Diagnostic Lab Cases

Trinity Clinical Lab Case (2023)

107M. The defendants owned and operated Trinity Clinical Laboratories, a genetic testing lab, located in Lewisville, Texas. Between January 2018 and October 2019, the defendants offered kickbacks and bribes in return for DNA specimens and corresponding prescriptions from thousands of Medicare beneficiaries. Trinity Clinical Lab then fraudulently billed Medicare and Medicare Advantage for genetic testing. The defendants used "sham contracts" for purported marketing and other services to cover their plan. As a result, Medicare reimbursed the lab about $44 million for the fraudulent claims, the DOJ said.

RDx Bioscience Case (2024)

5 Types of Kickback Issues. Between 2018 and 2022, RDx and Leykin are alleged to have paid commission "based on the volume and value of Medicare and Medicaid referrals to independent contractor marketers to arrange for and recommend that healthcare providers order RDx laboratory tests." Also, between 2018 and 2022, RDx marketer Corum Group allegedly paid providers thousands of dollars in management service organization payments disguised as investment returns, when in actuality, the payments were inducements to providers to order RDx lab tests. Additionally, from 2017 to 2023, RDx marketers BeauMed Consultants and Ralston Health Group allegedly paid providers thousands of dollars disguised as consulting and medical director fees that were, in fact, payments to induce RDx lab test orders, among other things, the DOJ said. The DOJ also alleged RDx marketer Seaworthy Recovery Services paid thousands of dollars in kickbacks to at least one principal of certain substance abuse recovery centers in return for referrals for RDx lab tests. Lastly, RDx and Leykin are alleged to have paid specimen collection fees to staff members of referring providers to induce them to order RDx lab tests, according to the DOJ.

S&G Labs Hawaii, LLC v. Graves - 2021

A clinical laboratory brought an action alleging that a former employee breached a noncompete agreement by soliciting employees and customers to a competitor. The former employee counterclaimed that the laboratory breached the employment contract by failing to issue appropriate compensation. According to the laboratory, the former employee's then-existing commission-based compensation structure was improper under EKRA as it was based on the volume of referrals, so the laboratory changed the compensation structure to pay a fixed salary while attempting to negotiate a new contract. When the negotiations fell through, the employee was terminated for cause and left to work for a competitor. The District Court analyzed the compensation structure at issue under EKRA, relying on the AKS, and found that while the commission structure paid to the employee was "remuneration," there was no inducement of a referral because the employee's activities targeted physicians and not individuals or patients. In other words, the laboratory's payment was to the employee for services, not to a particular physician for referrals, so the agreement at issue did not violate EKRA. It remains to be seen whether other courts will follow the S&G Labs Hawaii court's interpretation of the statute.

Anti-Kickback Statute

A criminal law that prohibits the exchange of anything of value to reward the referral of a patient sponsored by a government insurance plan.

OIG Approves Physician-Owned Medical Device Company With Several Safeguards (1/2)

A favorable advisory opinion (no. 22-07) regarding physician ownership of a medical device company that manufactures products ordered by the physician owners and other affiliated physicians. OIG effectively believed the physician owners (including the inventor) had a bona fide investment in the manufacturer that sells widely to non-owners, such that the ownership was not intended to induce referrals.

UTC Laboratories Case (2019)

A genetic testing company, UTC Laboratories, and its principals paid a total of $42.6 million to resolve allegations in six whistleblower False Claims Act cases that the lab paid kickbacks to physicians under the guise of participation in a clinical trial, and that the lab billed for tests that were not medically necessary. Between 2013 and 2017, UTC paid physicians to order unnecessary PGx tests that were billed to Medicare. The payments were made in return for the physicians' participation in a clinical trial for evaluating pharmacogenetic testing called the Diagnosing Adverse Drug Reactions Registry.

LDT

A laboratory-developed test, or LDT, is a type of assay that is ordered by a physician and conducted on a biological specimen, such as bodily fluid or tissue samples, in a clinical laboratory using various equipment to process the specimen and analyze specific proteins, genetic material, or other biomarkers, typically for the purpose of aiding the diagnosis of a patient. Specifically, FDA defines an LDT as an in vitro diagnostic test, or IVD, that is designed, manufactured, and used within a single clinical laboratory licensed under the Clinical Laboratory Improvement Amendments of 1988, or CLIA, to perform high complexity testing. Currently, there are LDTs for a broad range of intended uses, from measuring vitamin or mineral deficiencies to aiding the diagnosis of cancer or other life-threatening conditions.

US vs. Schena - 2022 (1/2)

A president of a California-based medical technology company was found guilty of two violations of EKRA related to paying kickbacks for referrals to a laboratory for COVID-19 and allergy testing. Schena also orchestrated an illegal kickback and health care fraud scheme that involved submitting fraudulent claims to Medicare and private insurance for unnecessary allergy testing. Arrayit ran allergy screening tests on every patient for 120 different allergens (ranging from hornet stings to codfish) regardless of medical necessity. In order to obtain patient blood specimens, Schena paid kickbacks to marketers in violation of the Eliminating Kickbacks in Recovery Act and orchestrated a deceptive marketing plan that falsely claimed that the Arrayit test was highly accurate in diagnosing allergies, when it was not, in fact, a diagnostic test. Arrayit billed more per patient to Medicare for blood-based allergy testing than any other laboratory in the United States, the evidence at trial showed, and billed some commercial insurers over $10,000 per test.

OIG Advisory Opinion - 2023 (OIG Advisory Opinion No. 23-15)

A recent Advisory Opinion (No. 23-15) from the U.S. Department of Health and Human Services' Office of Inspector General (OIG) concluded that a healthcare consulting company's plan to offer gift cards to physician practices in exchange for referring potential new customers to the company does not violate the federal Anti-Kickback Statute (AKS). The consulting company provides practice optimization and related services, none of which are reimbursable in whole or in part under any federal healthcare program. The company is also not affiliated with any other entity that bills federal programs. For those reasons, the company's proposals to give current customers $25 gift cards for recommending its consulting services to other physicians, and to provide additional $50 gift cards for successful recommendations, do not violate the AKS.

Merit-based Incentive Payment System (MIPS)

A reimbursement system that replaces the Sustainable Growth Rate formula previously used by Medicare Part B to a value-based system. The value-based system is called the Quality Payment Program.

OIG Advisory Opinion - 2022 (OIG Advisory Opinion No. 22-09)

Addresses a proposed arrangement pursuant to which the operator of a network of laboratories (the Requestor) would compensate hospitals for certain specimen collection services related to testing performed by the Requestor (the Proposed Arrangement). The OIG ultimately concluded that the Proposed Arrangement poses a risk of fraud of abuse under the federal Anti-Kickback Statute (AKS). While AO 22-09 noted that the specimen collection fees would only "generate prohibited remuneration under the [AKS] if the requisite intent were present," the OIG pointed out that a payment can violate the AKS if "even one purpose" is to induce or reward the referral of federal health care program business.

OIG Special Fraud Alert - 2014

Addressing remuneration paid by laboratories to referring physicians for blood specimen collection, processing, and packaging services. The OIG expressed concern over such agreements, regardless of whether they carve out federal health care program patients, particularly when the payment exceeds fair market value for the services or when the physician is also receiving payment for the same service from a third party payor. The OIG implied that the latter arrangement is a per se violation of the AKS because Medicare covers the services as part of the physician's office visit. Takeaway: After the Special Fraud Alert of 2014 made clear that laboratories could not compensate referring physicians for specimen collection, many physicians refused to provide specimen collection services. Some laboratories thus had no choice but to contract with other providers, such as hospitals, urgent care centers, and, in some cases, other laboratories. With the issuance of AO 22-09, the OIG has all but foreclosed the option of contracting with hospitals for specimen collection, unless the laboratory is certain that the hospital could not and would not refer, or influence referrals, to the laboratory.

Advanced Beneficiary Notice (ABN)

An ABN is a written notice from Medicare (standard government form CMS-R-131), given to you before receiving certain items or services, notifying you: Medicare may deny payment for that specific procedure or treatment. You will be personally responsible for full payment if Medicare denies payment. (Usually applies to Fee for Service bc that's the set-up of Medicare Programs)

HDL & Out of Network Status (1/2)

Big Patient Billing Issues Managing out-of-network status has always presented challenges for laboratories, and 2015 added another problem to that list: litigation risk. Both CIGNA and Aetna have filed suit against HDL primarily based on its alleged failure, as an out-of-network laboratory, to collect amounts owed by patients covered by those insurers. In addition, private insurers have reportedly sent letters to various other laboratories around the country questioning their patient billing practices. In October 2014, CIGNA filed suit for $84 million against HDL. CIGNA claimed that HDL had unlawfully waived out-of-pocket expenses for patients and billed CIGNA at "exorbitant and unjustified rates" that misrepresented what HDL actually intended to collect." CIGNA specifically alleged that HDL failed to charge CIGNA's members for out-of-network services and paid referral fees to in-network providers to encourage the referral of patients to out-of-network providers in violation of the in-network providers' contracts. The effect of HDL's scheme, CIGNA ahout disclosing that HDL had already agreed with the patient to discount the amount of the bill. Aetna argued that the billed charges should have been reduced by the copayment and coinsurance amounts that had been waived.rgued, was (1) deceiving health benefit plans into paying far more for services than they were obligated to pay; and (2) increasing HDL's volume of business by convincing patients that HDL provided services at little or no cost (which further increased the harm to CIGNA and other plans). Ultimately, CIGNA argued that HDL's scheme induced CIGNA into paying $84 million, which CIGNA sought to recover.

Biotheranostics Inc. Case (2018)

Biotheranostics Inc. has agreed to pay $2 million to resolve allegations that it submitted and caused the submission of false claims to Medicare for Breast Cancer Index (BCI) tests that were not reasonable and necessary for the diagnosis and treatment of breast cancer, the Department of Justice announced. Biotheranostics knowingly promoted and performed the BCI test for breast cancer patients who had not been in remission for five years and who had not been taking tamoxifen, and thus for whom the test was not reasonable and necessary based on published clinical trial data and clinical practice guidelines.

Bostwick Laboratories Case (2016)

Bostwick Laboratories agreed to pay up to $3.75 million for reimbursements for cancer detection tests that allegedly were not medically necessary or performed without a treating physicians' consent or order. In addition, the government asserted that the laboratory offered various discounts and billing arrangements to induce physicians to conduct business with the laboratory. The settlement provided for a guaranteed $2.6 million payment, with up to an additional $1.125 million to be paid within the next five years for certain financial contingencies. For his role in the two settlements, a whistleblower received more than $2.5 million.

The VALID Act's "New Category"

By creating the new category, VALID addresses FDA, stakeholder, and congressional concerns that LDTs have increased in complexity to that closer to IVDs but lack federal oversight.The need or level of review needed for approval will depend on ICVT risk categories. High-risk ICVTs would require preapproval review.

Exagen Case (2023)

California-based Exagen, which develops and offers autoimmune tests, agreed to factual admissions that it paid doctors to complete blood draws of patients. The company then billed federal health care programs to perform tests on the blood draws. Exagen has agreed to pay $653,143 to settle allegations that it paid doctors specimen processing fees to encourage them to use the company's laboratory tests

OIG Advisory Opinion - 2016 (OIG Advisory Opinion No. 16-12)

Can labs provide services consisting of the labeling of test tubes and specimen collection containers at no cost to dialysis facilities? OIG Opinion in 2016. No. The OIG's position on the provision of free or below-market goods or services to actual or potential referral sources is longstanding and clear: such arrangements are suspect and may violate the anti-kickback statute. The 1994 Special Fraud Alert explained that when a laboratory offers or gives an item or service for free or less than fair market value to a referral source, an inference arises that the item or service is offered to induce the referral of business. Also, with respect to laboratory pricing at dialysis facilities, the 1994 Special Fraud Alert identified suspect "swapping" arrangements, in which a laboratory offers discounts to a dialysis facility for composite rate tests payable out of the facility's pocket in exchange for referrals of all or most of the dialysis facility's non-composite rate tests billable by the laboratory directly to Medicare or other Federal health care programs.

Clinical Laboratory Improvement Amendments (CLIA)

Congress enacted the Clinical Laboratory Improvement Amendments of 1988 (CLIA'88), codified at 42 U.S.C. 263a, to ensure the accuracy and reliability of testing in all laboratories, including, but not limited to, those that participate in Medicare and Medicaid, that test human specimens for purpose of providing information for the diagnosis, prevention, or treatment of any disease or impairment, or the assessment of health, of human beings. FCA cases will most likely involve freestanding laboratory companies with labs covering most of the United States, although there are other CLIA laboratories, to include hospital-based and office-based, amounting to about 500,000 in terms of CLIA certification. While fraud schemes were ore rampant in the 1980's and early 1990's, typically involving unbundling, upcoding and other typical scenarios, kickbacks in the industry are still a mainstay for those that choose to violate the law.

EKRA Exemptions

Disclosed price discounts Non-volume-based compensation to bona fide employees Medicare Part D drug discounts Compensation for qualifying personal services Copay waivers Remuneration paid to Federally Qualified Health Centers Remuneration paid pursuant to "alternative payment models" and other approved payment arrangements

How does EKRA implicate laboratories?

EKRA significantly alters the nature of the relationship between laboratories and their marketing and sales personnel. As mentioned, the text of EKRA appears to prohibit certain commonly accepted business practices such as paying of sales commissions to marketing personnel or giving free equipment to physician clients. This conduct was a traditionally accepted practice and was not prohibited under the Anti-Kickback Statute, though it is now prohibited under EKRA. Also, EKRA applies regardless of the entity's medical business operations and regardless of payor. Even though EKRA was intended to combat the growing opioid epidemic, the text of the statute is broader than the purpose. As a result, a clinical laboratory may now be forced to revise and amend their marketing, sales, and patient broker arrangements in order to be compliant with EKRA laws.

Fee For Service

Fee-for-service is a traditional payment model where healthcare providers are reimbursed for each service they deliver to a patient.

Health Diagnostics Laboratory Case (2015)

HDL had collected hundreds of millions of dollars from Medicare while at the same time "[paying] doctors who sent it patients' blood for testing." In response, HDL asserted that these payments "fairly compensated doctors for the labor cost of handling blood that went beyond the $3 that Medicare pays for each blood draw." HDL reportedly stopped making such payments after the OIG issued an alert. HDL entered into a settlement agreement with the DOJ for almost $50 million related to alleged kickbacks paid to referring physicians, including the payment of processing and handling fees in exchange for referrals. HDL ultimately filed for bankruptcy and thus did not pay the entire settlement amount, but DOJ later obtained a sizable False Claims Act judgment at trial in its case against HDL's Chief Executive Officer and the principals of HDL's independent sales organization. Followed by a Corporate Integrity Agreement (CIA).

FDA's Proposed Rulemaking on Lab-Developed Tests (2023)

If finalized and adopted, the proposed rule will have a major impact on the future of LDT regulation and use, with implications for both patient care and the diagnostic industry. FDA has indicated that it intends to finalize this proposed rule in April 2024, and although such self-imposed deadlines often are aspirational and may not be met, in this case it is likely that FDA will try hard to meet its goal.

Protecting Access to Medicare Act of 2014

In addition to feeling the squeeze of enforcement actions, the laboratory industry is facing the most significant changes in the Medicare Part B payment structure since implementation of the MCLFS in 1984. The Protecting Access to Medicare Act of 2014 (PAMA) will require certain laboratories to report, for the first time, payment data so that the Medicare program can tie MCLFS reimbursement to private payor rates as of January 1, 2017.

Is it possible to face civil (instead of criminal) prosecution under the EKRA?

In certain circumstances, it is possible that a violation of the EKRA could lead to civil prosecution under the False Claims Act. If the violation involves a government health care benefit program, and if prosecutors do not believe that they have sufficient evidence to prove criminal culpability under the EKRA, it is possible that providers could face civil False Claims Act liability.

Project LabScam Settlements

In the 1990s, which involved a number of multi-million dollar civil and criminal settlements and criminal convictions. The conduct primarily involved billing for medically unnecessary laboratory tests or for tests not performed; using incorrect diagnosis codes to obtain payment or incorrect CPT codes to obtain higher reimbursement amounts; and paying kickbacks to physicians. 2015 has left many in the laboratory industry with a feeling of déjà vu.

Inform Diagnostics Case (2019)

Inform Diagnostics agreed to pay $63.5 million to settle allegations that it violated the anti-kickback statute and the Stark Law by giving referring physicians subsidies for electronic health records systems and free or discounted technology consulting services.

OIG Advisory Opinion - 2022 (OIG Advisory Opinion No. 22-09)

Laboratories can't compensate hospitals for certain specimen collection services for laboratory tests furnished by themselves - as it would implicate AKS. Arrangements that do not fit in a safe harbor must be evaluated under the Federal anti-kickback statute on a case-by-case basis, based on the totality of the facts and circumstances. The Proposed Arrangement warrants careful scrutiny because: (i) in our experience, laboratory services may be particularly susceptible to the risk of steering; and (ii) the Proposed Arrangement would involve a "per-click" fee structure (in the form of a per-patient-encounter compensation methodology), which generally is inherently reflective of the volume or value of referrals or business otherwise generated between the parties. Here, the per-patient-encounter fee that would be offered under the Proposed Arrangement could induce Contract Hospitals to refer specimens to Requestor for testing, including testing that may be reimbursable, in whole or in part, by a Federal health care program.

What does OIG say about per-patient-encounter fee for specimens?

Laboratories thus should proceed with caution when considering an arrangement involving payment for specimen collection fees. If the party providing specimen collection services refers or can refer to the laboratory, whether directly or indirectly, compliance risk should be carefully considered given the OIG's view of the Proposed Arrangement. They constitute a "financial incentive to direct any such specimens to Requestor...." As those affiliated with the laboratory industry know, this scenario is unlikely to occur very often because physicians typically have relationships with performing laboratories and in many cases must choose a particular laboratory that is in-network with the patient's insurer. In addition, the OIG observed that Contract Hospitals would have an incentive to encourage their physicians and Affiliated Practices to order laboratory services from Requestor because the Contract Hospitals could use the specimen collection fees to offset the costs they incur to employ or contract with specimen collection personnel who serve all patients, including those carved out of the Proposed Arrangement. Even though the contract between the parties would require the Contract Hospitals to represent and warrant that they would not require or direct their physicians and Affiliated Practices to refer to the Requestor, the OIG inexplicably concluded that this and other compliance safeguards would "not overcome the risk of inappropriate steering to Requestor given the financial incentive inherent to a per-patient-encounter compensation methodology."

OIG Approves Physician-Owned Medical Device Company With Several Safeguards (2/2)

Lacked Certain Suspect Characteristics. Distributions Did Not Include Referral Revenue. Ownership for Bona Fide Exchange. Small Minority of Company's Revenue. (Less than 1%) No Requirement to Continue Medical Practice. No Referral Tracking or Special Treatment for those that do refer.

Millenium Labs - 2015

Millennium billed Medicare, Medicaid and other government health care programs for unnecessary urinalysis and genetic testing — which constitute violations of Washington's Medicaid Fraud False Claims Act — and provided kickbacks to physicians who agreed to refer expensive laboratory testing business to Millennium. Millennium, headquartered in San Diego, is one of the largest urine drug testing laboratories in the United States and conducts business nationwide. This practice violated federal healthcare program rules limiting payment to services that are reasonable and medically necessary for the treatment and diagnosis of an individual patient's illness or injury. The United States also alleged that Millennium's provision of free point of care urine drug test cups to physicians—expressly conditioned on the physicians' agreement to return the urine specimens to Millennium for hundreds of dollars' worth of additional testing—violated the Stark Law and the Anti-Kickback Statute. The Stark Law and the Anti-Kickback Statute generally prohibit laboratories from giving physicians anything of value in exchange for referrals of tests.

Can you add a blood test if its medically unnecessary?

No. 2017 - Quest Diagnostics paid $6 million to resolve a lawsuit by the United States alleging that Berkeley HeartLab Inc., of Alameda, California, violated the False Claims Act by paying kickbacks to physicians and patients to induce the use of Berkeley for blood testing services and by charging for medically unnecessary tests. Berkeley paid kickbacks to referring physicians disguised as "process and handling" fees. The complaint also alleged that Berkeley paid kickbacks to patients by routinely waiving copayments owed by certain patients who were legally required to pay for part of their tests. Allegedly, Berkeley paid the kickbacks to induce both the physicians and patients who received them to choose Berkeley over other laboratories. The government's complaint further alleged that these illegal practices resulted in medically unnecessary cardiovascular tests being charged to federal healthcare programs.

Can doctors provide "advisory services" in exchange for lab test referrals.

No. 2022 - Three North Texas Labs Indicted in $300 Million Kickback Fraud. The providers allegedly ordered millions of dollars worth of tests while the labs attempted to disguise the transactions as medical advisor agreement payments, salary offsets, lease payments, and marketing commissions. The indictment says that the labs paid doctors hundreds of thousands of dollars for "advisory services" in exchange for lab test referrals. The labs also paid portions of the doctors' staff's salaries and parts of their office leases, depending on the number of lab tests they referred each month. Labs in question: Unified Laboratory Services, Spectrum Diagnostic Laboratory, and Reliable Labs

Can labs give commission to 1099 employees (sales reps)?

No. The Department of Justice also has brought several recent cases against labs that paid performance-based commissions to independent ("1099") sales reps. The anti-kickback statute allows performance-based compensation for employees, but not for third parties. Labs that pay commissions to 1099 sales reps may be violating the anti-kickback statute and the False Claims Act. Genotox Laboratories Ltd.- $5.9 million FCA settlement.

Can a doctor prescribe or order unnecessary cancer genetic tests?

No. 2024 - Defendant, a physician, allegedly received cash kickbacks from a lab representative and others in exchange for approving orders for lab tests billed to Medicare. He allegedly participated in COVID-19 testing events at which he authorized COVID-19 tests and expensive and medically unnecessary cancer genetic tests that patients did not request, were not used in patients' treatment and for which the patients rarely received the results. The Defendant also allegedly billed for lengthy office visits that were never provided to patients. Additionally, the Defendant allegedly solicited and received cash kickbacks and bribes from an owner of a DME supply company in exchange for ordering medically unnecessary, and reimbursement ineligible, braces.

Physician Owned Distributorships (PODs)

OIG has repeatedly expressed concerns about arrangements that exhibit questionable features with regard to the selection and retention of investors, the solicitation of capital contributions, and the distribution of profits. Such questionable features may include, but are not limited to: (1) selecting investors because they are in a position to generate substantial business for the entity, (2) requiring investors who cease practicing in the service area to divest their ownership interests, and (3) distributing extraordinary returns on investment compared to the level of risk involved. PODs that exhibit any of these or other questionable features potentially raise four major concerns typically associated with kickbacks—corruption of medical judgment, overutilization, increased costs to the Federal health care programs and beneficiaries, and unfair competition. This is because the financial incentives PODs offer to their physician-owners may induce the physicians both to perform more procedures (or more extensive procedures) than are medically necessary and to use the devices the PODs sell in lieu of other, potentially more clinically appropriate, devices.

Verifying Accurate Leading-edge IVCT Development (VALID) Act

Originally introduced in 2020and reintroduced in 2021, introduced a revamp of the FDA regulatory framework for in vitro diagnostics and laboratory developed tests (LDT). The bill defines a new regulatory category for diagnostic testing, called in vitro clinical tests (IVCT) that would encompass both IVDs and LDTs.

U.S. V. Mallory (2021)

Paying Physicians to Draw Blood and Process Samples Can Be an Illegal Kickback.

Indicia of an unlawful specimen processing arrangement.

Payment exceeds fair market value for services actually rendered by the party receiving the payment. Payment is for services for which payment is also made by a third party, such as Medicare. Payment is made directly to the ordering physician rather than to the ordering physician's group practice, which may bear the cost of collecting and processing the specimen. Payment is made on a per-specimen basis for more than one specimen collected during a single patient encounter or on a per-test, per-patient, or other basis that takes into account the volume or value of referrals. Payment is offered on the condition that the physician order either a specified volume or type of tests or test panel, especially if the panel includes duplicative tests (e.g., two or more tests performed using different methodologies that are intended to provide the same clinical information), or tests that otherwise are not reasonable and necessary or reimbursable. Payment is made to the physician or the physician's group practice, despite the fact that the specimen processing is actually being performed by a phlebotomist placed in the physician's office by the laboratory or a third party.

Evidence that a Specimen Processing Arrangement has an unlawful purpose include, but are not limited to, the following:

Payment exceeds fair market value for services actually rendered by the party receiving the payment. Payment is for services for which payment is also made by a third-party, such as Medicare. Payment is made directly to the ordering physician rather than to the ordering physician's group practice, which may bear the cost of collecting and processing the specimen. Payment is made on a per-specimen basis for more than one specimen collected during a single patient encounter or on a per-test, per-patient, or other basis that takes into account the volume or value of referrals. Payment is offered on the condition that the physician order either a specified volume or type of tests or test panel, especially if the panel includes duplicative tests (e.g., two or more tests performed using different methodologies that are intended to provide the same clinical information), or tests that otherwise are not reasonable and necessary or reimbursable. Payment is made to the physician or the physician's group practice, despite the fact that the specimen processing is actually being performed by a phlebotomist placed in the physician's office by the laboratory or a third-party.

Billing & Medicare Claims Processing for Specimen

Physician charges for specimen collection fee are allowed when: (1) it is the accepted and prevailing practice among physicians in the locality to make separate charges for drawing or collecting a specimen; and (2) it is the customary practice of the physician performing such services to bill separate charges for them. Only one collection fee is allowed per patient encounter, regardless of the number of blood specimens drawn.

Stark Law Exceptions

Physician services In-office ancillary services Preventive screening tests, immunizations, and vaccines Eyeglasses and contact lenses following cataract surgery Intra-family rural referrals Compensation exceptions (for Stark Law) include: Rental of office space Rental of equipment Bona-fide employment relationships Personal service arrangements Physician recruitment Non-monetary compensation Fair market value exception Medical staff incidental benefits Risk-sharing arrangements

The VALID Act's "High Risk ICVT"

Presents an unreasonable risk for serious or irreversible harm or death to a patient or patients, or would otherwise cause serious harm to the public health; or otherwise likely to result in the absence, significant delay, or discontinuation of life-supporting or life-sustaining medical treatment; and (ii) shall account for the degree to which the technology for the intended use of an in vitro clinical test or tests is well-characterized and the criteria for performance of the test or tests are well-established for the intended use, the clinical circumstances under which the in vitro clinical test is used, and the available of other tests (such as confirmatory or adjunctive tests). In comparison, low-risk diagnostics could come to market after an agency listing. Low-risk ICVT either present minimum or no harm to users or are high risk with mitigating factors described in the legislation. Under VALID, the Secretary must maintain a list of low-risk categories.

Unbundling Codes

Refers to separating the components of a procedure and reporting them as billable codes with charges to increase reimbursement rates

OIG Advisory Opinion - 2022 (OIG Advisory Opinion No. 22-07)

Regarding an arrangement whereby certain physicians have an ownership interest in a medical device company that manufactures products that may be ordered by the physician owners and a physician spouse of one of the physician owners. The Arrangement implicates the Federal anti-kickback statute because the Physicians are either beneficiaries of, or the spouse of a beneficiary of, the Trusts, which hold an ownership interest in the Company, and the Physicians order products from the Company that may be reimbursable by Federal health care programs and may recommend the Company's products to others. The Arrangement does not fit in a safe harbor. BUT - OIG Issued a favorable opinion. OIG effectively believed the physician owners (including the inventor) had a bona fide investment in the manufacturer that sells widely to non-owners, such that the ownership was not intended to induce referrals.

US vs. Schena - 2022 (2/2)

Schena was convicted of one count of conspiracy to commit health care fraud and conspiracy to commit wire fraud, two counts of health care fraud, one count of conspiracy to pay kickbacks, two counts of payment of kickbacks, and three counts of securities fraud. He is scheduled to be sentenced on Jan. 30, 2023 and faces a maximum penalty 20 years imprisonment for the conspiracy to commit health care fraud and conspiracy to commit wire fraud; 10 years of imprisonment for each count of health care fraud; five years imprisonment for conspiracy to pay kickbacks; 10 years imprisonment for each count of payment of kickbacks; and 20 years imprisonment for each count of securities fraud. U.S. District Judge Edward J. Davila will determine any sentence after considering the U.S. Sentencing Guidelines and other statutory factors.

Anti-Kickback Penalties

Shall be guilty of a felony and upon conviction thereof, shall be fined not more than $100,000 or imprisoned for not more than 10 years, or both. 42 U.S.C. § 1320a-7b(b)

HDL & Out of Network Status (2/2)

Similarly, Aetna has accused HDL of routinely waiving Aetna members' out-of-pocket costs that are typically associated with using an out-of-network provider and submitting billed charges to Aetna without disclosing that HDL had already agreed with the patient to discount the amount of the bill. Aetna argued that the billed charges should have been reduced by the copayment and coinsurance amounts that had been waived.

Referral Volume Data & Patients = Risky

Substantial fraud and abuse risk would arise if a laboratory paid or collected data only from physicians selected on the basis of their past or anticipated referral volume. The OIG noted that while the AKS does not prohibit laboratories from compensating physicians for legitimate research activities, registry arrangements—even those that exclude federal health care program business—will violate the AKS if even one purpose of the arrangement is to induce or reward referrals.

EKRA 18 U.S.C. § 220

The Eliminating Kickbacks in Recovery Act ("EKRA") was passed by Congress on October 24, 2018 as a part of the Substance Use-Disorder Prevention that Promotes Opioid Recovery and Treatment for Patients and Communities Act (SUPPORT) Act. It targets patient brokers who seek to profit from illegal patient referrals by prohibiting laboratories, clinics, recovery centers, and other clinical treatment facilities from accepting or paying kickbacks for such referrals.

OIG Advisory Opinion - 2005 (OIG Advisory Opinion No. 05-08)

The OIG addressed whether laboratories could provide free blood collection kits and pay a per-patient amount to ordering physicians who perform blood draws in their office. The OIG determined that the arrangement posed a "substantial risk that the Lab would be offering the blood draw remuneration to the physicians in exchange for referrals to the Lab" and thus posed a risk of fraud and abuse under the AKS.

Specimen Processing Arrangements = Risky

The OIG defined specimen processing arrangements as involving direct or indirect payments from laboratories to referring physicians for certain specified duties, such as blood specimen collection, centrifuging, maintenance, and packaging. These payments are usually made to physicians on a per-specimen or per-patient-encounter basis and are often associated with expensive or specialized tests. The Special Fraud Alert states that when paying physicians for specified services, laboratories should consider whether the physicians are eligible to receive reimbursement from Medicare or any other third party for the services. In the event that a physician is already receiving third-party reimbursement for a service, a laboratory's payment may constitute double payment. The OIG noted that while the AKS may be implicated regardless of whether a payment is fair market value, the probability that a payment is illegitimate is increased if it exceeds fair market value or is for a service already covered by a third-party payor.

OIG Advisory Opinion - 2015 (OIG Advisory Opinion No. 15-04)

The OIG's position on the provision of free or below-market goods or services to actual or potential referral sources is longstanding and clear: such arrangements are suspect and may violate the anti-kickback statute, depending on the circumstances. If the physicians or the physician practices would receive remuneration from the Requestor, the anti- kickback statute would be implicated. However, although the physicians and physician practices would not receive direct payments under the Proposed Arrangement, the Requestor certified to other facts that we believe, in combination, would amount to remuneration. First, according to the Requestor, physician practices have expressed a preference to work with a single laboratory because of the convenience of receiving all test results with consistent reference ranges and the efficiency gained from maintaining a single interface with a single laboratory. Second, although the interfaces themselves may be free, the Requestor stated that some electronic medical record system vendors charge physician practices a monthly maintenance fee in connection with the interface. The Proposed Arrangement could relieve physician practices of this expense for any interface that the physician practice no longer would maintain.

Registry Arrangements for Labs = Risky

The Special Fraud Alert also addresses laboratory-physician arrangements involving "registries," which are laboratory-operated databases that are designed to collect data on patient characteristics and outcomes. In many of these arrangements, laboratories pay physicians to provide certain duties, such as submit patient data, answer patient questions, or review registry reports. Although laboratories have championed registries for benefitting clinical research and treatments, the OIG is concerned that registry payments may induce physicians to order medically unnecessary or duplicative tests or to prefer labs that offer registry payments over other labs that may otherwise be clinically superior.

VALID ACT 2023

The VALID Act modernizes regulatory oversight of in vitroclinical tests (IVCTs) - including in vitro diagnostics (IVDs) and laboratory-developed tests (LDTs). On September 29, 2023, the US Food and Drug Administration (FDA) issued its highly anticipated proposed rule that would explicitly regulate laboratory developed tests (LDTs) as medical devices (the Proposed Rule). LTDs are in vitro diagnostic products (IVDs) intended for clinical use and designed, manufactured, and used within a single clinical laboratory that meets certain requirements. LTDs have a direct impact on patient care and are used routinely across the healthcare system in a great number of medical decisions. Importantly, most LDTs currently are not reviewed by FDA for clinical validity prior to clinical use. The Proposed Rule intends to clarify that all IVDs—including LDTs—are regulated medical devices under the Federal Food, Drug, and Cosmetic Act (FD&C Act), and reflects FDA's shift in approach to oversight and regulation of laboratories.

Characteristics of a Registry Arrangement that may be evidence of such unlawful purpose include, but are not limited to, the following:

The laboratory collects comparative data for the Registry from, and bills for, multiple tests that may be duplicative (e.g., two or more tests performed using different methodologies that are intended to provide the same clinical information) or that otherwise are not reasonable and necessary. Compensation paid to physicians pursuant to Registry Arrangements is on a per-patient or other basis that takes into account the value or volume of referrals. Compensation paid to physicians pursuant to Registry Arrangements is not fair market value for the physicians' efforts in collecting and reporting patient data. Compensation paid to physicians pursuant to Registry Arrangements is not supported by documentation, submitted by the physicians in a timely manner, memorializing the physicians' efforts. The laboratory offers Registry Arrangements only for tests (or disease states associated with tests) for which it has obtained patents or that it exclusively performs. The tests associated with the Registry Arrangement are presented on the offering laboratory's requisition in a manner that makes it more difficult for the ordering physician to make an independent medical necessity decision with regard to each test for which the laboratory will bill (e.g., disease-related panels). A subset of physicians who were selected on the basis of their prior or anticipated referral volume, rather than their specialty, sub-specialty, or other relevant attribute.

Registry arrangements that include any of the following characteristics may be unlawful under the AKS:

The laboratory requires physicians to perform tests with a stated frequency to be eligible to receive compensation. The laboratory collects comparative data from multiple tests that are duplicative or otherwise not reasonable or necessary and bills for these tests. Physician compensation is based on a per-patient or other basis that accounts for the value or volume of referrals. Physician compensation is not fair market value for the physician's efforts in collecting and reporting patient data. Physician compensation is not supported by documentation, submitted by the physician, which memorializes the physician's efforts. The laboratory offers registry arrangements only for tests (or disease states associated with tests) for which it has obtained patents or that it exclusively performs. When a test is performed by multiple laboratories, the laboratory collects data only from the tests it performs. The laboratory's requisition displays tests in a manner that makes it more difficult for the ordering physician to make an independent medical necessity decision with regard to each test for which the laboratory will bill (e.g., disease-related panels).

True or False: EKRA is broader than Antikickback Statute?

True - EKRA is broader than the federal Anti-Kickback Statute and other federal statutes. The Anti-Kickback Statute is limited to federal and state healthcare programs. Under EKRA, health care benefit programs include not only state and federal health care programs (e.g., Medicare and Medicaid) but also private health insurance plans. EKRA's reach is therefore more extensive than the Anti-Kickback Statute. It potentially applies any time an entity provides medical services and regardless of whether such services are covered by government insurance plans (federal or state), private health insurance plans, or even in cases where the patients themselves pay. Additionally, EKRA contains less exemptions than the Anti-kickback Statute. While the Anti-Kickback Statute contains statutory and regulatory safe habors, the EKRA statute has less statutory safe harbors and no regulatory safe harbors. Therefore, conduct that was once exempt from the Anti-Kickback Statute is now prohibited by EKRA. Examples of EKRA exemptions are payments to bona fide employees, remuneration paid pursuant to "alternative payment models", remuneration paid to Federally Qualified Health Centers, and others.

Second Chance Detox LLC Case - 2022

Two operators of addiction treatment facilities were sentenced to 188 months and 97 months in prison for obtaining patients through recruiters who offered illegal kickbacks to patients. According to court documents and evidence presented at trial, the defendants conspired to unlawfully bill for approximately $112 million of addiction treatment services that were medically unnecessary and/or never provided, which were procured through illegal kickbacks at two addiction treatment facilities, Second Chance Detox LLC, dba Compass Detox (Compass Detox), an inpatient detox and residential facility, and WAR Network LLC (WAR), a related outpatient treatment program. The defendants obtained patients through patient recruiters who offered illegal kickbacks to patients, including free airline tickets, illegal drugs, and cash payments.

Value Based Care

Value-based care is a newer approach that incentivizes providers to focus on quality outcomes rather than the quantity of services rendered. Value-based care models reimburse providers based on the quality of the care they deliver. Value-based care programs aim to hold providers more accountable for patient health outcomes by offering financial incentives. CMS aims to have every traditional Medicare beneficiary in a value-based care relationship by 2030.

EKRA Penalties

Violations of this provision subjects the individual to a fine of not more than $200,000, an imprisonment term of not more than 10 years, or both, for each occurrence. Additional violations that may be imposed include sanctions, licensure revocations, or the exclusion from participating in governmental healthcare programs.

Are volume-based commissions in violation of the AKS?

Yes. 2024 - Defendant was the owner of a clinical lab who allegedly entered into an agreement with an independent contractor sales representative to arrange for, or recommend, medically unnecessary urine drug tests and respiratory pathogen panels (RPP) in return for volume-based commissions in violation of the AKS. The drug screens were performed to satisfy a requirement of a school mentoring services program for at risk teenagers without regard to medical need or patient history. With the Defendant's alleged knowledge, his lab paid the mentoring service program a percentage of the reimbursement for samples submitted by the program to the lab. The Defendant and his lab used independent sales representatives who completed test requisition forms for RPP using forged physician signatures to order COVID-19 tests and using sham diagnosis codes that did not reflect the medical conditions of the senior community residents receiving the tests, and the claims were submitted to federal health care programs.

Can laboratory compliance officers get in trouble?

Yes. 2024 - Defendants, a toxicology lab, its owner, and its director of operations/compliance officer, allegedly submitted false claims for urine drug testing services to Medicare and Medicaid. The two non-corporate Defendants knew that Medicaid only paid for medically necessary urine drug tests, but drug tests ordered by courts for use in judicial proceedings are not medically necessary and so not payable to Medicare or Medicaid. Allegedly with the Defendant-owner's knowledge, the Defendant-compliance officer recruited a company to refer court-ordered drug tests to Defendant-lab which then billed the non-medically necessary tests to Medicare and Medicaid, resulting in fraudulently obtained payments in violation of the FCA. The non-corporate Defendants also allegedly solicited urine drug tests from substance abuse recovery programs that did not provide medical treatment, and the Defendant-compliance officer misled sober home directors, inducing them to send more tests to the Defendant-lab by putting facility staff on the lab's payroll and compensating them based on the number of urine drug tests sent to the lab, despite knowing those urine drug tests were not for medical purposes when they were billed to Medicare and Medicaid.

Are Patient Gift Cards a AKS violation?

Yes. (2023) The Defendants in the case were Exact Sciences Corporation and Exact Sciences Laboratories, LLC ("Exact Sciences"). Exact Sciences is a laboratory company that manufactures, markets, and sells a colon cancer screening test called "Cologuard" throughout the United States. Cologuard is an at-home screening test that Exact Sciences claims can detect signs of colon cancer in a person's stool. Exact Sciences Agrees To Pay $13.75 Million To Resolve Kickback Case.

BlueWave Healthcare (Got in trouble with the HDL Case)

• offered and/or paid illegal remuneration to health care providers through processing and handling payments; speaker programs; advisory boards; consulting arrangements; goods and services and gifts in violation of the AKS and the Stark Law; • routinely offered to waive and/or waived cost-sharing obligations, such as copayments and deductibles for certain TRICARE beneficiaries, with the intent to induce referrals in violation of the AKS (note that this allegation does not relate to the waiver of amounts owed by commercially insured patients); • submitted or caused to be submitted claims for payment for tests that were not medically necessary or that were not appropriately coded; and • offered and/or paid illegal remuneration in the form of commission payments to BlueWave to induce BlueWave to arrange for or recommend referrals in violation of the Anti-Kickback Statute (AKS).