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FDA’s Regulatory Hurdles ‘Paralyzed’ Efforts of CLIA-Certified Clinical Laboratories to Offer Alternatives to CDC’s Flawed COVID-19 Test, Part Two of Two

Washington Post investigation outlines scientists’ frustrations in the early days of the pandemic, as they worked to deploy laboratory-developed tests for the novel coronavirus

In the wake of the failed rollout of the Centers for Disease Control and Prevention’s (CDC) COVID-19 diagnostic test last February, many CLIA-certified academic and public health laboratories were ready, and had the necessary resources, to develop their own coronavirus molecular diagnostic tests to help meet the nationwide demand for clinical laboratory testing. However, the response from the US Food and Drug Administration (FDA) was, in essence, “not so fast.”

In this second part of Dark Daily’s two-part e-briefing, we continue our coverage of the Washington Post (WP) investigation that detailed the regulatory hurdles which blocked private laboratories from deploying their own laboratory-developed tests (LDTs) for COVID-19. The report is based on previously unreported email messages and other documents reviewed by the WP, as well as the newspaper’s exclusive interviews with scientists and officials involved.

CDC ‘Health Emergency’ Declaration Stifled Laboratory-Developed Tests

The CDC’s COVID-19 test kits began arriving at public health laboratories on February 8, just 18 days after the first case of the novel coronavirus was confirmed in the US. As the WP noted in an earlier analysis, titled, “What Went Wrong with Coronavirus Testing in the US,” the CDC’s decision to develop its own test was not surprising. “The CDC will develop [its] own test that is suited to an American healthcare context and the regulations that exist here,” explained Jeremy Konyndyk, Senior Policy Fellow at the Center for Global Development. “That’s how we normally would do things.”

But state and local public health laboratories quickly discovered that the CDC test kits were flawed due to problems with one of the reagents. While numerous academic, research, and commercial labs had the capability to produce their own COVID-19 PCR tests, FDA rules initially prevented them from doing so without a federal Emergency Use Authorization (EUA).

The bureaucratic hurdles arose due to Health and Human Services Secretary Alex Azar’s January 31 declaration that COVID-19 was a “health emergency” in the US. By doing so, HHS triggered a mandate that requires CLIA-certified labs at universities, research centers, and hospitals to seek an EUA from the FDA before deploying any laboratory-developed tests.

Scientists, Clinical Laboratories Frustrated by Bureaucratic Delays and Red Tape

To make matters worse, the EUA process was neither simple nor fast, which exasperated lab scientists and clinical laboratory administrators. “In their private communications, scientists at academic, hospital, and public health labs—one layer removed from federal agency operations—expressed dismay at the failure to move more quickly, and frustration at bureaucratic demands that delayed their attempts to develop alternatives to the CDC test,” wrote the WP investigators.

In a Feb. 27 email to other microbiologists, Marc Couturier, PhD, Medical Director at ARUP Laboratories, a national reference laboratory network located in Utah, voiced his irritation with the red tape that stymied private laboratory development of COVID-19 tests. He wrote, “We have the skills and resources as a community, but we are collectively paralyzed by a bloated bureaucratic/administrative process,” reported the WP.

Keith Jerome, MD, PhD (above), Head of the Virology Division at the Fred Hutchinson Cancer Research Center in Seattle, maintains federal regulations muted one of the nation’s greatest assets in the fight against COVID-19. “The great strength the US has always had, not just in virology, is that we’ve always had a wide variety of people and groups working on any given problem,” he told MIT Technology Review. “When we decided all coronavirus testing had to be done by a single entity, even one as outstanding as CDC, we basically gave away our greatest strength.” (Photo copyright: Jonathan Hamilton/NPR.)

‘FDA Should Not Treat Labs Like They Are Creating Commercial Products’

Perhaps no scientist was more frustrated by the bureaucratic runaround than Alex Greninger, MD, PhD, a clinical pathologist and Assistant Professor at the University of Washington. Greninger is Assistant Director of the UW’s clinical virology laboratory, which had begun developing a test for the novel coronavirus as soon as the World Health Organization (WHO) China Country Office reported that it had been “informed” about the emergence in China of a “pneumonia of unknown cause.”

According to Kaiser Health News (KHN), Greninger was able to identify one of the nation’s first cases of community-acquired COVID-19 by taking “advantage of a regulatory loophole that allowed the lab to test samples obtained for research purposes from UW’s hospitals.”

But navigating the EUA process was a different story, Greninger told the WP. He spent more than 100 hours filling out forms and collecting information needed for the EUA application. After emailing the application to the FDA, Greninger received a reply containing eCopy Guidance telling him he needed to resubmit the information to the Document Control Center (DCC) at the Center for Devices and Radiological Health (CDRH), a federal agency Greninger knew nothing about. Another FDA rule required that the submission be copied to a hard disk and mailed to the DCC.

In an interview with ProPublica, Greninger stated that after he submitted his COVID-19 test—which copies the CDC protocol—an FDA reviewer told him he would need to prove the test would not show a positive result for someone infected with either a SARS or MERS coronavirus. The first SARS coronavirus disappeared in mid-2003 and the only two cases of MERS in the US were diagnosed in 2014. Greninger told ProPublica it took him two days to locate a clinical laboratory that could provide the materials he needed.

Greninger maintains the FDA should not treat all clinical laboratories as though they are making a commercial product. “I think it makes sense to have this regulation when you’re going to sell 100,000 widgets across the US. That’s not who we are,” he told ProPublica.

FDA Changes Course

Under pressure from clinical laboratory scientists and medical doctors, by the end of February the FDA had issued new policy that enabled CLIA-certified laboratories to immediately use their validated COVID-19 diagnostics while awaiting an EUA. “This policy change was an unprecedented action to expand access to testing,” said the FDA in a statement.

Since then, the FDA has continued to respond—albeit slowly—to scientists’ complaints about regulations that hampered the nation’s COVID-19 testing capacity.

Clinical laboratory leaders and pathologists involved in testing for the SARS-CoV-2 coronavirus should monitor the FDA’s actions and be aware of when and if certain temporary changes the agency implemented during the early days of the COVID-19 pandemic become permanent.

To read part one of our two-part coverage of the Washington Post’s investigation, click here.

—Andrea Downing Peck

Related Information:

Inside the Coronavirus Testing Failure: Alarm and Dismay among the Scientists who Sought to Help

Contamination at CDC Lab Delayed Rollout of Coronavirus Tests

Pneumonia of Unknown Cause–China

How Intrepid Lab Sleuths Ramped Up Tests as Coronavirus Closed In

Key Missteps at the CDC Have Set Back Its Ability to Detect the Potential Spread of Coronavirus

Why the CDC Botched Its Coronavirus Testing

Coronavirus (COVID-19) Update: FDA Issues New Policy to Help Expedite Availability of Diagnostics

Coronavirus (COVID-19) Update: FDA Expedites Review of Diagnostic Tests to Combat COVID-19

 

Opioid Epidemic is Latest Healthcare Fraud ‘Hot Spot’ as Some Unethical Clinical Laboratories, Physicians, and Service Providers Attempt to Cash-in

It’s critical that medical laboratory leaders prepare for increased scrutiny and pressure from DOJ fraud investigations

Recent efforts by federal investigators to ferret out and prosecute healthcare fraud have shown that certain clinical laboratory companies are guilty of fraud and abuse. And as Dark Daily covered in “Preparing Clinical Laboratories for Invasive Federal Enforcement of Fraud and Abuse Laws, Increased Scrutiny by Private Payers, New Education Audits, and More,” November 13, 2019, the US Department of Justice (DOJ) and other federal and state regulators are becoming more aggressive in their hunt for bad actors.

Thus, clinical laboratory leaders must constantly be on guard against being drawn into potentially fraudulent activities. For example, schemes involving substance-use disorder (SUD), which are the latest healthcare-related scams to draw the attention of the DOJ.

Lack of Oversight in Substance-Use Disorder (SUD) Leads to Fraud

According to four experts who co-authored a blog post in Health Affairs, America’s opioid epidemic has affected more than 20 million lives and become a “hot spot” for healthcare fraud.

“Substance-use disorder (SUD) treatment was a $9 billion per year industry in 1986 and is now a $35 billion industry that is expected to reach $42 billion in 2020,” they wrote. Thus, it has given rise to escalating opioid-related scams by unethical clinical laboratories, healthcare providers, and recovery-house operators.

Anuradha Rao-Patel, Lead Medical Director Government Programs at Blue Cross and Blue Shield of North Carolina; Michael Adelberg, Principal and Healthcare Strategy Lead at Faegre Baker Daniels Consulting; Samantha Arsenault, Vice President of National Treatment Quality Initiatives at Shatterproof; and Andrew Kessler, JD, Founder and Principal of Slingshot Solutions, explained in Health Affairs how lack of oversight led to the increase in fraud.

“While current regulations around SUD treatment aim to protect patient safety instead of criminalize addiction treatment, they vary by state—and in some states, patient protections are limited,” they explained. “This lack of oversight invites deceptive business practices, insurance fraud, patient neglect, and ultimately, treatment malpractice that can damage lives and tear families apart.”

In December 2019, the US Department of Health and Human Services (HHS) Office of the Inspector General (OIG) released its Semiannual Report to Congress. The report details the $5.9 billion HHS recovered from healthcare fraud investigations during fiscal year 2019, more than double the amount of the prior year.

Included in that amount was a $17 million settlement with Acadia Healthcare (NASDAQ:ACHC), and its subsidiary, CRC Health, LLC, which allegedly defrauded Medicaid out of $8.5 million from 2012 to 2018. According to a DOJ press release, the clinical laboratory testing reimbursement scheme ended in the largest healthcare fraud settlement in West Virginia history.

“Medicaid fraud is not a victimless crime,” US Attorney Michael Stuart (above) said in the DOJ press release. “In [the Acadia Healthcare] case, every dime in false billings was doubled for a total settlement that represents twice the harm caused. This is a strong message and a massive penalty. The message is clear—if you are cheating the system and we find you, you’ll not only pay for the damage done, but far more.” (Photo copyright: Wikipedia.)

The Health Affairs authors focused on the major players in addiction treatment-related fraud that were highlighted in a 2018 Government Accountability Office (GAO) report. They are:

  • SUD treatment providers who take advantage of “gaps in regulations and quality assurance to offer substandard and fraudulent care that endangers patients and wastes money.”
  • Unlicensed patient brokers who SUD providers pay to transport addicts to them, often from hundreds of miles away.
  • Disreputable recovery house or “sober home” operators who are subsidized financially by fraudulent SUD providers.

One example the GAO report outlined involved SUD providers in Florida who funded their illegal operations by billing patients’ insurance hundreds of thousands of dollars in unnecessary drug testing over the course of several months.

“At the very moment that ethical healthcare providers are working harder than ever to address the opioid crisis, unethical actors—such as providers engaged in fraud—pose a growing problem,” the Health Affairs authors stated.

Opioid Crisis Turns Urine Screening into ‘Liquid Gold’

Kaiser Health News (KHN) reported that many doctors who prescribe opioids began making drug screenings routine in their practices after being persuaded that doing so would keep them in good standing with licensing boards and law enforcement, while also reducing their liability and preventing patient abuse of prescription pills.

In some instances, doctors opened their own clinical laboratories, KHN stated.

KHN described the nation’s painkiller addiction as turning urine screening into “liquid gold,” particularly for doctors who operate their own clinical laboratories. In 2014 and 2015, Medicare paid $1 million or more for drug-related tests billed by healthcare workers at more than 50 pain management practices in the US, KHN reported.

“It was almost a license to steal. You had such a lucrative possibility, it was tempting to sell as many [tests] as you can,” Charles Root, PhD, Senior Consultant at consulting firm CodeMap, told KHN. CodeMap provides publications, tools, and services that help healthcare professionals navigate the federal Medicare program and has tracked the increase in medical testing laboratories in doctors’ offices, KHN noted.

The graphic above is built on data from CodeMap. It illustrates the “explosive” growth in certain urine tests to “detect and quantify a variety of drugs,” according to KHN. This has led some providers to open clinical laboratories in their offices to capture the increasing revenue generated by this testing. (Image copyright: Kaiser Health News.)

Federal officials have taken notice of physicians whose priority is testing patients, not treating them. Jason Mehta, JD, who at that time was Assistant US Attorney in Jacksonville, Fla., told KHN, “We’re focused on the fact that many physicians are making more money on testing than treating patients. It is troubling to see providers test everyone for every class of drugs every time they come in.”

Clinical laboratories have an important role to play in identifying fraud and solving the opioid epidemic. Not only are lab leaders ideally positioned to help providers better understand drug test ordering and interpretation, but also to help develop value-based interventions within the continuum of care for this national health crisis.

—Andrea Downing Peck

Related Information:

Fraud’s Newest Hot Spot: The Opioid Epidemic and the Corresponding Rise of Unethical Addiction Treatment Providers

U.S. Department of Health and Human Services Office of Inspector General: Semiannual Report to Congress: April 1, 2019-Sept. 30, 2019

United States Attorney Announces $17 Million Healthcare Fraud Settlement

Substance Use Disorder: Information on Recovery Housing Prevalence, Selected States’ Oversight, and Funding

Liquid Gold: Pain Doctors Soak Up Profits by Screening Urine for Drugs

National Health Care Fraud Takedown Results in Charges Against Over 412 Individuals Responsible for $1.3 Billion in Fraud Losses

10 Popular Health Care Provider Fraud Schemes

Preparing Clinical Laboratories for Invasive Federal Enforcement of Fraud and Abuse Laws, Increased Scrutiny by Private Payers, New Education Audits, and More

Medical Tourism Lowers Healthcare Costs for Companies and Their Employees, But Is It Good Medicine for Patients and Can Clinical Laboratories Participate?

Some companies save so much in healthcare cost they pay their employees to participate in medical tourism programs

Medical tourism is not new, but it’s changing, and clinical laboratories have a role to play in the models employers use to save money on their employees’ health coverage costs.

Employers that manage the entire process—from securing passports for their employees, to ensuring they have access to high-quality care outside the country’s borders—report saving money as well as simplifying the process for their employees. An apparent win-win.

However, questions linger about:

  • Availability of diagnostic testing and clinical laboratories;
  • If patients treated outside the US receive adequate protections; and
  • Whether the quality of care is equal to that in the US.

One recent example of a company helping employers and employees receive high quality care outside of the US is NASH—the North American Specialty Hospital. NASH was featured in a Kaiser Health News (KHN) article that described one patient’s experience traveling to Cancún for a surgical procedure.

Location, Pre-Existing Conditions, Length of Stay, Etc., Affect Final Bill in US

One of NASH’s corporate clients is Ashley Furniture Industries. Headquartered in Arcadia, Wis., the American home furnishings manufacturer and retailer employs approximately 17,000 people, including Terry Ferguson. Terry’s wife, Donna, is the patient highlighted in the KHN story.

One of the healthcare providers NASH partners with is Galenia Hospital, a 55-bed general services hospital in Cancún, Mexico. NASH leases the entire third floor of the hospital. Galenia is next door to a Four Points Sheraton Hotel, making lodging a simple matter for medical tourists.

Currently, NASH focuses on orthopedic surgeries such as total knee replacements, the medical procedure Donna Ferguson underwent.

A 2015 BlueCross BlueShield study showed that costs for total-knee-replacement surgery in the US averaged about $31,000. However, depending on where the surgery takes place, it can cost as low as $11,317 (Alabama) and as high as $69,654 (New York City). Pre-existing conditions, length of time in the operating room, number of days in the hospital, and numerous other factors contribute to the final bill.

NASH, however, sets the final price is up front.

Some Companies Pay Their Employees to Use Medical Tourism

With the average cost for the surgery coming in at around $12,000, the cost savings to employers is so great some companies actually pay employees who are willing to travel for procedures, KHN reported. Donna Ferguson paid no co-pays for her surgery, paid nothing out of pocket for travel or lodging while in Cancún, and the Ferguson’s received a $5,000 check from Ashley Furniture.

Ferguson told KHN, “It’s been a great experience. Even if I had to pay, I would come back here because it’s just a different level of care—they treat you like family.”

That’s important for hospitals, clinical laboratories, and all healthcare providers in America to consider. In the minds of patients, quality of care starts with their experience at the hands of the provider.

Donna Ferguson (center) is shown above meeting Thomas Parisi, MD, JD (left), a surgeon with the Orthopedic Institute of Wisconsin, for the first time in Cancún the day before he performed her knee replacement surgery. Clinical laboratory tests, X-rays, and other diagnostics took place in the US prior to Ferguson’s authorization to undergo surgery in Mexico. (Photo copyright: Rocco Saint-Mleux/KHN.)

Clinical Laboratory Tests in US, Surgery in Mexico

Prior to traveling outside the US for surgery, Ferguson underwent a physical exam, X-rays, and other diagnostic testing to ensure the treatment approach was the best for her. Once that was confirmed, IndusHealth, Ashely’s medical travel plan administrator, “coordinated [Donna’s] medical care and made travel arrangements, including obtaining passports, airline tickets, hotel and meals,” for both Donna and Terry Ferguson, KHN reported.

It seems reasonable to assume that NASH has agreements with multiple clinical pathology laboratories and healthcare facilities throughout the US for patients to get the tests they need prior to surgery. Partnerships with medical tourism companies may well represent an avenue for pathology laboratories to pursue.

Protections for Patients

So, why hasn’t medical tourism become the healthcare juggernaut some experts predicted? Managed Care suggests one reason is that Americans tend to be skeptical of the quality of care they will receive in a foreign facility.

“Building a familiar culture in a foreign destination may be appealing to some American consumers, but I do not see it as a sustainable business,” Health consultant Irving Stackpole, PhD, MEd, Psychology, told KHN. “It’s not unusual for people thinking about this to have doctors, family, and friends who will see this as a high-risk undertaking.”

Several factors helped Ferguson feel better about her decision to travel to Mexico for surgery. One is that Galenia is credentialed.

Managed Care notes, “A number of organizations credential international facilities. The American Medical Association guidelines for medical tourism recommend that foreign medical providers have accreditation from the Joint Commission International or a similar organization.”

Galenia Hospital has accreditation from the Joint Commission International, the General Health Council of Mexico, as well as diamond-level accreditation from Canada’s Qmentum International Accreditation Program.

In addition to a credentialed facility and a highly trained surgeon, NASH also provides US malpractice insurance coverage, giving patients recourse in the event something goes wrong. Ferguson and American patients like her would be able to sue in the US if care under this arrangement was not successful.

Medical Tourism Pays Surgeon’s Full Fee

One fascinating twist in this story is that an American physician was flown to Cancun to perform this operation and was paid his full fee. The surgeon scheduled to perform Ferguson’s operation, Thomas Parisi, MD, JD, trained at the Mayo Clinic. He traveled from Wisconsin to Cancún to perform the procedure. “Dr. Parisi trained at Mayo, and you can’t do any better than that,” Ferguson told KHN.

KHN reported that Parisi spent less than 24 hours in Cancun and was paid $2,700 for this surgery. That fee is three times of the amount Medicare pays for this procedure. Further, Parisi’s fee was significantly above what many managed care plans would negotiate for this type of surgery.

American-trained physicians are common at many of the facilities credentialed by the Joint Commission International. “Many overseas hospitals are staffed in part by physicians and other health professionals who were trained in US hospitals. One hospital in India has 200 US-trained board-certified surgeons,” wrote James E. Dalen, MD, MPH, ScD, and Joseph S. Alpert, MD, in “Medical Tourists: Incoming and Outgoing,” published in The American Journal of Medicine (AMJMED).

“In the past, medical tourism has been mostly a blind leap to a country far away, to unknown hospitals and unknown doctors with unknown supplies, to a place without US medical malpractice insurance. We are making the experience completely different and removing as much uncertainty as we can,” James Polsfut, CEO and Chairman, North American Specialty Hospital (NASH), told KHN.

Clinical laboratories in America may find opportunities providing testing services to medical tourism organizations like NASH. It’s worth investigating.

 —Dava Stewart

Related Information:

To Save Money, American Patients and Surgeons Meet in Cancun

Blue Cross Blue Shield Association Study Reveals Extreme Cost Variations for Knee and Hip Replacement Surgeries

Understanding Knee Replacement Costs: What’s on the Bill?  

NASH Self-Pay Medical Tourism

Medical Tourism: Once Ready for Takeoff, Now Stuck at the Gate

Medical Tourists: Incoming and Outgoing

Medical Tourism Continues to Flourish as U.S. Patients Seek Lower Cost Healthcare in Overseas Countries

Healthcare Reform in the United States May Actually Increase Medical Tourism

Utah Public Employees Receive Transportation and a $500 Cash Bonus to Purchase Prescriptions in Mexico

Walmart Flies Employees to Top Hospitals for Surgeries in a Bid to Cut Healthcare Costs

Proposed Federal Rules Let Patients Compare Healthcare Costs on Their Smartphones

Another push for price transparency steps up pressure on medical laboratories and anatomic pathology groups to develop compliance strategies

Clinical laboratories and anatomic pathology groups are under increasing pressure to develop strategies for making their test prices more accessible to patients. Those pressures are likely to grow due to newly proposed federal regulations that aim to allow patients to compare prices for healthcare services on their smartphones.

This new proposed rule comes less than a year after a rule involving hospital prices was implemented. As of January 1, 2019, the federal Centers for Medicare and Medicaid Services (CMS) required US hospitals to post their prices online. Dark Daily reported last year about the risks and opportunities posed by that move.

Now, new proposed rules published separately in March by CMS and also by the Office of the National Coordinator for Health Information Technology (ONC) focus on larger issues involving patient access to electronic health information (EHI). That includes empowering patients who want to compare healthcare costs, said Donald Rucker, MD, National Coordinator for Health Information Technology in a statement to the US Senate Committee on Health, Education, Labor and Pensions (HELP).

“In our current health system, there is an asymmetry of information for patients. They have few ways if any to anticipate or plan for costs, lower or compare costs, and, importantly, measure their quality of care or coverage relative to the price they pay. Transparency in the price and cost of healthcare could help address some of those concerns by empowering patients with information they need to make informed decisions,” said Donald Rucker, MD (above), National Coordinator for Health Information Technology (ONC), in remarks delivered to the US Senate. (Photo copyright: ONC.)

Giving Patients Access to Their Health Information

In May, officials with those agencies discussed the regulations in prepared remarks for a hearing of the HELP committee.

“A central purpose of the proposed [ONC] rule is to facilitate patient access to their EHI on their smartphone, growing a nascent patient- and provider-facing app economy,” he said, noting that this access is impeded by a lack of interoperability between health information systems, as well as restrictions on information exchange imposed by health IT developers.

The proposed rule will mandate use of common software standards so that app developers can access health information systems from different vendors. As a result, patients could choose their own apps to view their data regardless of which electronic health records (EHR) system their provider uses. The rule also includes provisions for dealing with so-called “information blocking” by vendors, Rucker noted.

If the proposed rule is implemented as currently written, there would be a need for clinical laboratories and pathology groups to ensure that their laboratory information systems (LIS) meet the specifications of the new rule. This may mean that, along with enabling two-way digital interfaces with physicians’ EHRs, labs also would need to be able to pass data to the apps and mobile devices used by patients that are covered by the proposed new rule.

“ONC’s proposed rule primarily focuses on clinical data,” he said. “However, advances in computer science and the maturity of data standards are accelerating the convergence of medical data with billing and price data. As such, the rule proposes to include such information as part of a patient’s EHI that should be available for access, exchange, and use.”

Enabling cost comparisons will allow patients to make more-informed decisions about their healthcare, Rucker added. But he acknowledged that implementing this vision won’t be easy.

“Unfortunately, the complex and decentralized nature of how payment information for healthcare services is currently created, structured, and stored presents many challenges to achieving price transparency,” he said. “This entire information chain is geared to retrospective payments rather than prices.”

Rucker told the HELP committee that the [ONC] will be seeking public input about how to capture price information and enable price transparency. Once the rule is finalized and published, providers will have two years to comply.

Medical Laboratories Need a Strategy for Providing Access to Patient Records

The proposed CMS rule imposes requirements on payers to provide electronic access to health claims and other information for their enrollees.

In her prepared remarks for the Senate HELP hearing, Kate Goodrich, MD, Director of the Center for Clinical Standards and Quality (CCSQ) and CMS Chief Medical Officer, said, “A core policy principle underlying our proposals is that every American should be able, without special effort or advanced technical skills, to see, obtain, and use all electronically available information that is relevant to their health, care, and choices—of plans, providers, and specific treatment options.”

That’s all well and good, however, as Fred Schulte, a senior correspondent for Kaiser Health News, wrote in his coverage of the two proposed rules, “Meeting these goals could prove to be a tall order.”

He continued, “For well over a decade, federal officials have struggled to set up a digital records network capable of widespread sharing of medical data and patient records.” Not to mention the billions of dollars already spent by the CMS and ONC incentivizing providers to implement truly interoperable health information exchange (HIE) systems nationwide.

Nevertheless, pressure for greater consumer data access and price transparency will likely continue to build across the healthcare industry, including on medical laboratories. Price transparency as a trend is making steady forward progress, despite resistance by hospitals, physicians, medical associations, and others.

All clinical laboratories should have a strategy to make lab test prices readily available to patients. It is something that will become common at some future point.

—Stephen Beale

Related Information:

Going Above and Beyond the CMS Hospital Price Transparency Rule

Proposed Rule by the Centers for Medicare and Medicaid Services on 03/04/2019

Proposed Rule by the Health and Human Services Department on 03/04/2019

Feds Want to Show Health Care Costs on Your Phone, But That Could Take Years

Latest Push by CMS for Increased Price Transparency Highlights Opportunities and Risks for Clinical Laboratories, Pathology Groups

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?

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