OIG Issues Special Fraud Alert Targeting Clinical Reference Labs
The Office of the Inspector General (OIG) for the US Department of Health and Human Services recently issued a Special Fraud alert that is directed to the relationship between laboratories that perform tests and the physicians that send them to the labs. OIG has identified two specific trends involving transfers of value from laboratories to physicians, both of which according to OIG present a substantial risk of fraud and abuse under the anti-kickback statute. The two trends covered in the Special Fraud Alert are blood-specimen collection, processing and packaging arrangements and registry payments.
A September 8 Wall Street Journal story entitled "A Fast Growing Medical Lab Tests Anti-Kickback Law" showcased a lab that vigorously engaged in the first above mentioned trend. Health Diagnostic Laboratory Inc. (HDL) paid physicians $20 per patient sample that a physician sent to its lab. Some physician practices received more than $4,000 per week in blood sample fees.
HDL is a small lab compared to the two leading US commercial reference labs (Quest Diagnostics and LabCorp) with just $383 million in 2013 revenues. However, in 2012 HDL received 64% of Medicare's nationwide reimbursements for 9 procedures performed by HDL and 93% of Medicare reimbursements for another test. As if this wouldn't catch the attention of the Centers for Medicare and Medicaid reimbursement personnel that track these payments, it also employed one of its mot prolific test prescribers among their 296 customers to its paid medical advisory board and also paid him for speaking fees. Added to this were suspect HDL practices of performing expensive genetic tests, billing third party payers while never collecting the amount not covered by insurance from patients.
The above practices produced the expected results. HDL's CEO resign from the company on September 23, 2014. Cigna also filed suit against HDL and is asking for a jury trial. HDL billed Cigna $84 million for tests performed by the lab. But HDL isn't the only target in the OIG cross hairs. other labs engaging in the practice of paying physicians for sending patient samples to their labs include Boston Heart Diagnostics Corp, Singulex, Atherotech Diagnostics Lab among others. Once again, a few labs engaging in highly questionable practices has drawn the attention of OIG on the entire industry.
The commercial reference lab segment in the US is estimated to be approximately $25 billion. With that much on the table and small labs trying to run under the radar, it’s not surprising to see these situations appear, as they have many times in the past.