A new Office of Inspector General (OIG) fraud alert warns of two arrangements with clinical laboratories that it considers illegal kickbacks for referrals — specimen processing arrangements and registry arrangements — that are subtle enough that not all ordering physicians who receive the payments may be aware that they are breaking the law.

In the first case, speciment processing arrangements, the payments may seem simply like good customer service. However, according to the OIG, if the provider ordering a test receives compensation from the laboratory for collecting, processing and packaging the specimen for shipping, it may be an illegal kickback if a payor, including Medicare, already covers all or part of the cost of this work, either directly or as part of a bundled payment. A big red flag is if the payment is greater than fair market value for the work of collecting, processing and/or packaging the specimen. But even when the payment is at fair market value, it can be a kickback if:

• The payment is made directly to the ordering physician rather than to the ordering physician’s group practice, which may bear the cost of collecting and processing the specimen.
• The payment is made on a per-specimen basis for more than one specimen collected during a single patient encounter or on a per-test, per-patient, or other basis that takes into account the volume or value of referrals.
• Payment is offered on the condition that the physician order either a specified volume or type of tests or test panel, especially if the panel includes duplicative or clinically unnecessary tests.
• Payment is made to the physician or the physician’s group practice, even if the specimen processing is actually performed by an in-office phlebotomist provided by the laboratory or a third party.

The second form of kickback that providers may be unaware of relates to laboratories that maintain databases, either directly or through an agent, in order to collect data on patients who have undergone, or who may undergo, certain tests performed by the laboratories. These registries are set up with the stated goal of gathering clinical information for research purposes. However, problems arise when the labs then offer the physicians ordering tests money for helping them gather patient data.

According to the OIG, when labs offer to compensate ordering physicians for duties related to the database, such as submitting patient data to be incorporated into the database, answering patient questions about the database or reviewing reports, these payments could be illegal kickbacks for orders. Red flags for “registries,” “observational outcomes databases” or other terms for the databases are:

• The laboratory requires, encourages or recommends that physicians who enter into registry arrangements perform the tests with a stated frequency to be eligible to receive compensation.
• The laboratory collects comparative data for the registry from, and bills for, tests that may be duplicative or unnecessary.
• Ordering physicians receive registry payments on a per-patient or other basis that is tied to the volume of referrals.
• Payments are above fair market value for the work and do not require the physician to submit documentation of the work done to be paid.
• The laboratory collects data only from the tests it performs.
• The tests are part of panels that make it difficult for the physician to only order the tests he or she needs.