Type: Law Bulletins
Date: 11/28/2011

Potential Anti-Kickback Violations Presented by Proposal for Allergy Laboratories in Primary Care Physician Offices

On November 23, 2011, the Office of Inspector General issued an advisory opinion addressing a proposed arrangement under which an entity would furnish allergy testing and immunotherapy laboratory services within various primary care physicians’ medical offices in exchange for a percentage of the physicians’ collections for the services.  The OIG concluded the proposed arrangement would constitute grounds for the imposition of sanctions under the exclusion authority at section 1128(b)(7) of the Social Security Act, or civil monetary penalty provision at section 1128A(a)(7) of the Act, as those sections relation to remuneration under the Federal anti-kickback statute. 

The Arrangement:

Under the proposed arrangement, the laboratory services company would enter into exclusive contracts with the physicians to operate allergy testing laboratories in the physicians’ offices. The laboratory services company would provide all of the lab personnel, equipment, supplies, training, and billing and collection services to the physicians as needed. In addition, the laboratory services company would assist the physicians with marketing allergy services by providing education materials and reviewing patient files to identify candidates for allergy services (OIG did not offer an opinion regarding patient privacy concerns). The physicians would provide space, administrative staff, general office supplies, general liability and malpractice insurance, and physician supervision and interpretation of laboratory results.  The physicians would bill Federal health care programs and third-party payors for laboratory services under their own identification numbers. The laboratory management services company would provide billing and collection services to the physicians for the allergy testing services.  The physicians would pay the laboratory management services company a fee equal to 60% of the Physician’s gross collections from allergy testing and immunotherapy items and services.  

The Advisory Opinion:

The OIG stated that the arrangement would not qualify for protection under either the equipment leasing or personal services safe harbor for two reasons: 1) the applicable safe harbors require arrangements on a part-time, periodic or sporadic basis to specify the exact schedule of intervals, their precise length, and the charge for each interval – here, the services would be provided on an as-needed basis; 2) the applicable safe harbors require that the aggregate compensation to be paid under the contract be set in advance and not be determined in a manner that takes into account the volume or value of any business generated between the parties that is payable by a Federal health care program  - here, because payment is calculated as a percentage of gross collections, the aggregate charges would not be set in advance and would be based in part on the volume or value of Federal health care program business. 

Noting that finding the arrangements to be outside a safe harbor did not end the inquiry, the OIG further examined the facts and circumstances of the proposed arrangements.  The OIG indicated that percentage compensation arrangements are “inherently problematic” and also characterized the laboratory service company’s fee as not being tied to actual and necessary services provided by the company.  The OIG also noted that reviewing patient files is a suspect marketing activity that could encourage physicians to order unnecessary tests and pose a risk of harm to patients.  Finally, the OIG noted that its concerns were magnified in this case because the physicians, who may not have significant, specialized allergen immunotherapy experience, might be influenced by the laboratory services company to order unnecessary services.

This opinion emphasizes again that health care providers and entities that provide products and services to health care providers must take special care in structuring their relationships.  For more information about this decision, please contact any member of Taft's Health & Life Sciences Practice Group.

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