Is Your Lab Paying Your Practice an Illegal Kickback?

The issue of laboratory payments to physician practices surfaced again last week when the U.S. Department of Justice intervened in a whistleblower False Claims Act lawsuit. The suit seeks $11,000 per specimen penalty, treble (triple) damages, and attorney’s fees, claiming Berkeley Heartlab Inc., and its marketing company, BlueWave Healthcare Consultants Inc., paid $80 million in kickbacks, conducted unnecessary medical testing, and cheated the government in at least some of the $500 million in claims paid by Medicare and other government programs. The defendants are expected to deny all allegations.

The lawsuit alleges doctors were paid improper “processing and handling” fees to refer blood samples to Berkeley and other designated laboratories for expensive tests. BlueWave, the marketing arm, is accused of entering into illegal contracts calling for physicians to refer lab tests to certain companies.

The lawsuit alleges a form of “kickback” occurred in two principle ways: 1.) handling fees the lab paid to the physicians are alleged to be too high to constitute a fair market value payment; and 2.) the waiver of copayments for private insurance patients amounts to a kickback, essentially “steering” patients to the lab.

This week, we will discuss payments to you might be offered by an ancillary services provider; also the subject of a June 2014, OIG Special Fraud Alert entitled, “Laboratory Payments to Referring Physicians.” According to the Alert, “[w]hen a laboratory pays a physician more than fair market value for the physician’s services or for services the laboratory does not actually need or for which the physician is otherwise compensated, the federal Anti-Kickback Statute (AKS) is implicated.”  Labs can pay doctors for a service, and the doctors can make referrals under the AKS, as long as the Personal Services safe harbor rules are followed.

In the context of payments to you from a lab (or any ancillary service provider) for any type of service, the key is often “fair market value.” This could be a payment for processing samples, or a payment for medical director services. Fair market value is complicated, but essentially has two major components: 1.) Is the payment to you a fair value for the service actually performed?; and 2.) Did the lab or ancillary service provider legitimately need the service?

A lab could pay you for any service it actually needs. As an example including mowing the yard once a week. But the lab could not pay you for an hour of physician time to mow grass, because the job doesn’t call for a physician.Nor could the lab pay you and 50 other doctors, even at $15 an hour, to mow the yard every week. That would be 50 times more service than the lab actually needs.

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