News, Analysis, Trends, Management Innovations for
Clinical Laboratories and Pathology Groups

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News, Analysis, Trends, Management Innovations for
Clinical Laboratories and Pathology Groups

Hosted by Robert Michel
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Clinical Laboratory Compliance Practices Under Pressure as Federal Spotlight Is Aimed at Common Fraud and Abuse Schemes; Penalties for Violations Surge

New healthcare fraud prevention partnership white paper outlines the most common abuses and the reasons clinical laboratories are susceptible to fraudulent practices

When it comes to questionable marketing and billing practices for lab testing, clinical laboratory companies can expect increased scrutiny and enforcement actions by federal healthcare authorities. That’s one message in a recently-issued white paper that was jointly authored by the Centers for Medicare and Medicaid Services (CMS) and the Healthcare Fraud Prevention Partnership (HFPP).

Systemic Challenges That Put Clinical Labs at Risk

According to the CMS/HFPP report: “Examining Clinical Laboratory Services: What You Need to Know, How You Can Avoid its Consequences, and What to Do if You Are a Target of This Enforcement,” clinical laboratories face systemic challenges that can lead to the potential for fraud and abuse. Those include the:

  • Number and variability of laboratories;
  • High-volume, low-dollar nature of ordering, providing, and billing for clinical laboratory services; and,
  • Technical complexity and continuing evolution of clinical laboratory services.

While HFPP, a public-private partnership of healthcare payers and allied organizations, notes it is difficult to put a price on the cost of laboratory fraud and abuse, it concludes, “[Fraud] can negatively impact patient care and outcomes, cause financial harm to legitimate service providers and drive up the cost of care for all.”

The CMS/HFPP white paper points out that fraud within the clinical laboratory industry typically is related to abuse of billing standards, improper laboratory relationships, and medically unnecessary testing, such as:

  • Improper use of Current Procedural Terminology Code Modifier 91, which indicates when a test needs to be repeated on the same day;
  • Unbundling of laboratory panels;
  • Pass-through billing schemes;
  • Rural health pass-through billing;
  • Physician partial ownership of laboratories and co-referral networks;
  • Use of exclusively large panels;
  • Standing orders for laboratory tests;
  • Excessive or improper urine drug testing;
  • Sober living facilities (Sober Homes) that profit from urine drug testing; and,
  • Excessive or improper genetic testing.

As the spotlight intensifies on an industry ripe for potential abuse, criminal and civil penalties for fraudulent and/or improper billing for medical laboratory services skyrocket as well.

This means clinical laboratory managers and pathologists can no longer simply rely on written compliance programs. They must implement compliance procedures that can stand up to investigations and enforcement actions and keep pace with frequently changing laws and regulations.

Diagnostic laboratories that fail to comply with healthcare fraud and abuse regulations face increasing legal risk. The Bipartisan Budget Act of 2018 (BBA) doubled many healthcare fraud and abuse penalties. The maximum penalties under U.S. Code § 1320a–7a—the Civil Monetary Penalties Law (CMPL)—for knowingly filing an improper claim jumped to $20,000; $30,000; or $100,000, depending on the violation.

Similarly, the maximum financial penalty related to payments to induce the reduction or limitation of services increased from $2,000 to $5,000. Criminal penalties for felony convictions of the Anti-Kickback Statute (AKS) also were substantially increased. Previously, a provider who violated the AKS could be fined as much as $25,000 and receive a maximum five-year prison sentence. As of February 9, 2018, AKS violations now can result in a maximum fine of $100,000 and up to a 10-year prison term.

Since 2015, monetary penalties for non-compliance with CMPL and AKS regulations have included an annual inflation adjustment, making the recently enacted increases less dramatic than they first appeared. Nonetheless, the BBA has upped the ante for clinical laboratories.

Protecting Your Clinical Laboratory Against Compliance Violations

“The BBA contained key changes to federal healthcare fraud statutes that, on the whole, reflect ongoing Congressional efforts to heighten penalties for healthcare fraud infractions. The revisions to the AKS and CMPL will, in Congress’s view, raise the stakes companies and individuals face in healthcare fraud cases,” noted law firm Hogan Lovells of Washington, D.C.

To help clinical laboratories and pathologists understand the significance of the CMS/HFPP white paper, and to navigate the increasingly treacherous regulatory and legal landscape, Dark Daily will be presenting a July 18 webinar titled “The New CMS White Paper on Healthcare Fraud Prevention: What You Need to Know, How You Can Avoid its Consequences, and What to Do if You Are a Target of This Enforcement.”

Melissa Jampol and Charles Dunham, IV

Melissa Jampol (left) and Charles Dunham, IV (right), are with Epstein Becker and Green, P.C., a national law firm with decades of experience focusing on healthcare and life science regulatory and enforcement issues that impact clinical and anatomic pathology laboratories, hospitals and health systems, and physician group practices and networks. (Photo copyrights: Epstein Becker and Green.)

During this valuable webinar, you will hear from two legal experts—Charles Dunham, IV, (above right) and Melissa Jampol (above left)—both of Epstein Becker and Green, P.C. (EBG). They have extensive healthcare industry regulatory experience and understand the enforcement process. They will provide diagnostic laboratories with a critical understanding of:

  • Department of Justice operations, procedures and techniques for fraud enforcement, as well as laboratory actions that could be viewed as signs of potential fraud or abuse;
  • Non-governmental enforcement procedures and techniques used by private health insurers;
  • Tools for dealing with enforcement procedures or actions;
  • How to build a compliance program that becomes infused in the culture of a clinical laboratory’s operations; and,
  • Best practices designed to protect your lab from compliance violations or to mitigate potential problems, and more.

First to speak will be Charles Dunham, who is a partner at EBG. His national practice includes representation of healthcare providers and health-related entities. He has a particular focus on clinical and anatomic pathology laboratories, hospitals and health systems, and physician group practices and networks. His national clientele provides him with a wide view of the latest and most important developments in how laboratories, hospitals, and physicians need to comply with state and federal laws.

Clinical lab managers and pathologists participating in the webinar will get a unique, insider’s perspective from the co-presenter. Melissa Jampol is a former Assistant U.S. Attorney now at EBG. In this role, she has significant experience interacting with a range of federal and state law enforcement agencies on cases involving healthcare fraud and abuse. Her earlier experience includes more than six years as an Assistant District Attorney at the New York County District Attorney’s office.

To register for this crucial webinar and see essential details about discussion topics, use this link (or copy and paste this URL into your browser:

While only a small percentage of labs engage in fraudulent business practices, all laboratory organizations today are subject to increased scrutiny and potential enforcement action. This essential webinar will provide in-depth information for laboratory managers and pathologists seeking practical advice on how to decrease non-compliance risks.

Don’t miss this unique opportunity to proactively protect your lab or pathology group from future problems, and learn how to respond if you are the subject of a payer audit, served with a Civil Investigative Demand letter, a subpoena, or other action. Register today!

—Andrea Downing Peck

Related Information:

Examining Clinical Laboratory Services: A Review by the Healthcare Fraud Prevention Partnership

Health Care Program Penalties Rise with Bipartisan Budget Act of 2018

Global Clinical Laboratory Services Market: Growing Demand for Quick Results and High Prevalence of Seasonal Infections Remain Important Drivers, Says TMR

Examining Clinical Laboratory Services Infographic

The New CMS White Paper on Healthcare Fraud Prevention: What You Need to Know, How You Can Avoid its Consequences, and What to Do if You Are a Target of This Enforcement

Cincinnati’s Health Alliance Dissolves, Was a Pioneer in Consolidation of Clinical Pathology Laboratory Testing

Its Laboratory Alliance Lab Outreach Business was Sold in 2003

Back in the mid-1990s, Cincinnati was the location for a multi-hospital clinical laboratory consolidation that was one of the first and biggest of its time. Now, all but one of the original organizing hospitals of The Health Alliance of Greater Cincinnati have gone their separate ways.

The original goal was for the alliance to help its not-for-profit health members compete economically. Now this story may turn out to be a cautionary tale about the perils of alliances where health entities share operations but not governance.

Back in 2003, financial struggles of The Health Alliance contributed to its decision to sell ownership of the outreach business of Alliance Laboratory Services, the consolidated clinical laboratory organization, to LabOne, Inc. LabOne’s ownership of this medical laboratory later passed to Quest Diagnostics, Incorporated (NYSE: DGX) when LabOne was itself acquired by Quest Diagnostics in 2005. (See The Dark Report, August 22, 2005, “Quest Pays $934 Million In Acquisition of LabOne.”)