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IG weighs sanctions against lab discount practices.

As part of broad new proposals designed to tighten the reins on laboratories and other providers, the Inspector General of Health and Human Services is considering stiff penalties for the practice of giving deep discounts to referring physicians.

The proposals were contained in an April 2 Federal Register draft of rules implementing a 1987 law to prevent Medicare/ Medicaid fraud and abuse. Apart from efforts to crack down on blatent scams such as fees for referrals, IG Richard Kusserow's office apparently intends to attack one commonly accepted business practice in the lab industry-discounts to physician clients.

Part of the impetus may stem from Kusserow's earlier finding that Medicare pays nearly twice as much as physicians for the same tests. Charges of "discriminatory pricing" were levied because the amounts billed Medicare were about three times higher than the physicians' tabs (sec Washington Report, April MLO).

Now, individuals or entities-including labs-may be excluded from Medicare or Medicaid if they submit bills or payment requests substantially in excess of the usual charges or costs for their services.

The impact of such a rule would, of course, hinge on the Government's interpretation of ,substantially in excess" and usual charges or costs." Officials invited comment on those terms, asking whether they should formally define them in final regulations and, if so, what the appropriate definitions should be.

Authorities note that the thorny issues include what constitutes a "substantial" charge difference and whether differences should be calculated for each test or on an aggregate basis. The IG Office has noted that for some less frequently ordered tests, such as HIV antibody detection, Medicare actually pays less than physician prices.

Further, HHS must decide how to compare billings for services rendered by physicians on a monthly client basis with those for individual Medicare patients.

An exception in the proposed rules permits billing of excess costs "when such charges or costs are due to unusual circumstances or medical complications requiring additional time, effort, expense, or other good cause. "

Labs consistently defend multiple pricing structures on grounds that it often costs more to do business with Medicare. Some have noted that physicians generally send one payment for lab services rendered in a given month, whereas some Medicare carriers might issue a stack of checks for each beneficiary served.

The IG Office generally seems to acknowledge that such practices are unnecessarily burdensome, and it is working with the Health Care Financing Administration to encourage a more streamlined billing process. Without further clarification, however, it's uncertain how much leeway the current proposal might offer.

Other issues involve calculation of a lab's "usual" charges. Options include use of the lab's average charge, its median charge, or its most frequent charge or "mode." Some analysts note that the choice of "mode" would have minimal effect if discounted fees constituted only a small share of a lab's total charges.

Similarly, considerations center on whether the Government would consider only non-Medicare business in determining the lab's usual charges, and whether it would compare those amounts against actual Medicare billings or fee-schedule reimbursements.

Laboratorians might argue that the proper comparison is between usual charges and the fee schedule, since labs can't recoup more than those fixed amounts. The IG has previously paid strict attention to the amounts printed on the bills, however, and may continue to factor them into the equations.

On other fronts, the Government seeks to add exclusion sanctions against any provider who has solicited, received, offered, or paid any remuneration inducing services reimbursed by Medicare or Medicaid. The sanctions would apply "irrespective of whether the entity or individual may be able to prove that the remuneration was also intended for some other purpose." The IG could thus hold a laboratory liable under anti-kickback statutes if only one of the purposes of a financial arrangement was to gain program business.

The proposal notes that HHS would enforce this interpretation of the law pending issuance of additional "safe harbor" exemptions. When those regulations take effect, any entity claiming an exemption would bear the burden of proof that remuneration fit into one of the safe harbors.

Another section of the proposal could exclude from Medicare and Medicaid any provider that failed to grant inspectors Immediate access" to records during a probe for fraud and abuse. Facilities that were hit with a "reasonable request" in writing would have to comply with the access and copying requirements "or provide a compelling reason why such records cannot be produced within 24 hours. "

Thus, any laboratory that becomes the subject of a fraud and abuse investigation could face program expulsion for not promptly supplying records even if it is subsequentially found that the lab was engaged in no wrongdoing.

Other new exclusion authority could be exercised if a provider furnished services substantially in excess of the patient's needs, or of a quality that fails to meet professionally recognized standards of health care. "

Most labs would probably qualify for an exception under the provision that states entities are not responsible if they are "not in a position to determine medical necessity or to refuse to comply with the physician's order. "

Although labs are not generally in a position to judge the medical necessity of testing, some legal analysts believe problems may still exist if a lab knows that doctors who hold an ownership position are ordering an excessive number of tests. On the other hand, entities operating as part of an HMO or other competitive medical plan could face an overall exclusion for not providing enough health care services.

Finally, one sleeper provision could exclude providers for falling to provide certain information" to Medicare or its agents. Subsections apply to information on the ownership of facilities such as clinical labs. Those requirements would apparently supplement ownership reporting rules mandated by last year's physician self-referral ban, scheduled to take effect Oct. 1, 1990. Those rules carry fines of up to $ 1,000 per day of violation.

The Government concedes that reporting failures "may not have as severe an impact on the programs or beneficiaries" as other bases for exclusion. The proposal says the IG Office "intends to take its responsibilities under these sections seriously, but in general does not expect to take action based on isolated or unintentional failures to supply information unless a significant impact is seen.

The length of exclusion for provisions relating to excessive billings or delivery of services would be set at five years unless "aggravating or mitigating" factors are involved. Periods of exclusion under most other sections would be based on the severity of the specific infractions.

The period for public comment on the draft ended June 1. It is uncertain when final regulations might be published.
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Title Annotation:Inspector General of Health and Human Services
Publication:Medical Laboratory Observer
Date:Jun 1, 1990
Previous Article:Realistic qualifications to practice medical technology.
Next Article:Should the public have direct access to lab services?

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