OIG Says Free Labeling of Test Tubes, Collection Containers Could Violate Anti-Kickback Laws

Test tube labelingThe Office of Inspector General (OIG) recently issued an advisory opinion suggesting that a laboratory’s proposal to label test tubes and specimen collection containers at no cost to dialysis facilities could constitute remuneration under the anti-kickback statute and result in potential sanctions.

The opinion issued this month came at the request of an unnamed laboratory that contracts with dialysis facilities to provide testing services to patients. The lab would retain sole discretion regarding which dialysis facilities would receive the free labeling services. The laboratory noted that the decision would be based on whether offering the services would be required to obtain or regain the dialysis facility’s business.

This isn’t the first time that OIG has been asked to provide an opinion on this matter. In May 2008, the agency was presented with a factually identical proposed arrangement.

The OIG noted that at that time “Medicare employed a composite rate reimbursement system for the laboratory testing services at issue. And, at that time, the lab provided both the composite rate tests, which were included in the composite rate that Medicare paid the dialysis facilities, and, therefore, were not separately reimbursable, and separately reimbursable laboratory tests that were not covered by the Medicare composite rate.”

If the dialysis facilities received the labeling services for free, they would reduce their costs for the composite rate tests and realize a greater portion of the composite rate reimbursed by Medicare.

Since that original opinion was issued, the Centers for Medicare & Medicaid (CMS) has implemented a prospective payment system to reimburse facilities for providing renal dialysis services to patients with end-stage renal disease (ESRD). That rule became effective in January 2011 and resulted in the creation of a bundled payment system in place of the previous case-mix adjusted composite payment system and reimbursement methodologies for separately reimbursable outpatient items and services related to end-stage renal disease.

Given that the payment system has changed since the previous request for an opinion, the laboratory wanted to know if such an arrangement would still constitute grounds for sanctions.

In its December 5 opinion, OIG noted that federal law prohibits a laboratory from offering an item or service for free, or less than fair market value to a referral source because it can be inferred that the action is being taken to induce the referral of business.

After consulting with CMS, the OIG concluded that the changes to the reimbursement structure since the original opinion was issued did not change the agency’s conclusion that the proposed arrangement posed more than just a minimal risk of fraud and abuse. It found that providing free labels would result in a tangible benefit to the dialysis facilities and could influence a dialysis facilities’ decision as to whether to use that lab.

“By capturing referral streams from the dialysis facilities, the lab likely would be able to generate substantial revenue, because dialysis patients typically need lifelong laboratory testing services associated with their receipt of dialysis services, OIG wrote in its opinion. “While this risk may be lessened in circumstances where laboratories bill for fewer separately reimbursable tests, it remains a concern under the end-stage renal disease payment system (ESRD PPS), because CMS continues to permit laboratories to receive separate payment for certain tests ordered in the ESRD setting when furnished for reasons other than for the treatment of ESRD.  Comparable competitor arrangements may similarly run afoul of the anti-kickback statute.”

At the time the earlier opinion was issued questions arose as to whether the laboratory may have been intentionally seeking a negative opinion from OIG as a way to root out some “bad actors” who may have been providing such services. Otherwise, why would the requestor acknowledge that its decision to provide free labeling would be based on whether it could obtain or retain a dialysis facility’s business? Could that be the case again? Only the requestor’s attorneys know for sure.

While OIG advisory opinions apply only to the requestor of the opinion, it should serve as a bellwether for other laboratories and dialysis facilities on how such arrangements would be perceived.

The Health Law offices of Anthony C. Vitale can assist clients in navigating the very complex rules and regulations impacted by this advisory opinion.  Give us a call at 305-358-4500 or send us an email to info@vitalehealthlaw.com and let’s discuss how we might be able to assist you.

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