New PGX laboratories often run into regulatory and compliance problems in the early stages of their development. While each lab is different, and their individual issues are unique, this entry addresses some of the most common problem areas for a new laboratory:
Establishing an Effective Compliance Department. An engaged and effective compliance team is critical to the long-term success of any PGX laboratory. From the Clinical Laboratory Improvement Amendments (CLIA) and the Health Insurance Portability and Accountability Act (HIPAA) to fraud and abuse statutes like the Stark Law and the Anti-Kickback Statute, there are a myriad of laws and regulations that apply to PGX laboratories. And noncompliance with the requirements of any of those laws can spell disaster for a new laboratory. A lab will not achieve compliance by accident and dabbling in compliance is not enough. Without an individual or group dedicated to identifying and resolving compliance issues, costly mistakes will be made. Putting the right compliance framework and personnel in place early is an important first step to assuring the PGX laboratory grows and operates in a way that does not undermine its potential for future success.
Qualified Staff: PGX laboratories need to make sure that all the members of their staff are appropriately certified and properly trained and supervised. The compliance team has an important role at critical stages of the employment process: pre-hire screening, onboarding and training, and supervision throughout employment. Inadequate screening of potential employees and hiring of underqualified individuals are common and costly but avoidable mistakes. In addition to confirming the qualifications and clean criminal record of potential employees, PGX laboratories need to investigate and ensure that potential employees, particularly sales personnel, do not have problematic relationships whit physicians or other potential referral sources. Proper training of staff members includes not only instruction in the laboratory’s business procedures, but also training on healthcare regulations, such as HIPAA and anti-fraud statutes like the Stark Law and the Anti-Kickback Statute. Even after employees are properly trained, the compliance team must ensure that a sufficient supervisory infrastructure is in place to ensure that the laboratory’s policies and procedures are being followed. PGX laboratories may be held vicariously liable for the mistakes and misconduct of their staff members and even the best-trained employees can make mistakes. Regular oversight is the best way to prevent misconduct and limit it when it does occur.
Medical Necessity: Healthcare programs, such as Medicare, will only cover medical services that are medically necessary. Federal programs may deny payment for laboratory tests that are deemed unnecessary, and laboratories may face healthcare fraud charges if they knowingly bill for medically unnecessary testing. PGX laboratories should stay apprised as to which circumstances each program deems appropriate for PGX testing. For example, Medicare considers PGX testing appropriate once a patient has been diagnosed with a disease or disorder but will not cover PGX testing that is used merely for screening purposes.
Appropriate Marketing: While PGX laboratories may use marketing campaigns or outside marketers to promote their business, laboratories – like all medical service providers – must be vigilant about complying with all applicable health care regulations. In particular, PGX laboratories must ensure that their marketing efforts do not result in the inappropriate incentivizing of patient referrals to their laboratory. A PGX laboratory risks violating state and federal anti-kickback laws if it provides – or allows its outside marketers to provide – any remuneration whatsoever to physicians or other medical service providers in exchange for patient referrals. Many laboratories and other ancillary service providers encounter serious compliance problems when they fail to adequately supervise and control the actions of their sales representatives.
Lawful Billing: As noted above, PGX laboratories may run afoul of state and federal healthcare laws if they bill healthcare programs for medically unnecessary tests. PGX laboratories may also commit healthcare fraud if they bill healthcare programs for tests that were never performed – sometimes called “phantom billing” – or if they charge a program for a more expensive test than the test they actually conducted – a practice known as “upcoding.” Another type of billing fraud common within the laboratory industry – nicknamed “unbundling” – involves deconstructing a group test on a bill to charge the healthcare program a separate premium for each item within the group that was tested for. Any of these unlawful billing practices may result in civil or criminal charges against the laboratory and the individuals within the laboratories participating in the practices. “Creative” billing is problematic billing, and careless billing can be just as detrimental. Even honest mistakes can result in serious civil and criminal liability because questions of intent are inherently difficult to determine and often must be proved by inference. Furthermore, even the best companies are vulnerable to the occasional flippant remark or written communication from employees that after the fact can be construed to turn an innocent mistake into a serious issue. And when employees are terminated, they often attribute unsavory motives to their former employers. When systematic billing mistakes are made, even honestly, they can result in severe consequences.
Consulting and Other Agreements with Physicians: While PGX laboratories may lawfully enter consulting agreements with physicians, they must be very careful that such agreements comply with all state and federal anti-kickback laws. PGX laboratories may only compensate consulting physicians for the fair market value of the time the physicians spend engaging in consulting work. Because laboratories have used consulting agreements as a sham to disguise improper payment of kickbacks to physicians for patient referrals in the past, federal investigators generally look on such agreements with suspicion. Labs should thoroughly investigate any financial relationship they enter with referring physicians and seek legal advice on the arrangement even when there is a legitimate need for the relationship.
Oberheiden, P.C. represents laboratories, physicians, and medical service providers throughout the country, including California, Texas, Michigan and Florida. Our team of lawyers includes former healthcare prosecutors and experienced criminal defense attorneys, all of whom possess a familiarity with the healthcare industry and a solid understanding of healthcare laws. Utilizing our knowledge and experience of both sides of healthcare prosecutions, we have helped hundreds of clients prevail against charges of violating healthcare statutes such as the Stark Law, the Anti-Kickback Statute, and the False Claims Act.
Healthcare Compliance – Litigation – Defense