of the per-patient-encounter fee.

Conclusion 

Although in issuing this Advisory Opinion, the OIG relied solely on the facts and information presented to it by the Requestor, the Advisory Opinion does provide a roadmap for evaluating arrangements between laboratories and hospitals for collection-based services. If you have any questions about Advisory Opinion 22-09, please contact a BMD healthcare attorney today.

[1] Advisory Opinion 22-09 is available here.

[2] Social Security Act Section 1128B(b).

[3] See United States v. Nagelvoort, 856 F.3d 1117 (7th Cir. 2017); United States v. McClatchey, 217 F.3d 823 (10th Cir. 2000); United States v. Davis, 132 F.3d 1092 (5th Cir. 1998); United States v. Kats, 871 F.2d 105 (9th Cir. 1989); United States v. Greber, 760 F.2d 68 (3d Cir. 1985).

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