6/6/2014

Essential Legal Issues Associated with Clinical Drug Testing by Physician Office Laboratories and Independent Clinical Laboratories

Presented by: Jennifer Bolen, Esq. Richard Cooper, Esq. Christy Petru Jane Pine Wood, Esq. ICOO 2014 at Boston, MA

Disclosures & Introductions • Jennifer Bolen, Esq., serves as a consultant for Alere Toxicology, Quest Diagnostics, and numerous physician office laboratories nationwide. She has also received speaker honoraria from E-Lab Solutions. • Richard Cooper, Esq., has nothing to disclose for this lecture. • Christy Petru is a billing and coding consultant and has nothing to disclose for this lecture. • Jane Pine Wood, Esq., has nothing to disclose for this lecture.

Objectives • Describe basic federal and state fraud and abuse issues associated with the POL and relationships with third-parties tied to laboratory equipment and independent clinical laboratories and their sales representatives.

• Identify and structure a basic outline of items to discuss with legal counsel relative to the creation of a POL, engagement of laboratory consultants, and referral relationship with an independent clinical laboratory.

• Identify key ethical and legal challenges associated with the POL.

• Identify relevant payor policies tied to medical necessity, forthcoming coding changes impacting POLs and clinical drug testing referrals.

• Identify key ethical and legal challenges associated with business ventures between the physician and the independent clinical laboratory.

• Discuss critical issues in the documentation of medical necessity to support claims for reimbursement tied to clinical laboratory services.

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Audience Survey • In-office CLIA-waived drug screening with use of an independent clinical laboratory for definitive testing? • Physician Office Laboratory – Analyzer? • Physician Office Laboratory – Analyzer and Liquid Chromatography/Mass Spectrometry or similar? • Independent Clinical Laboratory for screening and definitive testing? • Physician-owner in an Independent Clinical Laboratory (with or without a POL)? • Independent Clinical Laboratory personnel? • Compliance Officers for Independent Clinical Laboratory?

Overview Plays an important role in chronic pain management and addiction treatment

Revenue Center for Physicians

Clinical Drug Testing 2014

Numerous changes in coverage and reimbursement policies and billing and coding

Increasing regulatory scrutiny

BASIC FEDERAL AND STATE LAWS GOVERNING CLINICAL LABORATORY AND REFERRAL RELATIONSHIPS

The Basic Legal Framework

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Basic Federal Framework

CLIA for laboratory registration and related requirements

FDA for 510(k) clearance and test regulations

OIG framework for federal Fraud and Abuse Enforcement Activity

Federal laws on Stark and Anti-kickback Issues

Medicare Program and Audit Framework

Basic State Framework

State AKS, Stark

Patient Brokering and Antifee splitting, and Similar

Other State Healthcare Fraud and Abuse Laws; Insurance Fraud Laws

General Nature of Recent Investigations Involving Clinical Laboratory (POL and Independent)

False Claims Act

Civil Monetary Penalties

ZPIC

Criminal

Other

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2013-2014 Activity • $5 million settlement involving a Dallas-based physicianpartnered laboratory arrangement • $15.75 million settlement involving a Kentucky Laboratory, Physician-Owners, and addiction treatment facilities. • $135+ million investigation involving a company placing chemistry analyzers into Physician Office Laboratories and allegedly providing inappropriate billing and coding advice (billing immunoassay tests as quantitative/definitive testing under Chemistry codes) • Lawsuits between independent clinical laboratories

A look at critical challenges in clinical laboratories and relationships

CASE STUDIES

CLIA High Complexity Testing • What is CLIA? • What are the basic requirements for CLIA High Complexity Testing? Where are these defined? • Who enforces CLIA? What are the potential penalties for violating CLIA? • How do the CLIA High Complexity Testing requirements relate to reimbursement for Clinical Laboratory Services? • What are the potential penalties for making claims for reimbursement under the inappropriate or wrong level of CLIA registration?

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Case Study – High Complexity Testing? • Physician purchases an analyzer that is FDA 510(k) cleared for moderate complexity testing. • Physician purchases reagents to create a test panel. All reagents are FDA 510(k) cleared for moderate complexity testing. • Physician uses a part-time medical assistant t operate the analyzer. Physician performs manual quality control. Physician uses a “rented Lab director”, who infrequently visits the site. • Physician bills Commercial Insurance under CPT 80101 x 12 and Government payors for G0431 x 1. • Physician audited and asked to produce documentation of high complexity testing. • What are the core issues here? Is the physician potentially liable for overpayment under these facts? What should be done to protect the physician?

Medical Necessity Basics • Where does the phrase “Medical Necessity” come into play regarding clinical laboratory testing? • Where is the phrase defined? • What key factors should the physician take into account when establishing medically necessary clinical drug testing? • How should medical necessity be documented? • What are the potential consequences for failing to document medical necessity?

Case Study – Medical Necessity • A physician enters into an agreement with a Third Party Laboratory Set-up and Management Company to set up and handle all aspects of POL (analyzer and LC/MS testing). • The Third Party is compensated on a “per-analyte tested” basis. The Third Party is also responsible for “growing” the test panels, as reflected by the attached chart. • The Third Party supplies the POL with coding instructions throughout the relationship. The Third Party changes the POL’s approach to billing and coding with each denial, and ultimately creates the same test panel (using a standing order) for each patient, each time they are tested. • What are the critical challenges with regard to this arrangement? What are the potential challenges to medical necessity based on these facts? How might the POL avoid these problems?

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Case Study – Referral Relationships – OIG 13-03

Case Study – Referral Relationships – Splitting Fees? Inducement for Federal Referrals? • Laboratory C offers physicians $400 of every commercial fee reimbursement it receives after taking $100 laboratory fee. • Laboratory C makes clear that it will not pay the physician any fee associated with federal government beneficiary claims. Laboratory C also makes clear that there is no requirement that physicians use their laboratory to test specimens tied to federal health plan beneficiaries. • Laboratory C labels the $400 fee a “professional component” fee for the physician’s interpretation of the test results. • Are there problems with the proposed relationship? Are there variations of this offering that are also problematic? Does it matter if the physicians are investors in the laboratory and only receive payment based upon their investment interest?

Case Study – Waivers of CoPays and Deductibles • A physician wants to do business (or is already doing business) with Laboratory A. The physician does not want to hear complaints from his patients about Laboratory A’s charges and out of network status, so she asks/suggests/tells Laboratory A’s representative that they will not be in the running for the practice’s business UNLESS they agree to waive co-payments and deductibles. • Is this a problem? Why or why not? What are the key legal issues here? Are there other potential problems with this arrangement? Does it matter whether Laboratory A is in or out of network? Is there a difference between the routine waiver of these fees and an occasional waiver based on true hardship? How are these facts viewed under state law?

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Case Study – Waivers of Co-Pays and Deductibles • Is a toxicology laboratory allowed to engage in complete or substantial waiver of patient co-pays or deductible obligations? • Only under very limited circumstances, including documentation of financial hardship. • Under federal and state law, routine significant or complete waiver of patient balances can trigger liability under the federal or state false claims statutes because the submission of a claim is considered certification that it represents the provider’s actual charge to the patient and deciding in advance to waive a portion of the patient’s balance means the claim does not reflect the actual charge to the patient. • There could also be exposure for routine/significant waiver of copays or deductibles under state insurance law.

Case Study – Free Supplies? Kickback? Inducement? • Laboratory C is an independent clinical laboratory and it supplies its physician-customers with CLIA-waived 12 panel specimen collection and instant test devices FREE OF CHARGE. • Laboratory C encourages physician customers to use the results of the drug screens run on these free cups at the point of care, but requires them to order immuoassay screening because the “cutoffs” on the cups are not reliable enough. Laboratory C also requires the physicians to choose from a set panel of confirmation testing of both positive and negative screening results. • Fraud? Abuse? Kickback violations? Would the answer change depending on who was performing the point of care screen? What are the potential consequences of an auditor picking up on this relationship?

Case Study – False Claims? • The physician uses a CLIA-waived cup to perform immunoassay screening at the point of care. The physician uses the results of these screens to make treatment decisions. • The physician wants to open a Physician Office Laboratory and perform qualitative immunoassay screening. However, the physician knows that he will have to wait a couple of days to get the immunoassay screening results. So the physician wishes to perform, but not bill for the CLIA-waived cup, document the results, but send the specimen to his POL chemistry analyzer, for “official” screening. The physician will test virtually all the same drugs on his analyzer as he did with his waived test device. • The physician intends to bill for CLIA High Complexity qualitative screening. • What are the core issues here? Do the facts here present a potential for a false claims analysis? Does it matter that the physician is essentially repeating the screening of the same drugs/drug classes between cup and analzyer? Is the physician subject to other potential liability here? Why or why not?

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Case Study – Specimen Validity Testing • Laboratory B is an Independent Clinical Laboratory and it performs specimen validity testing based on a routine, standing order from a pain practitioner. • The results of some of these specimen validity tests show invalid test samples. • Regardless, Laboratory B performs the remaining tests in the physician’s standing order, and reports the sample as invalid and the test results as negative. • Laboratory B bills Medicare for both the specimen validity testing and the testing of numerous lines of code associated with the drugs of abuse testing. • Fraud? Abuse? Discussion? Applicable to POL?

Case Study – Potential for Medical Malpractice • John Doe is a physician and the Medical Director for a large pain management practice that also has its own Physician Office Laboratory, which includes an analyzer and LC/MS instrumentation. • Dr. Doe’s practice does not have formal risk evaluation, stratification, and monitoring guidelines. Dr. Doe drug tests every patient for the same set of drugs almost every time the patient visits. • Dr. Doe’s POL bills for the clinical drug testing. An audit reveals that Dr. Doe’s practice has ignored many of the clinical drug test results obtain from LC/MS testing. The same paperwork shows that Dr. Doe and his partners continue doing procedures and billing for them, as well as prescribing controlled medication, despite laboratory test results showing many compliance issues. • What potential liability might Dr. Doe face as the owner of the clinic and the POL? Does CMS have administrative authority to remove Dr. Doe from Medicare enrollment? Might Dr. Doe face licensing board scrutiny? Is there the potential for malpractice liability and why? What other considerations are appropriate here?

Quick Reference Checklist • CLIA Requirements • OIG Advisory Opinions • State laws • Recent Settlements and Instructive Documents • Billing and Coding Changes, CLFS. • Current Clinical Guidelines. • Current Payor Local Coverage Determinations and Medical Policies.

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If you already have your own laboratory…perform a self-audit.

Regulatory Instrumentation

Personnel

Test Panels

Medical Necessity and Individualization

Documentation

Moderated

QUESTION & ANSWER SESSION

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