"Lab Compliance Update"

Physician Group Path Ventures To Undergo OIG Review in 2005

IN ITS FISCAL YEAR 2005 WORK PLAN, the Department of Health and Human Services (DHHS) Office of Inspector General (OIG) will “identify and review relationships between physicians who furnish pathology services in their offices and outside pathology companies.”

It is another sign that federal healthcare investigators are concerned that more specialist physician groups are creating some type of business arrangement designed to capture the revenues from anatomic pathology (AP) services performed from their patient referrals. Earlier this year, the OIG made an unusual public statement, declaring that such arrangements pose significant kickback risks and can lead to excessive referrals.

“The OIG’s stated interest in this topic is a significant event,” observed Jane Pine Wood, Attorney and Principal at McDonald Hopkins, the law firm based in Cleveland, Ohio. “The OIG’s willingness to spend time and resources to study this trend is a sign that it sees problems with what is happening in the healthcare marketplace.”

OIG’s Choice Of Words

Wood considers the specific wording used in the OIG’s work plan description to be revealing. “Take the first sentence, which reads ‘Our review will focus on pathology services performed in physicians’ offices.’ The specific emphasis on ‘pathology services in physicians’ offices {my italics} is a key distinction,” she noted. “It links to a deliberate choice of words in the second sentence, which says ‘examination of cells or tissue samples by a physician who prepares a report of his findings’ {my italics}. I believe this indicates three areas of OIG concern.

“One, the emphasis is not on a pathology laboratory or a pathology group practice. The OIG study will look at non-pathology medical group practices that are, in some form or another, directly involved in performing AP services on their own patients,” observed Wood.

Interpreting AP Cases

“Two, I believe the OIG study intends to look at which physicians are interpreting AP cases,” she said. “The OIG might be concerned, for example, that a pathologist who is not appropriately licensed is interpreting these cases. I’ve been told of situations where, say, a urology group owns an AP condominium lab in another state. The case is read by a pathologist in the state where the laboratory is located, but the pathologist is not licensed in the state where the urology practice and the patient are located (which often is required under state medical practice statutes).

“Furthermore, to avoid license restrictions or for managed care contracting reasons, a urologist in the group practice may actually sign the pathology report in order to bill for the professional component. That type of arrangement raises several relevant issues of medical ethics and regulatory compliance,” added Wood.

“Three, it is obvious that concerns about unnecessary utilization underlie this OIG study,” continued Wood. “The sentence which follows the first two states ‘Medicare pays over $1 billion annually to physicians {my italics} for pathology services.’

“I believe the choice of the word ‘physician’ over ‘pathologist’ is deliberate. It seems the OIG is concerned about situations where physician groups have an arrangement that allows them to bill for anatomic pathology services provided to their patients. This is a self-referral arrangement and has many direct parallels with all the self-referral, inducement, and kickback issues involving clinical laboratories and their referring physician- clients that have incited OIG enforcement action over the past 15 years.

“Further, if my interpretations of the OIG work study statement are accurate, they dovetail neatly with what is happening in the private payer community,” explained Wood. “There are numerous examples of payers reviewing the provision of ancillary services by physician practices. Whether radiology, pathology, or similar ancillaries, payers are reacting to the trend of physician groups actively establishing arrangements that allow them to bill for ancillary services performed on behalf of their groups’ patients.

Outside Path Companies

“Finally, a comment on the OIG’s final sentence, the one that reads ‘We will identify and review the relationships between physicians who furnish pathology services in their offices and outside pathology companies.’ [my italics]. What companies is the OIG referencing if not the anatomic pathology condominium complex operators which have caused such a fuss lately?” asked Wood. (See TDRs, July 19 and August 9, 2004.)

“For pathology group practices—and for individual pathologists interested in contracting services to a physician group practice—the OIG’s statement is a warning flag,” she added. “Like many other attorneys, I have advised great caution whenever a physician group wants to craft a business relationship that allows it to financially benefit from the anatomic pathology services provided to its patient population. In the foreseeable future, these types of arrangements may come under detailed scrutiny by both private payers and government health program investigators. Compliance with all applicable federal and state laws is critical.”

The OIG’s 2005 Work Plan should be viewed in context with two other dynamics involving clinical lab and anatomic pathology services. The first is proposed Medicare regulations that will tighten the definition of “usual and customary charges.” That is a direct attack on “client bill” or “discounted billing” arrangements between a lab and a physician client.

The second is the criminal indictments in the UroCor case. One section of the indictment alleges that UroCor paid a kickback to urologist-clients when it offered discounted, below-cost prices to the urologist, who then billed private payers for the “usual and customary charge” and pocketed the difference. With a court trial yet to commence, it would seem an inauspicious time for any pathologist to enter into any business arrangement that somehow splits technical and professional fees with a referring physician.

OIG’s 2005 Work Plan

IN PUBLISHING ITS 2005 WORK PLAN, the Department of Health and Human Services (DHHS) Office of the Inspector General (OIG) specifically identifies a project to study aspects of how pathology services are performed within physician group practices. The short paragraph in the work plan which describes the project is reproduced below:

Physician Pathology Services

Our review will focus on pathology services performed in physicians’ offices. Pathology services include the examination of cells or tissue samples by a physician who prepares a report of his findings. Medicare pays over $1 billion annually to physicians for pathology services. We will identify and review the relationships between physicians who furnish pathology services in their offices and outside pathology companies.

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