Resources

Client Alerts, News Articles, Blog Posts, & Multimedia

Everything you need to know about BMD and the industry.

Proposed Laboratory Arrangement Draws Heightened Scrutiny from the OIG

Client Alert
October 18, 2023

On September 25, 2023, the Office of Inspector General for the U.S. Department of Health and Human Services (OIG) issued Advisory Opinion 23-06 (AO). The Opinion involved a proposed arrangement between an independent laboratory and other physician laboratories for the purchase of the technical component of anatomic pathology services.

The Arrangement at Issue

The proposed arrangement specifically involved an anatomic pathology laboratory operator (“Requestor”) that entered into agreements with third-party laboratories, including laboratories that were owned by and/or employed physicians (“physician laboratories”).

Importantly, reimbursement for anatomic pathology laboratory services involves two distinct components: a “technical” component, involving the physical preparation of the specimen for pathologist review, and a “professional” component, involving analysis of the slide by the pathologist. Under the arrangement, the physician laboratory completed the technical component of the anatomic pathology service and then referred the prepared specimen to the Requestor for completion of the professional component. Once both components were finished, the Requestor billed commercial payors for both components as an in-network provider and paid the referring physician laboratory a fair market value, per-specimen fee for the technical component of the anatomic pathology service.

The OIG’s Conclusion

The OIG ultimately concluded that the arrangement at issue, if it was entered into with the requisite intent, would implicate the Federal Anti-Kickback Statute (AKS) and constitute grounds for sanctions. Notably, the proposed arrangement did not satisfy any safe harbor, including the safe harbor for personal services and management contracts. In reaching this conclusion, the OIG highlighted that 1) the arrangement allowed the Requestor to pay the physician laboratory for services that they would otherwise not be able to bill for due to their out-of-network status and 2) if the Requestor did not enter into the arrangement, it would lose out on a significant volume of referrals, including federal health care program business, from physician laboratories.

What this Opinion Means for Labs Moving Forward

This Opinion is noteworthy because the OIG opined that the proposed arrangement lacked commercial reasonableness. Even though the physician laboratory was paid fair market value for the technical component of the services under the proposed arrangement, the Requestor had the ability to perform both components and would save money and time doing so rather than paying a third party to perform the technical component. Thus, the proposed arrangement was not commercially reasonable.

Additionally, the OIG reiterated its skepticism toward arrangements that “carve out” federal health care program business in the Opinion. Historically, the OIG has been skeptical of carve out arrangements because they potentially “disguise remuneration for Federal health care program business through the payment of amounts purportedly related to non-Federal health care program business.” 

Lastly, the Opinion cautioned that, absent an applicable safe harbor, proposed arrangements must be evaluated under the AKS on a case-by-case basis by examining the totality of the circumstances to determine whether a “nexus” exists between the proposed arrangement and referrals for services reimbursable by Federal healthcare programs. Per the OIG, a nexus likely existed between the proposed arrangement at issue and referrals for services reimbursable by Federal healthcare programs for two important reasons. First, there was no commercially reasonable purpose for the arrangement for the Requestor. Second, the Requestor, because of this arrangement, would probably receive more referrals of Federal healthcare program business from physician laboratories.

Moving forward, all laboratories should exercise caution if they intend to enter into arrangements resembling the one at issue in this Opinion. In-network independent laboratories that can perform both components effectively should perform both the technical and professional components. Relatedly, out-of-network physician laboratories should not enter into arrangements where they are paid for anatomic pathology services that they are unable to independently bill for.

If you have questions about this Advisory Opinion, or third-party laboratory arrangements, please contact BMD Vice President and Healthcare Attorney Amanda Waesch at alwaesch@bmdllc.com.

Health LawAmanda L. Waeschjordan burdickAnti-Kickback Statute
Client Alert

Employer Liability for COVID-19 Vaccine Side Effects

June 9, 2021As employers encourage or require employees to obtain a COVID-19 vaccine, they should be aware of OSHA recording obligations and potential workers’ compensation liability. Though OSHA has yet to revise its COVID-19 guidance in response to the latest CDC recommendations, OSHA has revised its position regarding the recording of injury or illness resulting from the vaccine. Until now, OSHA required an employer to record an adverse reaction when the vaccine was required for employees and the injury or illness otherwise met the recording criteria (work-related, a new case, and meets one or more of the general recording criteria). OSHA has reversed course and announced that it will not require recording adverse reactions until at least May 2022, irrespective of whether the employer requires the vaccine as a condition of employment. In its revised COVID-19 FAQs, OSHA states:Client Alert

The New Rule 1.510 - Radical Change for Summary Judgement Procedure in Florida

June 8, 2021In civil litigation, where both sides participate actively, trial is usually required at the end of a long, expensive case to determine a winner and a loser. In federal and most state courts, however, there are a few procedural shortcuts by which parties can seek to prevail in advance of trial, saving time, money and annoyance. The most common of these is the “motion for summary judgment”: a request to the court by one side for judgment before trial, generally on the basis that the evidence available reflects that a win for that party is legally inevitable and thus required. Effective May 1, 2021, summary judgment procedure in Florida has radically changed.Client Alert

Vacating, Modifying or Correcting an Arbitration Award Under R.C. 2711.13: Three-Month Limitation Maximum; Not Guaranteed Amount of Time

June 8, 2021In a recent decision, the Supreme Court of Ohio held that neither R.C. 2711.09 nor R.C. 2711.13 requires a court to wait three months after an arbitration award is issued before confirming the award. R.C. 2711.13 provides that “after an award in an arbitration proceeding is made, any party to the arbitration may file a motion in the court of common pleas for an order vacating, modifying, or correcting the award.” Any such motion to vacate, modify, or correct an award “must be served upon the adverse party or his attorney within three months after the award is delivered to the parties in interest.” In BST Ohio Corporation et al. v. Wolgang, the Court held the three-month period set forth in R.C. 2711.13 is not a guaranteed time period in which to file a motion to vacate, modify, or correct an arbitration award. 2021-Ohio-1785.Client Alert

EEOC Provides Updated Guidance Regarding Employer COVID-19 Vaccine Policies

June 3, 2021On May 28, 2021, the U.S. Equal Employment Opportunity Commission updated its guidance regarding employer COVID-19 vaccination policies. The new guidance provides much-needed clarification of expectations for employers seeking to promote workplace safety and prevent the spread of COVID-19, including discussion of mandatory vaccination policies, voluntary vaccination incentives, and accommodation of employees based on disability or sincerely held religious beliefs. The full text of the update is found in Section K of the EEOC’s COVID Q&A document. You can also learn more about these and other developments from BMD's Bryan Meek and Monica Andress through the Employment Law After Hours YouTube channel, available here.Client Alert

What Telemedical Barriers Practices Face and How They Can Manage Them

May 28, 2021The onset of the COVID-19 pandemic has led to many businesses and industries having to rapidly adapt new practices in order to stay profitable, and the healthcare industry is no exception. Although telehealth tools and practices have existed and been used since the Vietnam War, the pandemic has caused many individual healthcare practices to heavily rely on telehealth as a large portion of their service mix in order to continue to provide care for patients. Because of this rapid adoption of telehealth practices in order to combat the restrictions of COVID-19, the telemedicine industry’s revenue has exploded in the last year. Experts predict that telehealth will continue to grow in use beyond the current pandemic, estimating the industry’s worth to be $25 billion by 2025. However, this rapid adoption of telehealth was prompted out of need and has not been without its own barriers that practices now face.
Older posts
Newer posts