Georgia Lab Pays Docs For Urine Test Referrals

Veritas Laboratory has legal opinion showing such payments are legal, but will feds agree?

CEO SUMMARY: Physicians could make $400 or more per sample, according to one physician. But under the federal Stark Law, the federal Anti-kickback Law, and under Florida state law, physicians and other healthcare providers are prohibited from referring patients or doing work for kickbacks and from splitting fees with other healthcare providers, according to one attorney for a national law firm. An attorney for Veritas, however, issued an opinion that the arrangement complies with state and federal law.

WHEN IT COMES TO COMPLIANCE with Medicare and Medicaid law, probably the single most important guiding principle for pathologists and lab executives is “Thou Shalt Not Pay Inducement to Referring Physicians!”

This has been true since the birth of these federal health programs in 1966. Thus, veteran lab executives will be astonished to learn that a laboratory in Tifton, Georgia, openly pays physicians who order urine drug screening tests for their patients, according to Health News Florida (HNF), a news service in Gainesville.

Last month, HNF reported that Veritas, LLC—a lab company that conducts complex urine drug screening tests— collects hundreds of dollars from health insurers for each patient tested, but keeps only $100 of each patient’s reimbursement amount. It sends the remaining amount of each patient’s reimbursement to the referring physicians, HNF reported. The news service said that it had seen internal documents that described this arrangement.

The number of physicians who had received such payments from Veritas was not known, HNF reported. But one physician said in an email message to other physicians that payments from Veritas amounted to “fantastic revenue,” wrote HNF.

HNF quoted Jonathan Daitch, M.D., a pain specialist in Fort Myers, as saying, “You can make $400 or more per sample. Our practice has been using this arrangement VERY profitably for the past eight months!”

Questions About Referrals

Assuming that the news story by Health News Florida about Veritas LLC is true, the situation raises troubling questions. How can Veritas engage in a practice that is viewed by the vast majority of the nation’s clinical laboratory organizations as a violation of federal and state law?

What legal opinion underpins this policy of Veritas? And why haven’t federal or state prosecutors taken up this case, if this practice of a lab paying physicians is done in the open, as reported by HNF?

For insight and advice, THE DARK REPORT turned to attorney Richard Cooper, who leads the National Healthcare Practice Group of MacDonald Hopkins in Cleveland, Ohio. Cooper had strong words of warning.

“Under the federal Stark Law, the federal Anti-kickback Law, and under Florida law, physicians and other healthcare providers are prohibited from splitting fees with other healthcare providers and from receiving kickbacks or remuneration for referring patients to any other healthcare provider or facility,” declared Cooper.

For his clients, Cooper does not recommend an arrangement such as the one between Veritas and its physicians. “We would not issue an opinion to any of our clients suggesting that this arrangement is appropriate,” he said. “Looking at the facts and circumstances of the arrangement as it was reported, we don’t feel comfortable that it is a compliant arrangement. We would not recommend that any of our lab clients or physician clients enter into an arrangement like the one that has been reported.”

Legal Issues Examined

The appropriateness of the arrangement hinges on whether Veritas receives a referral for work from its physician clients, noted Cooper. However, as reported by Health News Florida, two Florida attorneys and a health policy expert in Florida all claimed the arrangement between Veritas and its physician clients does not violate state or federal law.

In its reporting of this story, HNF wrote that the wording of the legal opinion Veritas follows indicates that the reason the arrangement does not violate federal law is that the contract between Veritas and its client physicians is worded carefully so that the cash-back payments to physicians come only from tests for patients covered by private health insurers.

HNF reported that the payments from Veritas to referring physicians do not come from Medicare, Medicaid, or Tricare. The applicable federal statutes are known as the Stark Law and the Anti-kickback law. Many states have similar laws, but in its news story, HNF said that some Florida legal experts said Florida law allows such arrangements.

HNF wrote that Veritas has an eight-page legal opinion from attorney Mark S. Thomas of Gainesville. Notably, Thomas was previously Chief of Staff for the Florida Agency for Health Care Administration as well as Chief Assistant Attorney General in the Florida Attorney General’s Medicaid Fraud Control Unit.

In his opinion, Thomas explained that no work is being referred to Veritas. “Instead, he [Thomas] said, the doctor is merely outsourcing the high-tech part of the lab work,” HNF reported. “The high-tech part of the work is the technical component of reviewing urine screening drug test results.”

The arrangement Veritas has with its physicians “is not a kickback, self-referral or fee-splitting arrangement, which would be a violation of Florida law, but is instead a so-called ‘safe harbor’ from liability,” HNF reported, citing Thomas’ legal opinion as the source.

Cooper, however, was very clear on this point. “We would not issue an opinion with that interpretation of federal and state law,” he explained. “In regards to Medicare, Medicaid, and Tricare, the attorney who wrote the opinion for Veritas is attempting to avoid issues under federal law by limiting the tests to those performed only for patients covered by private commercial payers—but not for patients covered by Medicare, Medicaid, or Tricare.

Risk in Screening Patients

“There is risk in believing that a lab can be 100% successful in screening out patients who have Medicare, Medicaid, or Tricare coverage—even if it is the lab’s intent to do so,” Cooper explained. “First, the physician might not catch all the traditional Medicare and Medicaid patients, or patients covered by Medicare Advantage or when Medicare is a secondary payer.

Second, patients may not accurately report their coverage to the physician or the laboratory may not detect such coverage due to automated crossover of billing data. “It is possible that some patients will slip through the screen despite a lab’s best efforts to keep them out,” he added.

Violation Without Intent

“Even if it is the intent of the lab to screen out certain patients, the Stark Law is not an intent-based statute,” observed Cooper. “The lab could violate the Stark Law if there is a referral for a service for a patient covered by Medicare or other government program—even if there was no intent to have the arrangement apply to such patients.

“Mr. Thomas is entitled to his opinion,” Cooper continued. “But his opinion appears to hinge on a belief that a referral has not occurred. From what has been reported, it appears that he is saying that the ordering of lab tests by the physicians for the physicians’ patients does not constitute a referral under federal or state law.

“We believe, in fact, that the ordering of lab tests as described is arguably a referral as ‘referral’ is discussed in a variety of government statements that the federal Office of Inspector General has issued in advisory opinions and in other communications,” Cooper said. “Mr. Thomas appears to be saying that the remitting of reimbursement from the clinical lab to the physician is, in essence, a standard clinical lab service arrangement for the provision of medication monitoring services.”

Service Provided By Doctor

On this point, does urine drug testing involve medication monitoring? This is a service provided by an attending physician who: 1) reviews the medications prescribed for the patient; 2) assesses the patient’s adherence to the medication protocols; and 3) reviews the result of the clinical lab testing performed by an independent laboratory service.

“Generally, the provision of medication monitoring services is part of the physician’s evaluation and management (E&M) services,” Cooper said. “The AMA’s descriptions for the clinical laboratory CPT codes billed by laboratories for this type of testing do not include medication monitoring services. We have never heard of a third party payer including a component for medication monitoring of lab services in its payment for services billed with these codes.

“The testing being done by the clinical laboratory under the CPT code doesn’t contain any component for medication monitoring services,” he stated. “Therefore, when the lab bills for the clinical lab testing, it is billing only for the laboratory testing, and not for the medication monitoring services.

“Therefore, I would not be comfortable saying that the lab is compensating the physician for medication monitoring services,” added Cooper, “because the lab is not billing or being paid for such medication monitoring services. “We are concerned that enforcement agencies would consider the ordering of the testing by the physicians to be a referral that is not covered under any exception or safe harbor under federal or state law,” noted Cooper.

M.D., J.D.’s Opinion

In its reporting of this story, HNF interviewed Adam Levine, M.D., J.D., a Law Professor at Stetson University Law School. He stated that “I think a prosecutor might have a fairly easy time convincing a jury that’s a self-referral, you’re getting paid for it. I would not advise my clients to set up this sort of arrangement.”

HNF wrote that, “Wolfson said he disapproves, even if the deal is technically legal. The payment acts as an inducement to order more tests, even if they are not medically necessary, he said.”


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