The federal Anti-Kickback Statute is one of the medical legal issues that clinical laboratories wrestle with on a regular basis. It is a criminal statute that prohibits the exchange (or offer to exchange), of anything of value, in an effort to induce or reward the referral of any item or service payable by the federal healthcare programs (such as drugs, supplies, or healthcare services for Medicare or Medicaid patients).
It was enacted by Congress in 1972 as part of the Social Security Act Amendments.
Remuneration includes anything of value and can take many forms besides cash, such as free rent, expensive hotel stays and meals, and excessive compensation for medical directorships or consultancies. One common form of inducement offered by medical laboratories are above-market rent or lease payments to physicians for space in their offices. Other forms of remuneration that may be a violation of the ant-kickback statue are paying physicians for processing specimens, paying physicians to participate in clinical studies and trials, and paying physicians consulting fees where little or no work of value is provided by the physicians to the labs.
The statute covers the payers of kickbacks — those who offer or pay remuneration – as well as the recipients of kickbacks – those who solicit or receive remuneration. Each party’s intent is a key element of their liability under the Anti-Kickback Statute.
Some larger clinical laboratories have been known to waive patients’ fees in exchange for lab test referral. This creates a legal dilemma for smaller, competing labs: If they don’t match the offer, then could lose volume to this aggressive sales technique. But if they do match the offer, they could face investigations from federal and state regulatory agencies under the Anti-Kickback Statute, not to mention running afoul of health plan requirements not to waive fees.
Criminal penalties and administrative sanctions for violating the statute include fines, jail terms, and exclusion from participation in the federal healthcare programs.
There are anti-kickback law safe harbors that protect certain payment and business practices that could otherwise implicate the statute from criminal and civil prosecution. To be protected by a safe harbor, an arrangement must fit squarely in the safe harbor and satisfy all of its requirements. Some safe harbors address personal services and rental agreements, investments in ambulatory surgical centers, and payments to bona fide employees.
The federal Office of the Inspector General notes that kickbacks in health care can lead to:
- Increased program costs
- Corruption of medical decision-making
- Patient steering
- Unfair competition
The kickback prohibition applies to all sources of referrals, even patients. For example, where the Medicare and Medicaid programs require patients to pay copays for services, doctors are generally required to collect that money from patients. Routinely waiving these copays could fall under the Anti-Kickback Statute, and doctors may not advertise that they will forgive copayments.
However, physicians are free to waive a copayment if they make an individual determination that the patient cannot afford to pay or if their reasonable collection efforts fail.
The government does not need to prove patient harm or financial loss to the programs to show that a physician violated the statute. A physician can be guilty of violating the statute even if the physician actually rendered the service and the service was medically necessary.
NEWS STORIES ABOUT TWO DIFFERENT FEDERAL WHISTLEBLOWER CASES against lab companies provide a reminder that managers of every clinical laboratory and pathology group must be vigilant about compliance, because potential whistleblowers can emerge from the unlikeliest of places.
The first example involves Piedmont Pathology in Hickory, N.C. In May, it agreed to pay the federal government
AN INTERNAL MEDICINE PHYSICIAN who practiced in Yonkers, N.Y., is the latest physician to admit to taking bribes in connection with a laboratory test referral scheme that Biodiagnostic Laboratory Services LLC (BLS), of Parsippany, N.J., operated for years.
The physician, Ricky J. Sayegh, MD, 44, of Scarsdale, N.Y., pleaded guilty before U.S. District Judge Stanley R.
CEO SUMMARY: Unlike federal prosecutors, who to date have shown little interest in seeking to recover money from either the physicians who accepted inducements from Health Diagnostic Laboratory or many of the shareholders, executives, and sales consultants of HDL, the trustee of the HDL bankruptcy is moving aggressively to attempt to collect money from all
WHEN A CLINICAL LAB WAIVES patients’ fees in exchange for lab test referrals, competing labs face a legal dilemma.
If the competing lab does not match the offer, it could lose volume to this aggressive sales technique. But if the lab does match the offer, it could run afoul of health plan requirements not to waive
THE DARK REPORT is the only lab industry news source to recognize the significance of the lawsuit between the Cleveland Clinic Foundation and Cleveland HeartLab against a new lab company, True Health Diagnostics. It is the latest chapter in a string of questionable sales practices engaged in by defendants in the federal whistleblower lawsuit against Health
CEO SUMMARY: Florida’s highly-competitive market for lab testing services is again seeing some lab companies use “Waiver of Charges to Managed Care Patients” agreements with physicians in situations where the lab is an out-of-network provider. This means the lab will do free testing—waiving charges to the health plan and the patient—in order to keep the
IN ANOTHER MAJOR LAB FRAUD CASE, toxicology lab company Millennium Health will pay $256 million to settle allegations in a whistleblower lawsuit that it overbilled federal healthcare programs for unnecessary lab testing. Just 22 days after this agreement, Millennium Health filed a petition for a pre-packaged Chapter 11 bankruptcy on November 10.
In papers submitted to
CEO SUMMARY: This will be an interesting week in the ongoing saga of Health Diagnostic Laboratory. The judge in the bankruptcy case must review the sales auction and the winning bid of $37.1 million that True Health Diagnostics submitted. At least two lawyers representing whistleblowers in the federal case against HDL suggest that questions should be asked, given the public disclosure that True Health has relationships with one or more individuals involved in the federal government’s case that alleges fraud by HDL and BlueWave Consultants.
CEO SUMMARY: Events within the bankruptcy proceedings of Health Diagnostic Laboratory could be interpreted as setting the stage for the emergence of a laboratory company operated by executives-and marketed by a sales consultant-known to have had leadership roles in other lab companies accused by whistleblowers and the federal government of making illegal payments to induce physicians to refer lab tests to their respective lab companies. In that regard, some in the lab industry may consider this an example of history about to repeat itself.
CEO SUMMARY: In this second phase of the whistleblower case against three cardiology testing labs and a sales consulting company, federal prosecutors are requesting a jury trial against the individuals named in the court documents filed August 7. Federal investigators alleged that executives at one lab began a fraud scheme in 1999 and then expanded that scheme to other labs over 15 years. The suit claims that the labs made improper payments to referring physicians.