Archive September 2015 XVI, No. 9

Legal Update: Are Your GI Lab Services Legal?

Exclusive pathology contracts can attract anti-kickback scrutiny.

John Fanburg


path lab A CLOSER LOOK Federal regulators are suspicious of exclusive arrangements between path labs and gastro providers.

Do your gastroenterologists outsource their laboratory services? If so, you'd best ensure that their billing arrangements are on the level, because a recent advisory opinion from federal watchdogs has put a common endoscopy center business practice under the microscope.

Arrangements under scrutiny
In a rare negative advisory opinion (, the Department of Health & Human Services' Office of Inspector General (OIG) says that an exclusive pathology arrangement between a physician practice and a laboratory may violate the federal Anti-Kickback Statute. In particular, the OIG warned, labs that systematically waive payments for patients whose insurers don't contract with the lab may be engaging in illegal remuneration.

Why would a lab waive its charges for services rendered? Simply put, it allows one-stop shopping for gastro practices. The multi-regional medical laboratory that requested the OIG's opinion proposed to enter into exclusive contracts with physician practices and provide all of their necessary clinical lab and pathology services, unless patients opted to obtain the services from a different company. The lab explained that some practices prefer to work with a single lab, as it enables easier communication and consistency in the reporting of results.

Under this proposal, physicians would agree to refer all of their lab testing to the contracted lab, and the lab would submit the claims for all referred patients to the insurance plans in which the lab participates, including Medicare and Medicaid. However, the lab noted, some patients are covered by insurance plans that designate different labs as exclusive providers and don't permit patients to go out of network. In these cases, the lab would not charge the patients. The agreement between the lab and the practices it served would include a statement by the physicians attesting that they are not receiving benefits of any kind in exchange for referring patients to the lab, and that patients would be given a choice of labs in order to avoid the appearance of patient steering.

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