Letter to Florida Doctor Offers to Waive Lab Test Fees

Attorney believes that such arrangements may be false claims under state insurance regulations

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 physicians’ other lab test referrals. The physician must declare that he or she gets no remuneration or compensation because of this agreement.

ONE OF THE LAB INDUSTRY’S THORNIEST QUESTIONS about federal and state compliance is being asked in Florida. When is it permissible for an out-of-network laboratory to tell a physician it will do free testing and not bill a health plan or the patient?

This sales scheme involves “waiver of charges,” a situation where an out-of-network lab tells a medical group it will not charge a specific insurer or that insurer’s patients for lab tests as a business arrangement intended to persuade the physicians to continue using their lab, rather than the lab company that is in-network for that insurer. One purpose of “waiving charges” and doing free lab testing is to retain all the other lab test referrals of that physician, including patient self-pay, patients covered by other health plans, and patients enrolled in Medicare and Medicaid.

The “free testing” issue is surfacing again in Florida. It is believed to be a response by some lab companies to the exclusive lab testing contract for specific health plans that UnitedHealthcare has given to BeaconLBS, a business unit of Laboratory Corporation of America.

The free testing arrangement, known within public lab companies as “Waiver of Charges,” refers to the Advisory Opinion issued by the Office of the Inspector General in December 1994. This opinion set out criteria that must be met if a provider or lab enters into an agreement with a physician not to charge a specific health insurance plan and its patients for lab tests it performs. (See TDR, August 26, 2002.)

Newer OIG Advisory Opinion

Additionally, waiver of charges is the specific issue addressed in the new OIG Advisory Opinion 15-04, released last March. Lab industry attorneys are studying this document to understand how it may change the guidance provided in the 1994 advisory opinion.

What makes Florida an interesting case study is that, along with the need for labs to follow federal law, the Sunshine State has its own regulations to deal with inducement and kickbacks.

One lab company known to be using the “waiver of charges” business scheme of free lab testing in Florida is Quest Diagnostics Incorporated. Some lab competitors believe this is probably a response to UnitedHealthcare’s laboratory benefit management program.

But, in fact, Quest Diagnostics has been out of the UHC network since 2007. That’s the year when UHC established a national lab contract with LabCorp, eliminating Quest as an in-network option for UHC members, a UHC spokesperson said, further adding that Quest’s out-of- network status “has nothing to do with the BeaconLBS lab utilization effort.”

Out-of-Network Fees Waived

In a letter that appears to come from Quest Diagnostics and has been sent to a family physician, Quest offers to waive out-of- network charges for managed care services. The letter went to at least one physician in Florida and is signed by a physician in Southwest Florida and dated May 5, 2015. At the physician’s request, THE DARK REPORT agreed not to disclose the name of the doctor who signed the letter.

The letter is not printed on any letterhead. It is not clear how many physicians received the letter or how many physicians returned the letter.

The first line of the letter explains that Quest Diagnostics is seeking to gain the out-of-network business for UnitedHealthcare’s fully-insured products and those of Golden Rule, the Empire Plan, United Medical Resources, and Oxford. There are reports that this letter has been used recently with physicians in other states.

Quest Provides Statement

When asked about this letter and its use, Wendy H. Bost, Director, Corporate Communications at Quest, told THE DARK REPORT that “Quest Diagnostics carefully evaluates our billing practices and has a vigorous compliance policy designed to comply with applicable laws and regulations. We have reviewed the March 2015 OIG advisory opinion (AO 15-04). Our position on this recent AO is aligned with that of our trade group, the American Clinical Laboratory Association (ACLA). You may want to contact them for more information.”

One attorney who was asked to read the waiver of charges letter and comment said it could be an attempt to establish an illegal kickback arrangement with referring physicians. Asking not to be identified, this attorney said that the letter asks the physician to declare that he or she has no financial or business interests in the health plan in order to protect the physician from violating the self-referral rules.

Another attorney who saw the waiver of charges letter given to the Florida doctor is J. Marc Vezina, of the Vezina Law Group in New Orleans and Birmingham, Michigan. The letter could be the basis for a False Claim Act violation, and possibly could be a violation of Florida state insurance rules and regulations, he said.

Driving Marketshare

“My preliminary analysis is that this is a straight kickback arrangement—nothing more, nothing less,” Vezina declared. “This is clearly an arrangement in which Quest is driving marketshare, and therefore utilization, in exchange for waiving patients’ fees. In that way, the letter plainly describes a kickback arrangement that could be illegal under the Anti-Kickback Statute. Quest Diagnostics is saying, ‘If you give us your marketshare we will waive the fees for your patients.’ ”

Vezina recently represented a whistleblower in a False Claims Act case against Millennium Health in which the U.S. Department of Justice alleged in part that Millennium engaged in practices that violated the Anti-Kickback Statute. That matter was settled when Millennium agreed to pay $256 million. Vezina’s client was awarded a whistleblower’s share of the settlement. (See TDR, November 16, 2015.)

“To the extent that these five health insurance plans identified in the letter do insure Medicare, Medicaid, military, or other beneficiaries in federal or state programs, this letter would clearly implicate the False Claims Act, as well as other federal and state anti-fraud statutes,” Vezina said. “In addition, this process could implicate federal and state antitrust and consumer protection statutes.

“An out-of-network laboratory can benefit itself and the client physician if it waives the patients’ charges and has the physicians continue to refer patients to it,” he noted. “First, the arrangement obviously benefits the lab because it gets work it probably wouldn’t get because it is not an in-network provider.

“Second, it benefits the plan member who is not charged a fee for going out of network,” continued Venzina. “Normally, a patient going out of network would be charged a fee for doing so and that fee usually is much higher than going to an in-network laboratory.”

Not Much Resistance

Vezina further noted that offering free lab testing under the waiver of charges scheme doesn’t generate much resistance from physicians and their patients. “The point of this arrangement is that the physician and patient don’t care either way and so they are not likely to complain to the health plan,” Vezina said. “When you have a grey area like that, it’s just ripe for fraud.”

Patients and physicians may not care that the payer will not be charged by the out-of-network lab. But the health plans do have major concerns about this lab sales scheme. Several health insurers have sued lab companies over the failure of these labs—as out-of-network providers—to provide lab testing services but then not bill the patients.

Earlier this year, Cigna sued Health Diagnostic Laboratory in Richmond, Virginia, for waiving patients’ copayments, thus encouraging patients to use doctors who would send their lab test work to HDL. By waiving copayments, HDL was subverting Cigna’s attempts to steer patients to low-cost labs, Cigna said in court documents.

Another insurer that sued HDL was Aetna. It made similar claims in its court filings. In 2014, Aetna also sued Biodiagnostic Laboratory Services of Parsippany, New Jersey. BLS executives and as many as 30 physicians were found guilty of criminal charges in the federal anti-kickback case. Among the claims that Aetna made is that BLS waived patient co-pays on lab services to encourage patients to choose BLS.

Risk From Qui Tam Lawsuits

Meanwhile, lab companies using the waiver of charges sales strategies have another risk. It is from federal and state qui tam lawsuits filed by whistleblowers who are often employees of the lab, sales reps from competing labs, or physicians who consider the arrangement to be an illegal inducement.

Contact J. Marc Vezina at 248-558-2701 or jmv@vezinalaw.com.

When a Physician Affirms No Remuneration, ‘Waive Charges’ Letter Means Free Lab Tests

REPRODUCED BELOW IS A COPY OF A LETTER GIVEN TO A PHYSICIAN IN FLORIDA by a representative of Quest Diagnostics Incorporated. In the letter, Quest Diagnostics says it will not submit lab test charges to “UnitedHealthcare Fully-Insured Products, Golden Rule, The Empire Plan, United Medical Resources and Oxford.”

The OIG Advisory Opinion of December 1994 addressed what is known as “Waiver of Charges to Managed Care Patients” as it relates to federal anti-kickback statutes. The opinion was intended to allow an out-of-network provider to continue serving a physician. The OIG issued Advisory Opinion 15-04 in March which is an update to its guidance on this matter.

At the state level, Florida has a law that addresses this situation. J. Marc Vezina, of the Vezina Law Group in New Orleans and Birmingham, Michigan, believes that an arrangement as described in the letter reproduced below could be the basis for a false claim under rules of the Florida Department of Insurance Regulation.

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OIG Advisory Opinion 15-04 Unfavorable to Requestor

THIS SPRING, the Office of the Inspector General released Advisory Opinion 15- 04. It was a response to a request for an opinion from a “multi-regional medical laboratory,” about certain arrangements where, for a referring physician, the laboratory would waive charges for a certain “Exclusive Plan.”

Based on its analysis of the situation, the OIG wrote: “We conclude that the Proposed Arrangement could potentially generate prohibited remuneration under the anti-kickback statute.” This opinion is now being studied by lab industry attorneys.

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