Health Care Fraud Report: OIG Alert Regarding Laboratory Payments to Referring Physicians

law-education-series-3-68918-m.jpgClinical laboratory payments to physicians in excess of the fair market value of services provided or that correlate to the volume or value of referrals can constitute health care fraud and trigger very serious civil and criminal penalties. The Department of Health and Human Services’ Office of Inspector General (OIG) recently issued a Special Fraud Alert (the “Alert”) addressing lab compensation to referring doctors and medical practices for blood specimen collection, processing and packaging, and for submitting patient data to a registry or database. Our Georgia health care law firm endeavors to follow updates in health care laws and regulations that impact providers, particularly Stark law and the federal Anti-Kickback Statute (AKS). This OIG Alert warrants caution and careful evaluation of any applicable financial arrangements by affected physicians and medical practices to ensure compliance with federal law.

Labs and physicians: BEWARE of Stark Law and the Anti-Kickback Statute
At the heart of Stark Law and the AKS is the notion that (unlike most other industries) health care business referrals may, under some circumstances, be a bad thing. Kickbacks that corrupt medical judgment about the medical necessity of services, result in the overutilization of medical products and services, increase the cost of federal programs, or that cause unfair competition, are of great interest to the Federal Government and are the intended targets of Stark Law and the AKS.

The AKS, unlike Stark, is a criminal statute, a violation of which requires evidence of criminal intent. However, the OIG may find evidence of such intent even by mere characteristics of a particular financial arrangement, including legal structure, the absence of safeguards, and, of course, actual conduct of the parties regarding the arrangement.

The Alert discusses particular arrangements between labs and doctors that the OIG now views as suspect. The Alert identifies, for example, “Specimen Processing Arrangements” as potentially illegal under the AKS. A Specimen Processing Arrangement is one between a lab and physician (or medical practice) where the lab pays a doctor (directly or indirectly) to obtain, process and package patient blood specimens. Generally speaking, Specimen Processing Arrangements are associated with expensive and specialized tests.
While there are many considerations for clinical labs in evaluating compliance with federal law, the following key points should not be overlooked:

• The AKS prohibits knowing and willful compensation (direct or indirect) of physicians if one purpose of such compensation is to induce or reward referrals of Medicare patients • When determining fair market value of doctor services, analyze whether bundled payments include any services paid for by Medicare • Avoid double payment (e.g., a payment by a third party intended to reimburse the physician for an overhead item)
• Determine whether any services for which payment is made are also paid by a third party (such as Medicare)

Importantly, the AKS imposes criminal liability to parties on both sides of a financial arrangement prohibited by the AKS.

If you have questions about health care compliance in general or, specifically, the subject matter of this blog post, you may schedule a free consultation by contacting our Atlanta (404.685.1663) or Augusta (706.722.7886) office, or email us at

*Disclaimer: Thoughts shared here do not constitute legal advice.

Source: OIG Special Alert

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