On June 25, the U.S. Department of Health & Human Services, Office of the Inspector General ("OIG") issued a Special Fraud Alert updating the previous guidelines concerning compensation by clinical laboratories to referring physicians and physician groups. The Special Fraud Alert addresses two practices that are especially susceptible to fraud under the federal Anti-Kickback Statute ("AKS") when they invoke certain kinds of behavior: 1) blood specimen collection, processing, and packing arrangements, and 2) registry arrangements.

Processing Arrangements:

With respect to blood specimen collection, processing, and packing arrangements (collectively "processing arrangements"), the OIG focuses on arrangements under which a clinical laboratory pays a physician to collect, process and/or package specimens. Payments for these services are typically made on a per-specimen or per-patient encounter basis and are often associated with expensive or specialized tests.

Characteristics of processing arrangements potentially violating the AKS include:

• Payment to the physician exceeding fair market value or for services that are also made by a third party, such as Medicare;
• Payment directly to the ordering physician, rather than to the practice bearing the overhead;
• Payment is made on a per-specimen basis for more than one specimen collected in a single patient encounter or on a per-test, per-patient, or other basis taking into account the volume or value of referrals;
• Payment offered on the condition of a specified volume or type of test ordered (especially if the test is duplicative or is not reasonable or necessary or reimbursable); and
• Payment made to the physician or the group practice despite the fact that the work is performed by a phlebotomist placed in the office by the laboratory or a third party.

Registry Arrangements:

Registry arrangements are arrangements under which clinical laboratories establish, coordinate, or maintain databases, either directly or through an agent, purportedly to collect data on the patients who have undergone, or may undergo, certain tests performed by the offering laboratories. While registry arrangements take various forms, they typically involve payments from laboratories to physicians for certain duties related to the submission of patient data for the registry, answering patient questions about the registry and reviewing registry reports.

While registry arrangements are reasonable under certain circumstances, the OIG is particularly concerned that some registry arrangements may induce physicians to order medically unnecessary or duplicative tests performed for the purpose of obtaining comparative data, and to order those tests from laboratories that offer registry arrangements instead of other, potentially superior laboratories.

Characteristics of registry arrangements potentially violating the AKS include:

• Laboratories requiring, encouraging, or recommending that tests are performed with a stated frequency to receive compensation;
• Compensation is paid on a per-patient basis or other basis taking into account the volume or value of referrals;
• Compensation paid exceeds the fair market value of the services provided;
• No documentation is maintained or submitted regarding the physician's efforts in performing the services;
• A laboratory offers registry arrangements only for tests for which it has obtained patents or that it exclusively performs;
• When a test is performed by multiple laboratories, the laboratory collects data only from the test it performs; and
• The laboratory collects comparative data for the registry from, and bills for, multiple tests which may be duplicative or otherwise are not reasonable and necessary.

Significantly, in both of the highlighted arrangements, the OIG makes clear that its concerns are not abated by a "carve out" of federal health care program patients given the desire of most physicians to minimize the number of laboratories to which they refer (thus making it more likely that these arrangements will still induce the referral of federal health care business despite the carve outs).

Once again, the OIG has reconfirmed its longstanding concerns regarding payment arrangements between physician referral sources and third party providers. Consequently, this Special Fraud Alert provides a roadmap for physicians and laboratories of the obstacles to avoid in establishing processing and registry arrangements. It is important, then, that you review your current arrangements closely to ensure that they do not include any of the characteristics of suspect arrangements described above.