Of Congress and the OIG: Speedy Action Ahead?

Rapidly accelerating trend could boomerang and bring the wrath of OIG investigators

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CEO SUMMARY: During the short life of AP laboratory condominium complexes, they have attracted the interest of both an influential Senator and the Office of the Inspector General (OIG). Last month, Senator Charles E. Grassley sent a letter to the OIG requesting that it investigate the AP lab condo scheme and report its findings to him. Earlier this year, a national AP company requested an opinion from the OIG on AP ventures.

EVEN AS THE NUMBER of pathology condominium laboratory complexes mushrooms in states like Florida and Texas, they are attracting the attention of Congress and the Office of the Inspector General (OIG).

On June 10, 2004, Senator Charles E. Grassley (R-Iowa) sent a letter to the OIG specifically requesting that the government agency investigate the growing number of “anti-competitive joint ventures” between “some providers of pathology services and treating physicians.” In his letter, Grassley notes that the arrangements allow participating physicians to “expand into the pathology market with little investment of resources and share revenues from their referrals for pathology services.”

Grassley notes that such joint venture arrangements can potentially violate anti-kickback laws, the Stark self-referral law, and the OIG’s recent Special Advisory Bulletin on contractual joint ventures. He further observes that such pathology service joint ventures can encourage over-utilization and a decline in the quality of patient care, both contrary to the goals of the Medicare program.

Grassley’s letter was sent about the same time that an official of the OIG made a public statement acknowledging that the agency was aware of these pathology joint ventures and was looking into the situation. That statement is considered to be a public notice that the OIG wanted to alert the healthcare market- place that it knows about this trend and will have more to say at a future date.

OIG Opinion Requested

The OIG’s attention has also been drawn to the AP laboratory condo complex concept because it received a letter requesting an opinion on a business arrangement that is similar to the existing AP lab condo complexes operating today in Florida and Texas.

The opinion was requested by CBLPath, Inc. in January 2004. THE DARK REPORT contacted CBLPath and spoke to its attorney. “During the past year, specialist physician groups were engaging our sales reps in conversations about they could develop an anatomic pathology ancillary service joint venture or collaboration,” stated Thomas Bartrum, Attorney at Baker Donelson in Nashville, Tennessee.

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“CPBPath looked at developing a business model to serve this growing interest by our physician clients,” he explained. “It was immediately clear that various laboratory compliance requirements would come into play. In our analysis of the legal issues, we believed that a letter of opinion to the OIG would be answered in either of two ways.

“First, the OIG could issue a favorable opinion for our specific joint venture (JV) structure,” said Bartrum. “Obviously, this provides CBLPath with reassurance before moving forward to implement such JVs. But if the opinion was negative, to the degree such a joint venture was not doable, then we would understand the legal consequences of developing such a joint venture. In this event, we would also have an OIG opinion to show specialist physicians, so they could understand for themselves how and why the OIG objected to such opinions.”

A CBLPath subsidiary would establish a number of AP labs in a centralized location. It would provide management services those labs, including office rental, equipment rental and employee leasing. CBLPath would provide technical services, the specialist physicians would provide professional AP services. AP labs would be located in or near the specialist groups’ city. To create financial risk for the specialist group, there would be a fixed fee paid, along with charges that did vary with specimen volume.

“Since submitting our letter in January, we have twice provided supplementary information to the OIG,” Bartrum said. “That indicates to us the type of compliance concerns they are evaluating. However, we do not know when the OIG opinion will be issued.”


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