Laboratory Fraud

Congress enacted the Clinical Laboratory Improvement Amendments of 1988 (CLIA’88), codified at 42 U.S.C. 263a, to ensure the accuracy and reliability of testing in all laboratories, including, but not limited to, those that participate in Medicare and Medicaid, that test human specimens for purpose of providing information for the diagnosis, prevention, or treatment of any disease or impairment, or the assessment of health, of human beings.  FCA cases will most likely involve freestanding laboratory companies with labs covering most of the United States, although there are other CLIA laboratories, to include hospital-based and  office-based, amounting to about 500,000 in terms of CLIA certification. While fraud schemes were ore rampant in the 1980’s and early 1990’s, typically involving unbundling, upcoding and other typical scenarios, kickbacks in the industry are still a mainstay for those that choose to violate the law.

One purpose of the Anti-Kickback Statute is to protect patients from inappropriate medical referrals or recommendations by health care professionals who may be unduly influenced by financial incentives.  Providing free or below-market goods or services to a physician who is a source of referrals, or paying such a physician more than fair market value for his or her services, could constitute illegal remuneration under the anti-kickback statute. Two examples of violations which are occurring with Laboratories are unlawful specimen processing payments and unlawful registry payments.

Laboratories pay physicians, either directly or indirectly (such as through an arrangement with a marketing or other agent) to collect, process, and package patients’ blood specimens (Specimen Processing Arrangements). Payments under Specimen Processing Arrangements typically are made on a per-specimen or per-patient-encounter basis and often are associated with expensive or specialized tests.

Evidence that a Specimen Processing Arrangement has an unlawful purpose include, but are not limited to, the following:

  • Payment exceeds fair market value for services actually rendered by the party receiving the payment.
  • Payment is for services for which payment is also made by a third-party, such as Medicare.
  • Payment is made directly to the ordering physician rather than to the ordering physician’s group practice, which may bear the cost of collecting and processing the specimen.
  • Payment is made on a per-specimen basis for more than one specimen collected during a single patient encounter or on a per-test, per-patient, or other basis that takes into account the volume or value of referrals.
  • Payment is offered on the condition that the physician order either a specified volume or type of tests or test panel, especially if the panel includes duplicative tests (e.g., two or more tests performed using different methodologies that are intended to provide the same clinical information), or tests that otherwise are not reasonable and necessary or reimbursable.
  • Payment is made to the physician or the physician’s group practice, despite the fact that the specimen processing is actually being performed by a phlebotomist placed in the physician’s office by the laboratory or a third-party.

Clinical laboratories have also, either directly or through an agent, established and coordinated Registries, purportedly to collect data on the demographics, presentation, diagnosis, treatment, outcomes, or other attributes of patients who have undergone, or who may undergo, certain tests performed by the offering laboratories. If payments were made to induce referrals, then they would be in violation of the Anti-kickback Statute.

Characteristics of a Registry Arrangement that may be evidence of such unlawful purpose include, but are not limited to, the following:

  • The laboratory requires, encourages, or recommends that physicians who enter into Registry Arrangements perform the tests with a stated frequency (e.g., four times per year) to be eligible to receive, or to not receive a reduction in, compensation.
  • The laboratory collects comparative data for the Registry from, and bills for, multiple tests that may be duplicative (e.g., two or more tests performed using different methodologies that are intended to provide the same clinical information) or that otherwise are not reasonable and necessary.
  • Compensation paid to physicians pursuant to Registry Arrangements is on a per-patient or other basis that takes into account the value or volume of referrals.
  • Compensation paid to physicians pursuant to Registry Arrangements is not fair market value for the physicians’ efforts in collecting and reporting patient data.
  • Compensation paid to physicians pursuant to Registry Arrangements is not supported by documentation, submitted by the physicians in a timely manner, memorializing the physicians’ efforts.
  • The laboratory offers Registry Arrangements only for tests (or disease states associated with tests) for which it has obtained patents or that it exclusively performs.
  •  The tests associated with the Registry Arrangement are presented on the offering laboratory’s requisition in a manner that makes it more difficult for the ordering physician to make an independent medical necessity decision with regard to each test for which the laboratory will bill (e.g., disease-related panels).
  • A subset of physicians who were selected on the basis of their prior or anticipated referral volume, rather than their specialty, sub-specialty, or other relevant attribute.

Situations which include some or all of the above facts are likely indicative of violations of the False Claims Act and Anti-Kickback Statute.  Violations may occur even if payments for Medicare and Medicaid patients are carved out of the arrangements.

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