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ALERT - Clinical Labs under Scrutiny by OIG

As health care costs rise and providers are faced with challenges to meet the needs and demands of consumers; Medicare looks for questionable payments made to providers to ensure federal dollars for healthcare are spent for medically necessary services as it seeks to reduce fraud and abuse in the provision of health care. One such area is Clinical labs. As discussed below, these labs require prompt attention due to the significant increased scrutiny of their operations.

Payments to such labs are a focus point as the government attempts to contain fraud and abuse. Recently, the OIG updated its Work Plan for 2015 to include the following emphasis on diagnostic laboratory testing due to the high-volume and high-expenditure resulting from these tests. In the OIG 2015 Work Plan update a new section was added for the Annual analysis of Medicare clinical laboratory payments. The OIG indicated it will analyze Medicare payments for clinical diagnostic laboratory tests, including the top 25 clinical diagnostic laboratory tests by Medicare expenditures in 2014. Previous OIG work found that Medicare pays more than other insurers for certain high-volume and high-expenditure laboratory tests. Section 216 of the Protecting Access to Medicare Act of 2014 requires new Medicare payment rates for laboratory tests beginning in 2017 be based on private payer rates and establishes processes for determining initial payments for new laboratory tests. Pursuant to a requirement of the Protecting Access to Medicare Act, OIG will conduct an annual analysis and monitor Medicare expenditures and the new payment system for laboratory tests. (OEI; 09-15-00210; expected issue date: FY 2016).

In line with the increased scrutiny directed towards clinical labs was a recent report of a potential settlement with the nation’s largest drug-testing laboratory. On June 14, 2015, the Wall Street Journal reported that Millennium Health is negotiating with the government to settle alleged abuse of drug tests, including unnecessary tests resulting in inflated bills following a federal investigation that began over three years ago. The potential settlement of the government allegations was reported to be as much as $250 million.

Just this April, the Department of Justice reported a $48.5M settlement involving Health Diagnostics Laboratory, Inc. (HDL) and Singulex Inc. to resolve allegations they violated the False Claims Act by paying remuneration to physicians in exchange for patient referrals and billing federal health care programs for medically unnecessary testing.

In addition, last summer, on June 25, 2014, the OIG issued a Special Fraud Alert concerning compensation paid by laboratories to referring physicians and physician group practices. In that Alert, the OIG emphasized that transfers of value from laboratories to physicians represent a substantial risk of fraud and abuse under the anti-kickback statute. Arrangement involving payments by labs to physicians to collect, process, and package patients’ specimens was considered suspect because of the possibility of the physician receiving double payments, providing evidence of unlawful intent.

If you have clients operating clinical reference labs, please be sure they are alerted to this increased emphasis on fraud and abuse directed towards clinical laboratory operations. Should you have any questions, we are here to help.

By Denise Bloch

Denise Bloch

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