Laboratory Payments to Physicians for Specimen Processing Present Substantial Risk of Fraud and Abuse

By Rose Willis

The United States Office of Inspector General (“OIG”) recently issued a “Special Fraud Alert” focusing on two potentially illegal trends that it has detected in arrangements between laboratories and their referring physicians. This post focuses on the first trend (Specimen Processing Arrangements); the second trend (Registry Payments) will be the subject of a future post.

The first trend cited by the OIG involves payments made by laboratories to physicians to collect, process, and package patients’ blood specimens (which the OIG named “Specimen Processing Arrangements”). According to the OIG, Specimen Processing Arrangements may include payments by laboratories in exchange for physicians collecting blood specimens, centrifuging the specimens, maintaining specimens at a certain temperature, and packaging specimens so they are not damaged during transport. The OIG provides the following examples of characteristics of an illegal specimen processing arrangement:

  • 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.

  • Where a laboratory provides free or below market goods or services to referring physicians or provides a physician with greater than fair market value compensation, such value could constitute illegal remuneration under the Federal Anti-Kickback Statute.

According to the OIG, illegal payments for specimen processing may be made directly or indirectly through marketing or other agents. Thus, third party agreements with physicians involving specimen processing will need careful review of the underlying structure to ensure no undesirable consequences under the Anti-Kickback Statute.

All Specimen Processing Arrangements require careful structuring and should be reviewed under the characteristics listed above to determine the parties’ potential risk under the Anti-Kickback Statute.