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Doctors and Laboratories: Think Again says the OIG

The OIG issued an Advisory Opinion where it found an exclusive arrangement between a laboratory and a physician could potentially generate prohibited renumeration under the Anti-Kickback Statute and also subject the laboratory to certain administrative sanctions. It also concluded that such a proposed arrangement could constitute grounds for a permissive exclusion.

The grounds for a potential permissive OIG exclusion list are under the federal prohibition against charging the Medicare and Medicaid (CMS) programs “substantially in excess” of usual charges. According to therequestor, or the opinion, some Physicians prefer an exclusive arrangement because they prefer to work with a single laboratory for ease of communication and consistency in the reporting of results.

The physician and laboratory each were required to represent that neither of them, it nor the practice, would receive any financial benefit from the relationship.

With regard to the permissive exclusion potential, the Office of Inspector General had this to say: Pursuant to the permissive authority is provided in Section 1128(b)(6)(A) of the Social Security Act, referred in the industry as the “substantially in excess” provision of the Act. This statutory authority allows permissive exclusion authority for the Office of Inspector General in cases where a provider or supplier charges the Medicare and Medicaid (CMS) program amounts that are “substantially in excess of” their “usual charges to other payers for the same items or services.”

Note: The OIG has previously stated providing discounted or free services to uninsured or under-insured patients does not implicate the statute, the proposed arrangement between physician and laboratory per the requested Advisory Opinion, did involve the provision of free services to insured patients.

It should also be pointed out the OIG has been critical of the relationships between laboratories and physician practices. However, it has tried and failed on multiple occasions to implement regulations interpreting the “substantially in excess” provision in the past.

This topic will undoubtedly be the focus of the OIG in future proposed arrangements between laboratories and physicians and physician practices.