Risks Involved with Physician Ownership of Toxicology Labs

The laboratory industry is undergoing heightened medical scrutiny, both for independent clinical laboratories and physician office laboratories. Expansion into this industry is filled with regulatory risk for violation of state or federal laws. Some of the issues being scrutinized are as follows:

  • Service Arrangements. Some laboratories are entering into varying types of service arrangements, which include but are not limited to marketing agreements or management agreements. Some of these arrangemetns are being made directly with individuals who are in a position to refer business to the laboratory. These agreements must be carefully structured to ensure that the intent of the agreement is not to improperly influence referrals.
  • Physician Ownership. A number of laboratories include ownership by physicians who are in a position to refer. Structuring ownership with physicians who are in a position to refer should be carefully scrutinized.
  • Free medical supplies. Some practicing physicians have become accustomed to receiving free medical supplies-namely, urine cups-from laboratories in order to incentivize referring patients to that particular lab. Using these cups for tests that are billed to patients (for a profit) is a violation. There are also ways in which grouping billing CPT codes on these cups that can cause billing violations.
  • Duplicate charges. Medicare-and many other private insurance providers-will provide bundled funds for the handling and testing of a medical sample. In many cases, physicians may arrange to receive a handling fee from the lab itself. This "handling fee" can been seen as a kickback for referring the test to that lab. For physicians who already own the lab, establishing this arrangement is made easy.
  • Pass through billing. Another common practice for physician-owned labs is called "pass through billing." Pass through billing occurs when the lab charges the physician for lab work, which in turn allows the physician to directly bill buyers for the lab services. This allows doctors' offices the opportunity to charge Medicare and non-Medicare patients for profit, which is not only a Medicare violation, but also illegal.

If you are a pharmacy or DME organization that is looking to establish a physician-owned arrangement, then it is absolutely essential that you avoid these practices and ensure that you are in compliance with Medicare billing policies. At The Law Offices of Alejandro Mora, PLLC, our knowledgeable and proven Texas healthcare law attorney cannot only assist you in establishing best practices, but also help mount a defense if you have been accused of any violations.

Learn more about how our firm can help. Call us today.

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