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Carefully structure the lab arrangement

March 15, 2011
by Gary A. Enos, Editor
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Government scrutiny of clinical laboratories that first became a prominent issue several years ago with pain management clinics has begun to capture the attention of traditional addiction treatment facilities. Authorities' concerns about overutilization of drug tests, which in a few cases has led to indictments of laboratory executives, should cause treatment center managers to analyze the mechanics of their relationship with outside testing companies.

Jennifer Bolen, a leading legal expert on medical coding and federal laws governing physician self-referral practices, advises treatment centers to seek legal counsel in evaluating their business arrangements with drug testing vendors, and to be armed with some information in advance of a meeting with an attorney.

“A lot of individuals who claim to be coding and legal experts don't have the training in this area,” says the Knoxville, Tenn.-based Bolen, who writes and consults on the subject under “The Legal Side of Pain.” Bolen says, “You have to do a self-audit, and be prepared to ask an attorney the right questions.”

Much of the scrutiny about the relationship between clinical laboratories and health facilities started with pain management practices in Florida and Texas, Bolen says. “Medicare fraud units were getting information about Ameritox,” a venture capital-funded testing laboratory, Bolen recalls.

Last November, the U.S. Department of Justice announced a $16.3 million settlement with Ameritox; a former sales representative for the company had accused company officials of bribing physicians in pain management practices to prescribe Medicare-reimbursable drug tests. Ameritox was alleged to have offered free specimen collector personnel to physicians in order to fuel Medicare referrals. Ameritox continues to do business under a federal Corporate Integrity Agreement, according to Bolen.

State government authorities have joined their federal counterparts in examining the practices of testing laboratories more closely. Last July, two executives with Massachusetts-based Calloway Laboratories were indicted in a Medicaid fraud investigation alleging that the company orchestrated kickback payments to operators of sober residences. The case, which is pending, involves $10.6 million in possible unjustified Medicaid payments, state prosecutors said at the time the indictments were issued.

Examining the relationship

Bolen says treatment centers need to be extremely careful about how they structure their business arrangements with outside testing laboratories. She recently wrote in an article on fraud and abuse concerns that while many of the recent headlines have focused on laboratories' practices, “it is important to remember that it is the ordering practitioner who is responsible for claims associated with laboratory testing services. Practitioners who fail to take charge of their testing make easy targets for anti-fraud contractor audits and government investigations…”

Facilities especially need to use caution when a laboratory places an employee directly into the facility for purposes of test collection, Bolen says. Control over testing orders needs to remain in the hands of the treatment facility, so as to avoid overutilization of services and possible improper billing arrangements, she advises.

In situations where the treatment facility itself is not billing for any lab testing, an on-site arrangement with a lab is more likely to pass muster, Bolen says. Yet what often happens in this type of scenario is that the facility is billing for some services and the lab may be billing for additional (and potentially duplicative) services, and this could catch the eye of regulators. “There's an appearance of an inclination to test more,” Bolen says.

She adds, “If a lab is in an improved position to get referrals, it will put you under scrutiny.”

Other potentially suspect arrangements might occur where a testing lab is leasing space in a treatment center; Bolen says the terms of such arrangements have to be carefully analyzed. A potentially safer arrangement might involve a lab leasing space nearby but not within the facility, under an agreement in which the treatment center also does not agree to work exclusively with only the one vendor, Bolen says.

Know the rules

Bolen says treatment center managers need to familiarize themselves with federal provisions governing clinician self-referral. Three provisions in federal law are known by the name of the member of Congress who originally sponsored the law in this area: “Stark” law refers to the efforts of Rep. Pete Stark.

“I always tell my clients, ‘Your sales rep cannot give legal or billing and coding advice,’” Bolen says. “While what they say may sound good, [centers] should not put stock in how they set up their testing platform, particularly when other business relationships are also offered.”

Only when a treatment center staff knows more about what the law allows and what its existing business arrangements call for will it be able to identify the proper legal representation to guide decision-making, according to Bolen. She considers this in general to be a dangerous area for treatment centers: With most testing labs able to offer similar technology for testing, they will attempt to distinguish themselves with the business arrangements they make available, and this is where treatment center professionals must remain vigilant.

Addiction Professional 2011 March-April;9(2):44