Originally published May 16, 2008
Keywords: Advisory Opinion, Advisory Opinion, Department of Health and Human Services, Anti-Kickback statute, Section 1128D, Social Security Act, HHS-OIG
On May 2, 2008, the Department of Health and Human Services, Office of Inspector General (HHS-OIG) issued an Advisory Opinion through its Chief Counsel regarding an unnamed laboratory's proposal to provide labeling of test tubes and specimen collection containers at no cost to dialysis facilities located in the United States. In the OIG's opinion (AO 08-06), the proposed arrangement, in which the laboratory sought to offer the free services in order to "obtain or retain" business from dialysis facilities, could run afoul of HHS' Anti-Kickback statute and result in civil, administrative and criminal sanctions against the participants.
HHS-OIG issues and publishes advisory opinions pursuant to Section 1128D of the Social Security Act. These opinions provide guidance regarding the application of the Anti-Kickback and other HHS sanction statutes to specific factual situations presented to the OIG by health industry members.
In this factual situation, the unnamed laboratory disclosed that it sought to provide test tubes and specimen collection containers that the dialysis facilities would use to send specimens to the laboratory for testing; that it would, in its own discretion, determine which dialysis facilities received the free labeling services; and that it would provide these free services to dialysis facilities where the laboratory desired to "obtain or retain" business. The labeling services offered by the laboratory are currently being performed internally by the dialysis facilities' personnel.
Medicare provides benefits to patients who receive dialysis, a treatment that removes toxins from a patient's bloodstream. The Centers for Medicare and Medicaid Services (CMS), the agency that administers the Medicare program, provides for two types (or groups) of Medicare payments associated with dialysis. Under the first, known as the "composite rate," dialysis facilities are paid a set rate for each treatment session. It includes routine services provided for each treatment, including the dialysis treatment, nursing, the supplies used for the treatment, equipment, standard panel of laboratory tests and some medications. The composite rate is sometimes referred to as a bundled rate.
The second Medicare payment type associated with dialysis is the so-called "separately billable" laboratory test. These tests are not covered by the Medicare composite rates and therefore, are separately billed to Medicare directly by the laboratory.
In the scenario presented to HHS-OIG, the laboratory sought to provide the free labeling services even though the services were likely being reimbursed in the composite rate as part of the cost of performing the dialysis services. In addition the laboratory specifically stated that it was targeting the dialysis facilities from which it wished to obtain or retain business.
The OIG indicated that this proposed agreement could possibly violate the Anti-Kickback statutes, which prohibit any person or entity from knowingly making or accepting remuneration for referrals for federally funded medical services. 42 U.S.C. § 1320a-7b. The OIG opined that the free labeling services, in fact, could constitute remuneration.
The OIG focused on two aspects of the proposed agreement. First, that the labeling services could be a tangible benefit to the dialysis facilities because the services are currently being provided by the dialysis facilities as a component of the composite rate. OIG concluded that a reasonable inference drawn from such an arrangement was that the free labeling services are intended to influence the selection by the dialysis facilities in making their choice of which laboratory to send their composite and noncomposite tests.
Second, that the free labeling services would be the functional equivalent of a price reduction or discount for the test that the dialysis facilities ordinarily pay the laboratory for conducting composite rate laboratory tests. This reduction would provide an incentive or motive for the dialysis facilities to refer the "more lucrative" noncomposite rate tests to the laboratory.
Although the Advisory Opinion stopped short of concluding that the proposed agreement did constitute a violation of the Anti-Kickback statute, it expressed concern that the proposed agreement could create a significant risk of improper "swapping" of business between the laboratory and dialysis facilities, and further expressed concern that others in the industry may already be offering such "discounts," which could run afoul of the Anti-Kickback statute.
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