OIG Does Not View Favorably Proposed Arrangement of a Laboratory Management Company Providing Services in PCP Offices

In Advisory Opinion 11-17, the Office of Inspector General (“OIG”) reviewed an arrangement in which a laboratory services management company (“Requestor”) “proposes to provide allergy testing and immunotherapy laboratory services and related items to primary care physicians and physician practices (“Physicians”) within the Physicians’ medical offices. Specifically, Requestor would enter into exclusive contracts with the Physicians to operate an allergy testing laboratory on the Physicians’ behalf” (“Proposed Arrangement”). Requestor proposes it provide all of the necessities to conduct the testing (i.e., personnel, equipment, supplies, training, billing and collection services, etc.) and assist Physicians with marketing the services by reviewing patient files to identify candidates for Requestor’s services. In consideration for Requestor’s services, under the Proposed Arrangement, Physicians would pay Requestor a fee equal to 60% of the Physicians’ gross collections from the testing and services, a fee that Requestor states is equal to fair market value.

The OIG determined that because Requestor would be paid a percentage of gross collections for the tests (i.e., compensation would not be set in advance) the Proposed Arrangement did not fit within any of the Anti-Kickback Statute (“AKS”) safe harbors. Notwithstanding the fact that an arrangement does not fit within an AKS safe harbor, the arrangement could still be permissible if the OIG determines that it poses a low enough risk to be offered protection. However, for the following reasons, the OIG determined that the Proposed Arrangement would not be afforded protection:

1. Requestor’s fee would not be tied to actual and necessary services provided by Requestor to Physicians; rather, Requestor’s fee would be based upon a percentage of gross collections for the allergy testing and immunotherapy services; and
2. Requestor’s review of patient files to identify candidates for its services would be “a suspect marketing activity,” leading to unnecessary testing and overutilization.

Please note: While Requestor stated that the Proposed Arrangement was structured to comply with the Stark Law’s In-Office Ancillary Services Exception, the OIG did not opine on the Proposed Arrangement’s compliance with the exception. The OIG stated, “[e]ven if some features of the Proposed Arrangement were to comply with the Stark Law, such compliance would not affect our analysis under the anti-kickback statute.”

For more information on healthcare fraud and abuse and how to properly structure healthcare business ventures, please contact Adrienne Dresevic, Esq. or Carey F. Kalmowitz, Esq. at (248) 996-8510 or (212) 734-0128 or contact Daniel B. Brown, Esq. at (770) 804-4700 or visit the HLP website.