[Federal Register: December 19, 1994]
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DEPARTMENT OF HEALTH AND HUMAN SERVICES
Publication of OIG Special Fraud Alerts
AGENCY: Office of Inspector General, HHS.
ACTION: Notice.
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SUMMARY: This Federal Register notice sets forth the 5 previously-
developed Special Fraud Alerts issued directly to the health care
provider community by the HHS Office of Inspector General (OIG). In
keeping with the OIG's goal and intent of publicizing its concern about
possible widespread and abusive health care industry practices, and
seeking wider dissemination of this information to the general public,
we are republishing the main content of these Special Fraud Alerts in
the Federal Register. This notice also serves to alert the general
public of our intention to publish all future OIG Special Fraud Alerts
in this same manner, in addition to the current method used to
distribute this material to Medicare and State health care program
providers.
FOR FURTHER INFORMATION CONTACT: Joel J. Schaer, Legislation,
Regulations and Public Affairs Staff, (202) 619-0089.
SUPPLEMENTARY INFORMATION:
I. Background
The Use of Fraud Alerts by the OIG
Over the years, the OIG has used fraud alerts as a vehicle to
identify fraudulent and abusive practices within the health care
industry. The majority of these fraud alerts are disseminated
internally to the OIG's Office of Investigations and other agencies
within the Department. However, the OIG has also developed and issued
Special Fraud Alerts intended for extensive distribution directly to
the health care provider community.
Special Fraud Alerts
Since 1988, the OIG has issued 5 ``Special Fraud Alerts''
addressing specific trends of health care fraud and certain practices
of an industry-wide character. Specifically, the OIG Special Fraud
Alerts have served to provide general guidance to the health care
industry on violations of Federal law (including various aspects of the
anti-kickback statute), as well as to provide additional insight to the
Medicare carrier fraud units in identifying health care fraud schemes.
In developing these Special Fraud Alerts, the OIG relies on a
number of sources, such as studies or management and program
evaluations conducted by the OIG's Office of Evaluation and
Inspections. In addition, the OIG may consult with experts in the
subject field, including those within the OIG, other agencies of the
Department, other Federal and State agencies, and from those in the
health care industry.
The Nature of Past Special Fraud Alerts
For the most part, the OIG Special Fraud Alerts have been reserved
for national trends in health care fraud and have addressed potential
violations of the Medicare and State health care programs' anti-
kickback statute. The Special Fraud Alerts have addressed the following
topic areas that could violate the anti-kickback statute:
Joint venture arrangements;
Routine waiver of Medicare Part B copayments and
deductibles;
Hospital incentives to referring physicians;
Prescription drug marketing practices;
Arrangements for the provision of clinical laboratory
services.
II. Federal Register Publication of Special Fraud Alerts
In the past, the OIG has always printed and distributed copies of
these Special Fraud Alerts directly to all Medicare program providers.
While the OIG Special Fraud Alerts have been designed to be available
to all affected program providers, we believe it is useful to publicize
these various issues and concerns involving potential abusive health
care industry practices to a more widespread audience. For this reason,
we are using this Federal Register notice as a vehicle to reprint the
substance of the 5 previously-issued Special Fraud Alerts cited above.
It is our intention to use this same Federal Register form for
publishing future Special Fraud Alerts developed by the OIG.
Because each of the previously-developed Special Fraud Alerts
contained a similar brief narrative as to the nature of the OIG and a
description of the Medicare and Medicaid anti-kickback statute, we will
first summarize and set out this material in one section, as it is
germane to all 5 subject issuances. Following that will be the main
body and content of each of the Special Fraud Alerts. Lastly, we have
provided the general information set forth in each of these Special
Fraud Alerts addressing information on how to report information on
suspected violations.
The OIG Special Fraud Alerts
A. General Background
The Office of Inspector General was established at the Department
of Health and Human Services by Congress in 1976 to identify and
eliminate fraud, abuse and waste in Health and Human Services programs
and to promote efficiency and economy in departmental operations. The
OIG carries out this mission through a nationwide program of audits,
investigations and inspections. To help reduce fraud in the Medicare
and Medicaid programs, the OIG is actively investigating violations of
the Medicare and Medicaid anti-kickback statute, 42 U.S.C. Section
1320a-7b(b).
What Is the Medicare and Medicaid Anti-Kickback Law?
Among its provisions, the anti-kickback statute penalizes anyone
who knowingly and willfully solicits, receives, offers or pays
remuneration in cash or in kind to induce, or in return for:
A. Referring an individual to a person for the furnishing, or
arranging for the furnishing, of any item or service payable under the
Medicare or Medicaid program; or
B. Purchasing, leasing or ordering , or arranging for or
recommending purchasing, leasing or ordering, any goods, facility,
service or item payable under the Medicare or Medicaid program.
Violators are subject to criminal penalties, or exclusion from
participation in the Medicare and Medicaid programs, or both. In 1987,
section 14 of the Medicare and Medicaid Patient and Program Protection
Act, PL 100-93, directed this Department to promulgate ``safe harbor''
regulations, in order to provide health care providers a mechanism to
assure them that they will not be prosecuted under the anti-kickback
statute for engaging in particular practices. The Department published
11 final ``safe harbor'' regulations on July 29, 1991 (42 CFR 1001.952,
56 FR 35952), and two more on November 5, 1992 (42 CFR 1001.952, 57 FR
52723). The scope of the anti-kickback statute is not expanded by the
``safe harbor'' regulations; these regulations give those in good faith
compliance with a ``safe harbor'' the assurance that they will not be
prosecuted under the anti-kickback statute.
B. Special Fraud Alert: Joint Venture Arrangements
(Issued August 1989)
The Office of Inspector General has become aware of a proliferation
of arrangements between those in a position to refer business, such as
physicians, and those providing items or services for which Medicare or
Medicaid pays. Some examples of the items or services provided in these
arrangements include clinical diagnostic laboratory services, durable
medical equipment (DME), and other diagnostic services. Sometimes these
deals are called ``joint ventures.'' A joint venture may take a variety
of forms: it may be a contractual arrangement between two or more
parties to cooperate in providing services, or it may involve the
creation of a new legal entity by the parties, such as a limited
partnership or closely held corporation, to provide such services. Of
course, there may be legitimate reasons to form a joint venture, such
as raising necessary investment capital. However, the Office of
Inspector General believes that some of these joint ventures may
violate the Medicare and Medicaid anti-kickback statute.
Under these suspect joint ventures, physicians may become investors
in a newly formed joint venture entity. The investors refer their
patients to this new entity, and are paid by the entity in the form of
``profit distributions.'' These subject joint ventures may be intended
not so much to raise investment capital legitimately to start a
business, but to lock up a stream of referrals from the physician
investors and to compensate them indirectly for these referrals.
Because physician investors can benefit financially from their
referrals, unnecessary procedures and tests may be ordered or
performed, resulting in unnecessary program expenditures.
The questionable features of these suspect joint ventures may be
reflected in three areas:
(1) The manner in which investors are selected and retained;
(2) The nature of the business structure of the joint venture; and
(3) The financing and profit distributions.
Suspect Joint Ventures: What To Look For
To help you identify these suspect joint ventures, the following
are examples of questionable features, which separately or taken
together may result in a business arrangement that violates the anti-
kickback statute. Please note that this is not intended as an
exhaustive list, but rather gives examples of indicators of potentially
unlawful activity.
Investor
Investors are chosen because they are in a position to
make referrals.
Physicians who are expected to make a large number of
referrals may be offered a greater investment opportunity in the joint
venture than those anticipated to make fewer referrals.
Physician investors may be actively encouraged to make
referrals to the joint venture, and may be encouraged to divest their
ownership interest if they fail to sustain an ``acceptable'' level of
referrals.
The joint venture tracks its sources of referrals, and
distributes this information to the investors.
Investors may be required to divest their ownership
interest if they cease to practice in the service area, for example, if
they move, become disabled or retire.
Investment interests may be nontransferable.
Business Structure
The structure of some joint ventures may be suspect. For
example, one of the parties may be an ongoing entity already engaged in
a particular line of business. That party may act as the reference
laboratory or DME supplier for the joint venture. In some of these
cases, the joint venture can be best characterized as a ``shell.''
In the case of a shell laboratory joint venture, for
example:
--It conducts very little testing on the premises, even though it is
Medicare certified.
--The reference laboratory may do the vast bulk of the testing at its
central processing laboratory, even though it also serves as the
``manager'' of the shell laboratory.
--Despite the location of the actual testing, the local ``shell''
laboratory bills Medicare directly for these tests.
In the case of a shell DME joint venture, for example:
--It owns very little of the DME or other capital equipment; rather the
ongoing entity owns them.
--The ongoing entity is responsible for all day-to-day operations of
the joint venture, such as delivery of the DME and billing.
Financing and Profit Distribution
The amount of capital invested by the physician may be
disproportionately small and the returns on investment may be
disproportionately large when compared to a typical investment in a new
business enterprise.
Physician investors may invest only a nominal amount, such
as $500 to $1500.
Physician investors may be permitted to ``borrow'' the
amount of the ``investment'' from the entity, and pay it back through
deductions from profit distributions, thus eliminating even the need to
contribute cash to the partnership.
Investors may be paid extraordinary returns on the
investment in comparison with the risk involved, often well over 50 to
100 percent per year.
C. Special Fraud Alert: Routine Waiver of Copayments or Deductibles
Under Medicare Part B
(Issued May 1991)
To help reduce fraud in the Medicare program, the Office of
Inspector General is actively investigating health care providers,
practitioners and suppliers of health care items and services who (1)
are paid on the basis of charges\1\ and (2) routinely waive (do not
bill) Medicare deductible and copayment charges to beneficiaries for
items and services covered by the Medicare program.
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\1\This fraud alert is not intended to address the routine
waiver of copayments and deductibles by providers, practitioners or
suppliers who are paid on the basis of costs or diagnostic related
groups. The fact that these types of services are not discussed in
this fraud alert should not be interpreted to legitimize routine
waiver of deductibles and copayments with respect to these payment
methods. Also, it does not apply to a waiver of any copayment by a
Federally qualified health care center with respect to an individual
who qualifies for subsidized services under a provision of the
Public Health Service Act.
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What Are Medicare Deductible and Copayment Charges?
The Medicare ``deductible'' is the amount that must be paid by a
Medicare beneficiary before Medicare will pay for any items or services
for that individual. Currently, the Medicare Part B deductible is $100
per year.
``Copayment'' (``coinsurance'') is the portion of the cost of an
item or service which the Medicare beneficiary must pay. Currently, the
Medicare Part B coinsurance is generally 20 percent of the reasonable
charge for the item or service. Typically, if the Medicare reasonable
charge for a Part B item or service is $100, the Medicare beneficiary
(who has met his [or her] deductible) must pay $20 of the physician's
bill, and Medicare will pay $80.
Why Is it Illegal for ``Charged-Based'' Providers, Practitioners and
Suppliers to Routinely Waive Medicare Copayment and Deductibles?
Routine waiver of deductibles and copayments by charge-based
providers, practitioners or suppliers is unlawful because it results in
(1) false claims, (2) violations of the anti-kickback statute, and (3)
excessive utilization of items and services paid for by Medicare.
A ``charge-based'' provider, practitioner or supplier is one who is
paid by Medicare on the basis of the ``reasonable charge'' for the item
or service provided. 42 U.S.C. 1395u(b)(3); 42 CFR 405.501. Medicare
typically pays 80 percent of the reasonable charge. 42 U.S.C.
1395l(a)(1). The criteria for determining what charges are reasonable
are contained in regulations, and include an examination of (1) the
actual charge for the item or service, (2) the customary charge for the
item or service, (3) the prevailing charge in the same locality for
similar items or services. The Medicare reasonable charge cannot exceed
the actual charge for the item or service, and may generally not exceed
the customary charge or the highest prevailing charge for the item or
service. In some cases, the provider, practitioner or supplier will be
paid the lesser of his [or her] actual charge or an amount established
by a fee schedule.
A provider, practitioner or supplier who routinely waives Medicare
copayments or deductibles is misstating its actual charge. For example,
if a supplier claims that its charge for a piece of equipment is $100,
but routinely waives the copayment, the actual charge is $80. Medicare
should be paying 80 percent of $80 (or $64), rather than 80 percent of
$100 (or $80). As a result of the supplier's misrepresentation, the
Medicare program is paying $16 more than it should for this item.
In certain cases, a provider, practitioner or supplier who
routinely waives Medicare copayments or deductibles also could be held
liable under the Medicare and Medicaid anti-kickback statute. 42 U.S.C.
1320a-7b(b). The statute makes it illegal to offer, pay, solicit or
receive anything of value as an inducement to generate business payable
by Medicare or Medicaid. When providers, practitioners or suppliers
forgive financial obligations for reasons other than genuine financial
hardship of the particular patient, they may be unlawfully inducing
that patient to purchase items or services from them.
At first glance, it may appear that routine waiver of copayments
and deductibles helps Medicare beneficiaries. By waiving Medicare
copayments and deductibles, the provider of services may claim that the
beneficiary incurs no costs. In fact, this is not true. Studies have
shown that if patients are required to pay even a small portion of
their care, they will be better health care consumers, and select items
or services because they are medically needed, rather than simply
because they are free. Ultimately, if Medicare pays more for an item or
service than it should, or if it pays for unnecessary items or
services, there are less Medicare funds available to pay for truly
needed services.
One important exception to the prohibition against waiving
copayments and deductibles is that providers, practitioners or
suppliers may forgive the copayment in consideration of a particular
patient's financial hardship. This hardship exception, however, must
not be used routinely; it should be used occasionally to address the
special financial needs of a particular patient. Except in such special
cases, a good faith effort to collect deductibles and copayments must
be made. Otherwise, claims submitted to Medicare mat violate the
statutes discussed above and other provisions of the law.
What Penalties Can Someone Be Subject to for Routinely Waiving
Medicare Copayments or Deductibles?
Whoever submits a false claim to the Medicare program (for example,
a claim misrepresents an actual charge) may be subject to criminal,
civil or administrative liability for making false statements and/or
submitting false claims to the Government. 18 U.S.C. 287 and 1001; 31
U.S.C. 3729; 42 CFR 1320a-7a). Penalties can include imprisonment,
criminal fines, civil damages and forfeitures, civil monetary penalties
and exclusion from Medicare and the State health care programs.
In addition, anyone who routinely waives copayments or deductibles
can be criminally prosecuted under 42 U.S.C. 1320a-7b(b), and excluded
from participating in Medicare and the State health care programs under
the anti-kickback statute. 42 U.S.C. 1320a-7(b)(7).
Finally, anyone who furnishes items or services to patient
substantially in excess of the needs of such patients can be excluded
from Medicare and the State health care programs. 42 U.S.C. 1320a-
7(b)(6)(B).
Indications of Improper Waiver of Deductibles and Copayments
To help you identify charge-based providers, practitioners or
suppliers who routinely waive Medicare deductibles and copayments,
listed below are some suspect marketing practices. Please note that
this list is not intended to be exhaustive but, rather, to highlight
some indicators of potentially unlawful activity.
Advertisements which state: ``Medicare Accepted As Payment
in Full,'' ``Insurance Accepted As Payment in Full,'' or ``No Out-Of-
Pocket Expense.''
Advertisements which promise that ``discounts'' will be
given to Medicare beneficiaries.
Routine use of ``Financial hardship'' forms which state
that the beneficiary is unable to pay the coinsurance/deductible (i.e.,
there is no good faith attempt to determine the beneficiary's actual
financial condition).
Collection of copayments and deductibles only where the
beneficiary has Medicare supplemental insurance (``Medigap'') coverage
(i.e., the items or services are ``free'' to the beneficiary).
Charges to Medicare beneficiaries which are higher than
those made to other persons for similar services and items (the higher
charges offset the waiver of coinsurance.)
Failure to collect copayments or deductibles for a
specific group of Medicare patients for reasons unrelated to indigency
(e.g., a supplier waives coinsurance or deductible for all patients
from a particular hospital, in order to get referrals).
``Insurance programs'' which cover copayments or
deductibles only for items or services provided by the entity offering
the insurance. The ``insurance premium'' paid by the beneficiary is
insignificant and can be as low as $1 a month or even $1 a year. These
premiums are not based upon actuarial risks, but instead are a sham
used to disguise the routine waiver of copayments and deductibles.
D. Special Fraud Alert: Hospital Incentives to Physicians
(Issued May 1992)
Why Do Hospitals Provide Economic Incentives to Physicians?
As many hospitals have become more aggressive in their attempts to
recruit and retain physicians and increase patient referrals, physician
incentives (sometimes referred to as ``practice enhancements'') are
becoming increasingly common. Some physicians actively solicit such
incentives. These incentives may result in reductions in the
physician's professional expenses or an increase in his or her
revenues. In exchange, the physician is aware that he or she is often
expected to refer the majority, if not all, of his or her patients to
the hospital providing the incentives.
Why Is it Illegal for Hospitals to Provide Financial Incentives to
Physicians for Their Referrals?
The Office of Inspector General has become aware of a variety of
hospital incentive programs used to compensate physicians (directly or
indirectly) for referring patients to the hospital. These arrangements
are implicated by the anti-kickback statute because they can constitute
remuneration offered to induce, or in return for, the referral of
business paid for by Medicare or Medicaid. In addition, they are not
protected under the existing ``safe harbor'' regulations.
These incentive programs can interfere with the physician's
judgment of what is the most appropriate care for a patient. They can
inflate costs to the Medicare program by causing physicians to overuse
inappropriately the services of a particular hospital. The incentives
may result in the delivery of inappropriate care to Medicare
beneficiaries and Medicaid recipients by inducing the physician to
refer patients to the hospital providing financial incentives rather
than to another hospital (or non-acute care facility) offering the best
or most appropriate care for that patient.
Suspect Hospital Incentive Arrangements--What To Look For
To help identify suspect incentive arrangements, examples of
practices which are often questionable are listed [below]. Please note
that this list is not intended to be exhaustive but, rather, to suggest
some indicators of potentially unlawful activity.
Payment of any sort of incentive by the hospital each time
a physician refers a patient to the hospital.
The use of free or significantly discounted office space
or equipment (in facilities usually located close to the hospital).
Provision of free or significantly discounted billing,
nursing or other staff services.
Free training for a physician's office staff in such areas
as management techniques, CPT coding and laboratory techniques.
Guarantees which provide that, if the physician's income
fails to reach a predetermined level, the hospital will supplement the
remainder up to a certain amount.
Low-interest or interest-free loans, or loans which may be
``forgiven'' if a physician refers patients (or some number of
patients) to the hospital.
Payment of the cost of a physician's travel and expenses
for conferences.
Payment for a physician's continuing education courses.
Coverage on hospitals' group health insurance plans at an
inappropriately low cost to the physician.
Payment for services (which may include consultations at
the hospital) which require few, if any, substantive duties by the
physician, or payment for services in excess of the fair market value
of services rendered.
Financial incentive packages which incorporate these or similar
features may be subject to prosecution under the Medicare and Medicaid
anti-kickback statute, if one of the purposes of the incentive is to
influence the physician's medical decision as to where to refer his or
her patients for treatment.
E. Special Fraud Alert: Prescription Drug Marketing Schemes
(Issued August 1994)
How Does the Anti-Kickback Law Relate to Prescription Drug Marketing
Schemes?
In recent years, prescription drug companies in the United States
have increased their marketing activities among providers, patients and
suppliers such as pharmacies. Many prescription drug marketing
activities go far beyond traditional advertising and educational
contacts. Physicians, suppliers and, increasingly, patients are being
offered valuable, non-medical benefits in exchange for selecting
specific prescription drug brands. Traditionally, physicians and
pharmacists have been trusted to provide treatments and recommend
products in the best interest of the patient. In an era of aggressive
drug marketing, however, patients may now be using prescription drug
items, unaware that their physician or pharmacist is being compensated
for promoting the selection of a specific product. Prescription drugs
supplied under one of these programs are often reimbursed under
Medicaid. Among the specific activities, which the OIG has identified,
are the following actual cases:
A ``product conversion'' program which resulted in 96,000
brand-name conversions. In this scenario, for instance, Drug Company A
offered a cash award to pharmacies for each time a drug prescription
was changed from Drug Company B's product to Drug Company A's product.
The pharmacies were induced to help persuade physicians, who were
unaware of the pharmacies' financial interest, to change prescription.
A ``frequent flier'' campaign in which physicians were
given credit toward airline frequent flier mileage each time the
physician completed a questionnaire for a new patient placed on the
drug company's product.
A ``research grant'' program in which physicians were
given substantial payments for de minimis recordkeeping tasks. The
physician administered the drug manufacturer's product to the patient
and made brief notes, sometimes a single word, about the treatment
outcome. Upon completion of a limited number of such ``studies,'' the
physician received payment from the manufacturer.
If one purpose of any of these marketing schemes is to induce the
provision of a prescription drug item reimbursable by Medicaid, then
the criminal anti-kickback statute is implicated. There is no statutory
exception or ``safe harbor'' to protect such activities. Thus a
physician, pharmacy or other practitioner or supplier receiving payment
under these activities may be subject to criminal prosecution and
exclusion from participation in the Medicare and Medicaid programs.
A marketing program that is illegal under the anti-kickback statute
may pose a danger to patients because the offering or payment of
remuneration may interfere with a physician's judgment in determining
the most appropriate treatment for a patient. Further, where the
patient is a Medicaid beneficiary, these drug marketing practices may
increase the Federal government's costs of reimbursing suppliers for
the products. The OIG is investigating various drug marketing schemes,
and enforcing the anti-kickback laws where these practices affect the
Federal health care programs.
What To Look For
Generally, a payment or gift may be considered improper under 42
U.S.C. 1320a-7b(b) if it is:
Made to a person in a position to generate business for
the paying party;
Related to the volume of business generated; and
More than nominal in value and/or exceeds fair market
value of any legitimate service rendered to the payer, or is unrelated
to any service at all other than referral of patients.
OIG investigation may be warranted where one or more of the
following features is present in prescription drug marketing
activities:
Any prize, gift or cash payment, coupon or bonus (e.g.,
airline discounts and related travel premiums), offered to physicians
and/or suppliers (including pharmacies, mail order prescription drug
companies and managed care organizations) in exchange for, or based on,
prescribing or providing specific prescription products. These items
are particularly suspect if based on value or volume of business
generated for the drug company.
Materials which offer cash or other benefits to
pharmacists (or others in a position to recommend prescription drug
products) in exchange for performing marketing tasks in the course of
pharmacy practice related to Medicare or Medicaid. The marketing tasks
may include sales-oriented ``educational'' or ``counseling'' contacts,
or physician and/or patient outreach, etc.
Grants to physicians and clinicians for studies of
prescription products when the studies are of questionable scientific
value and require little or no actual scientific pursuit. The grants
may nonetheless offer substantial benefits based on, or related to, use
of the product.
Any payment, including cash or other benefit, given to a
patient, provider or supplier for changing a prescription, or
recommending or requesting such a change, from one product to another,
unless the payment is made fully consistent with a ``safe harbor''
regulation, 42 CFR 1001.952, or other Federal provision governing the
reporting of prescription drug prices.
F. Special Fraud Alert: Arrangements for the Provision of Clinical Lab
Services
(Issued October 1994)
How Does the Anti-Kickback Statute Relate to Arrangements for the
Provision of Clinical Lab Services?
Many physicians and other health care providers rely on the
services of outside clinical laboratories to which they may refer high
volumes of patient specimens every day. The quality, timeliness and
cost of these services are of obvious concern to Medicare and Medicaid
patients and to the programs that finance their health care services.
Since the physician, not the patient, generally selects the clinical
laboratory, it is essential that the physician's decision regarding
where to refer specimens is based only on the best interests of the
patient.
Whenever a laboratory offers or gives to a source of referrals
anything of value not paid for at fair market value, the inference may
be made that the thing of value is offered to induce the referral of
business. The same is true whenever a referral source solicits or
receives anything of value from the laboratory. By ``fair market
value'' we mean value for general commercial purposes. However, ``fair
market value'' must reflect an arms length transaction which has not
been adjusted to include the additional value which one or both of the
parties has attributed to the referral of business between them.
The office of Inspector General has become aware of a number of
practices engaged in by clinical laboratories and health care providers
that implicate the anti-kickback statute in this manner. Below are some
examples of lab services arrangements that may violate the anti-
kickback statute.
Provision of Phlebotomy Services to Physicians
When permitted by State law, a laboratory may make available to a
physician's office a phlebotomist who collects specimens from patients
for testing by the outside laboratory. While the mere placement of a
laboratory employee in the physician's office would not necessarily
serve as an inducement prohibited by the anti-kickback statute, the
statute is implicated when the phlebotomist performs additional tasks
that are normally the responsibility of the physician's office staff.
These tasks can include taking vital signs or other nursing functions,
testing for the physician's office laboratory, or performing clerical
services.
Where the phlebotomist performs clerical or medical functions not
directly related to the collection or processing of laboratory
specimens, a strong inference arises that he or she is providing a
benefit in return for the physician's referrals to the laboratory. In
such a case, the physician, the phlebotomist, and the laboratory may
have exposure under the anti-kickback statute. This analysis applies
equally to the placement of phlebotomists in other health care
settings, including nursing homes, clinics and hospitals.
Furthermore, the mere existence of a contract between the
laboratory and the health care provider that prohibits the phlebotomist
from performing services unrelated to specimen collection does not
eliminate the OIG's concern, where the phlebotomist is not closely
monitored by his [of her] employer or where the contractual prohibition
is not rigorously enforced.
Lab Pricing at Renal Dialysis Centers
The Medicare program pays for laboratory tests provided to patients
with end stage renal disease (ESRD) in two different ways. Some
laboratory testing is considered routine and payment is included in the
composite rate paid by Medicare to the ESRD facility which in turn pays
the laboratory. Some laboratory testing required by the patient is not
included in the composite rate, and these additional tests are billed
by the laboratory directly to Medicare and paid at the usual laboratory
fee schedule price.
The OIG is aware of cases where a laboratory offers to perform the
tests encompassed by the composite rate at a price below fair market
value of the tests performed. In order to offset the low charges on the
composite rate tests, the ESRD facility agrees to refer all or most of
its non-composite rate tests to the laboratory. This arrangement
appears to be an offer of something of value (composite rate tests
below fair market value) in return for the ordering of additional tests
which are billed directly to the Medicare program.
If offered or accepted in return for referral of additional
business, the lab's pricing scheme is illegal remuneration under the
anti-kickback statute. The statutory exception and ``safe harbor'' for
``discounts'' does not apply to immunize parties to this type of
transaction, since discounts on the composite rate tests are offered to
induce referral of other tests. See 42 CFR 1001.952(h)(3)(ii).
Waiver of Charges To Managed Care Patients
Managed care plans may require a physician or other health care
provider to use only the laboratory with which the plan has negotiated
a fee schedule. In such situations, the plan usually will refuse to pay
claims submitted by other laboratories. The provider, however, may use
a different laboratory and may wish to continue to use that laboratory
for non-managed care patients. In order to retain the provider as a
client, the laboratory that does not have the managed care contract may
agree to perform the managed care work free of charge.
The status of such agreements under the anti-kickback statute
depends in part on the nature of the contractual relationship between
the managed care plan and its providers. Under the terms of many
managed care contracts, a provider receives a bonus or other payment if
utilization of ancillary services, such as laboratory testing, is kept
below a particular level. Other managed care plans impose financial
penalties if the provider's utilization of services exceeds pre-
established levels. When the laboratory agrees to write off charges for
the physician's managed care work, the physician may realize a
financial benefit from the managed care plan created by the appearance
that utilization of tests has been reduced.
In cases where the provision of free services results in a benefit
to the provider, the anti-kickback statute is implicated. If offered or
accepted in return for the referral of Medicare or State health care
plan business, both the laboratory and the physician may be violating
the anti-kickback statute. There is no statutory exception or ``safe
harbor'' to immunize any party to such a practice because the Federal
programs do not realize the benefit of these ``free'' services. See 42
CFR 1001.952(h)(3)(iii).
Other Inducements
The following are additional examples of inducements offered by
clinical laboratories which may implicate the anti-kickback statute:
Free pick-up and disposal of bio-hazardous waste products
(such as sharps) unrelated to the collection of specimens for the
outside laboratory.
Provision of computers or fax machines, unless such
equipment is integral to, and exclusively used for, performance of the
outside laboratory's work.
Provision of free laboratory testing for health care
providers, their families and their employees.
When one purpose of these arrangements is to induce the referral of
program-reimbursed laboratory testing, both the clinical laboratory and
the health care provider may be liable under the statute and may be
subject to criminal prosecution and exclusion from participation in the
Medicare and Medicaid programs.
G. Reporting Information
What To Do If You Have Information About Suspect Activities or
Arrangements
If you have information about health care providers, practitioners,
entities or other persons engaging in these types of activities or
arrangements described above, contact any of the regional offices of
the Office of Investigations of the Office of Inspector General, U.S.
Department of Health and Human Services, at the following locations:
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Regions States served Telephone
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Boston.............. MA, VT, NH, ME, RI, CT............ 617-565-2660
New York............ NY, NJ, PR, VI.................... 212-264-1691
Philadelphia........ PA, MD, DE, WV, VA................ 215-596-6796
Atlanta............. GA, KY, NC, SC, FL, TN, AL, MS 404-331-2131
(No. District).
Chicago............. IL, MN, WI, MI, IN, OH, IA, MO.... 312-353-2740
Dallas.............. TX, NM, OK, AR, LA, MS (So. 214-767-8406
District).
Denver.............. CO, UT, WY, MT, ND, SD, NE, KS.... 303-844-5621
Los Angeles......... AZ, NV (Clark Co.), So. CA........ 714-836-2372
San Francisco....... No. CA, NV, AZ, HI, OR, ID, WA.... 415-556-8880
Washington, DC...... DC and Metropolitan areas of VA 202-619-1900
and MD.
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Dated: December 2, 1994.
June Gibbs Brown,
Inspector General.
[FR Doc. 94-31157 Filed 12-16-94; 8:45 am]
BILLING CODE 4150-04-P