OIG Issues Advisory Opinion 13-03

June 20, 2013

On June 13, 2013, the Department of Health and Human Services ("HHS") Office of Inspector General ("OIG") released Advisory opinion 13-03 regarding a proposed arrangement for clinical laboratory services. The OIG's ruling on the arrangement was unfavorable, concluding there was potential to generate remuneration prohibited under the anti-kickback statute.


THE ARRANGEMENT

The Proposed Arrangement contemplated a Parent Lab establishing a Management Company that would contract with Physician Groups to assist them in setting up their own independent laboratory facilities. The Management Company would offer services on a contract basis for facility leases, laboratory management, personnel, equipment, and licenses for use of certain proprietary methods of the Parent Lab. The Management Company would provide support and access to a business center (e.g. copier, fax machine, etc.) to each Physician Group, as well as shared custodial and waste collection help. Each individual lab would be responsible for its own billing, data collection, and quality review. All fees would be fixed amounts set at fair market value in arms-length transactions, with contracts running for more than a year.

The Physician Group Labs were to provide testing only for patients who were not beneficiaries of a Federal health care program. To ensure no mix-up (i.e. accidentally sending specimen from a federal beneficiary to the physician's own lab), certain precautions would be taken, including color-coded labeling to distinguish private payor specimens. All labs for Federal health care program beneficiaries would be referred out to an independent laboratory, one of which could potentially include the Parent Lab.

OIG ANALYSIS AND CONCLUSION

Analyzing the arrangement, the OIG first noted that it "has a long-standing concern about arrangements under which parties 'carve out' referrals of Federal health care program beneficiaries" because of the potential for such arrangements to disguise payments for federal program referrals as non-Federal program-related business. Here, the OIG was concerned that the offer by the Parent Lab to provide physicians with a "potentially lucrative opportunity to expand into the clinical laboratory business with little or no business risk" could increase the likelihood that referrals for lab work of Federal beneficiaries would be directed to Parent Lab, and as such could be seen as remuneration for the referrals. The OIG also expressed concern that the arrangement would create financial incentives potentially leading to overutilization of laboratory services for Federal and private programs. As such, the OIG deemed that the arrangement "could potentially generate prohibited remuneration under the anti-kickback statue," and thus the OIG could not ensure that administrative sanctions would not be pursued in such an arrangement.

For more information about OIG Advisory Opinion 13-03 or for questions regarding the anti-kickback statute, please contact Adrienne Dresevic, Esq. or Clinton Mikel, Esq., also available at (248) 996-8510.