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Clinical Laboratories and Pathology Groups

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Clinical Laboratories and Pathology Groups

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Federal Investigations into Alleged Kickback Schemes between Hospitals and Physicians Increase in Number and Scope

Hospitals and other organizations are finding ways to pay physicians for referrals in ways that don’t always look like kickbacks

Hospitals nationwide are being scrutinized by the federal Office of the Inspector General (OIG) for allegedly violating federal anti-kickback statutes. This will be of interest to clinical pathology laboratories that have been under a similar spotlight for various referral-kickback schemes and arrangements in the last few years, which Dark Daily repeatedly covered.

Kaiser Health News (KHN) recently reported on investigations by the OIG into hospitals allegedly offering unusually high salaries and other perks to specialists because they attract highly profitable business.

In the KHN article, titled, “Hospitals Accused of Paying Doctors Large Kickbacks in Quest for Patients,” Senior Correspondent Jordan Rau describes one investigation of salaries that involved certain high-profile specialists at Wheeling Hospital, in Wheeling, W.Va.

Wheeling, KHN reported, paid one anesthesiologist $1.2 million per year, which, Rau notes, is higher than the salaries of 90% of the pain management specialists around the country. Rau went on to describe how Wheeling also paid one obstetrician-gynecologist $1.3 million per year, and a cardiothoracic surgeon $770,000 per year along with 12 weeks of vacation time.

In each of those cases, the whistleblower who prompted the qui tam investigation reported that the specialists’ various departments were frequently in the red, reported KHN.

“The problem, according to the government, is that the efforts run counter to federal self-referral bans and anti-kickback laws that are designed to prevent financial considerations from warping physicians’ clinical decisions,” wrote Rau.

Wheeling not only contests the lawsuits brought against it, but also has filed a countersuit against the whistleblower. KHN said the hospital claims “its generous salaries were not kickbacks but the only way it could provide specialized care to local residents who otherwise would have to travel to other cities for services such as labor and delivery that are best provided near home.”

“We are confident that, if this case goes to a trial, there will be no evidence of wrongdoing—only proof that Wheeling Hospital offers the Northern Panhandle Community access to superior care, [and] world class physicians and services,” KHN reported Gregg Warren (above), Vice President of Marketing and Public Relations at Wheeling Hospital, saying in a statement. (Photo copyright: LinkedIn.)

OIG’s Fraud and Abuse Laws: A Roadmap for Physicians

The KHN article mentions five laws the OIG lists on its website that are particularly important for physicians to be aware of. They include the:

  • False Claims Act: states that it’s illegal to file false Medicare or Medicaid claims.
  • Anti-Kickback Statute: states that paying for referrals is illegal, that physicians can’t provide free or discounted services to uninsured people, and that money and gifts from drug and device makers to physicians are prohibited.
  • Stark Law(physician self-referral): says that referrals to entities with whom the physician has a familial or financial relationship are off-limits.
  • Exclusion Statue: describes who cannot participate in federal programs, such as Medicare.
  • Civil Monetary Penalties Law: authorizes the Secretary of Health and Human Services, which operates the OIG, to impose penalties in cases of fraud and abuse that involve Medicare or Medicaid.

“Together, these rules are intended to remove financial incentives that can lead doctors to order up extraneous tests and treatments that increase costs to Medicare and other insurers and expose patients to unnecessary risks,” KHN said.

Other Hospitals Under Investigation

Wheeling Hospital is not the only healthcare institution facing investigation. The Dallas Morning News (DMN) reported on a case involving Forest Park Medical Center (FPMC) in Dallas that resulted in the conviction of seven defendants, including four doctors. Prosecutors outlined the scheme in court, saying that FPMC illegally paid for surgeries.

“Prosecutors said the surgeons agreed to refer patients to the Dallas hospital in exchange for money to market their practices,” DMN reported, adding “Patients were a valuable commodity sold to the highest bidder, according to the government.” 

One of the convicted physicians, Michael Rimlawi, MD, told DMN, “I’m in disbelief. I thought we had a good system, a fair system.” His statement may indicate the level to which some healthcare providers at FPMC did not clearly understand how anti-kickback laws work.

“The verdict in the Forest Park case is a reminder to healthcare practitioners across the district that patients—not payments—should guide decisions about how and where doctors administer treatment,” US Attorney Erin Nealy Cox told DMN.

Know What Is and Is Not a Kickback

Both the Wheeling Hospital investigation and the Forest Park Medical Center case make it clear that kickbacks don’t always look like kickbacks. Becker’s Hospital Review published an article titled “Four Biggest Anti-Kickback Settlements Involving Hospitals in 2018” that details cases in which hospitals chose to settle.

These four incidents involved hospitals in Tennessee, Montana, Pennsylvania, and New York. This demonstrates that kickback schemes take place nationwide. And they show that violations of the Stark Law, the False Claims Act, and the Anti-Kickback Statute can happen in numerous ways.

Whether in a clinical laboratory or an enterprisewide health network, violating laws written to prevent money—rather than appropriate patient care—from being the primary motivator in hiring decisions, may result in investigation, charges, fines, and even conviction.

“If we’re going to solve the healthcare pricing problem, these kinds of practices are going to have to go away,” Vikas Saini, MD, President of the Lown Institute, a Massachusetts nonprofit that advocates for affordable care, told KHN.

Though these recent OIG investigations target hospitals, clinical laboratory leaders know from past experience that they also must be vigilant and ensure their hiring practices do not run afoul of anti-kickback legislation.

—Dava Stewart

Related Information:

Hospitals Accused of Paying Doctors Large Kickbacks in Quest for Patients

A Roadmap for New Physicians: Fraud and Abuse Laws

Surgeons, hospital owner convicted in massive kickback scheme involving Forest Park Medical Center

Four Biggest Anti-Kickback Settlements Involving Hospitals in 2018

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

Biodiagnostic Laboratory Services Leaders Sentenced to Prison in $100-Million Lab Test Kickback Scheme That Also Led to Convictions of 38 Physicians Does New Opioid Law Require Clinical Laboratories to Change How They Pay Sales Employees?

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