- October 19, 2023
- Alerts
OIG Finds Lab to Lab Technical Component Arrangement Poses Anti-Kickback Risk
In Advisory Opinion No. 23-06, posted on September 28, 2023, the U.S. Department of Health and Human Services’ Office of the Inspector General (OIG) declined to approve a proposed arrangement in which an anatomic pathology laboratory operator (“Operator”) would purchase the technical component of anatomic pathology services from Physician and Non-Physician Laboratories (the “Labs”) for commercial payors. The OIG concluded that the proposed arrangement would generate prohibited remuneration under the Federal anti-kickback statute (“AKS”), despite a “carve out” of Federal health care program business.
In this case, the Labs currently lacked contracts that enable them to bill certain commercial insurers for anatomic pathology services as in-network providers, making it likely that they would not receive referrals for these services. Under the proposed arrangement, the Labs would accept specimens from patients with out-of-network plans, perform the technical component of the anatomic pathology services and refer the specimen to the Operator, who would perform the professional component and bill payors globally for the service. The Operator would pay the Labs for the technical service (presumably at fair market value). The OIG noted that the Operator could perform the technical component in-house and at a lower cost than it was paying the referring laboratory and that, absent this arrangement, the Operator would have the opportunity to perform, bill for, and retain the full reimbursement for both the technical and professional components of the service.
Although the proposed arrangement carved out Federal health care program business and stated that the Labs would not be required to refer Federal health care program business to the Operator, the Operator certified that this arrangement would put the Labs in a position to refer laboratory services to the Operator that are billable to Federal health care programs. The OIG concluded that the arrangement may violate the AKS and reiterated its “longstanding concern” over arrangements that carve out Federal health care program referrals, stating that such arrangements may be disguising Federal health care program business through payments related to non-Federal health care program business. The OIG stated that the proposed arrangement could “give rise to a significant incentive” for the Labs to refer Federal health care program beneficiaries to the Operator and poses a risk of fraud and abuse under the Federal anti-kickback statute.
All providers must proceed with caution even when faced with a proposed arrangement that is presumably at fair market value and carves out Federal health care program business. Such arrangement may still be found to violate AKS and other state-specific laws.
Should you have any questions regarding the above, please contact the author or the Garfunkel Wild attorney with whom you regularly work, or contact us at info@garfunkelwild.com.
In this case, the Labs currently lacked contracts that enable them to bill certain commercial insurers for anatomic pathology services as in-network providers, making it likely that they would not receive referrals for these services. Under the proposed arrangement, the Labs would accept specimens from patients with out-of-network plans, perform the technical component of the anatomic pathology services and refer the specimen to the Operator, who would perform the professional component and bill payors globally for the service. The Operator would pay the Labs for the technical service (presumably at fair market value). The OIG noted that the Operator could perform the technical component in-house and at a lower cost than it was paying the referring laboratory and that, absent this arrangement, the Operator would have the opportunity to perform, bill for, and retain the full reimbursement for both the technical and professional components of the service.
Although the proposed arrangement carved out Federal health care program business and stated that the Labs would not be required to refer Federal health care program business to the Operator, the Operator certified that this arrangement would put the Labs in a position to refer laboratory services to the Operator that are billable to Federal health care programs. The OIG concluded that the arrangement may violate the AKS and reiterated its “longstanding concern” over arrangements that carve out Federal health care program referrals, stating that such arrangements may be disguising Federal health care program business through payments related to non-Federal health care program business. The OIG stated that the proposed arrangement could “give rise to a significant incentive” for the Labs to refer Federal health care program beneficiaries to the Operator and poses a risk of fraud and abuse under the Federal anti-kickback statute.
All providers must proceed with caution even when faced with a proposed arrangement that is presumably at fair market value and carves out Federal health care program business. Such arrangement may still be found to violate AKS and other state-specific laws.
Should you have any questions regarding the above, please contact the author or the Garfunkel Wild attorney with whom you regularly work, or contact us at info@garfunkelwild.com.