Stark and anti-kickback laws limit lab-marketing methods

May 1, 2010

The marketing of
laboratory services is competitive, which raises the compliance stakes
when trying to secure new clients and retain existing clients. Any
benefits provided to referral sources, however, must be carefully
considered in light of applicable federal and state fraud and abuse
regulations — many of which carry criminal penalties in addition to
substantial civil monetary fines. The most relevant federal restrictions
are the following:

  • The Medicare and Medicaid anti-kickback
    law prohibits the knowing and willful solicitation, offer,
    payment, or receipt of any remuneration, whether direct or
    indirect, in cash or in kind, to induce or in return for
    referrals for items or service covered by the Medicare,
    Medicaid, or other government health program. Violations are
    punishable by civil monetary penalties, criminal penalties,
    and exclusion from the Medicare and Medicaid programs.
  • The Stark law prohibits a physician
    from making a referral for certain designated health
    services (including clinical laboratory and
    anatomic-pathology services) for which payment may be made
    under the Medicare or Medicaid program if the physician (or
    an immediate family member) has a financial relationship
    with the entity that provides the designated health
    services. The Stark law contains limited exceptions. The
    penalties include civil monetary penalties and exclusion
    from the Medicare and Medicaid programs.

The Stark self-referral law contains an
exception for non-monetary compensation. This exception permits
a laboratory to provide certain non-monetary compensation to
referring physicians and avoid violation of the Stark law. The
Stark limit is adjusted for inflation every year, and currently
is $355 annually per physician. Note that this exception covers
only non-monetary compensation provided to a physician, and does
not include cash, cash equivalents, or gift certificates.

In addition, in commentary to the Stark
II regulations, the government provides guidance with respect to
the provision of free supplies by laboratories for the
collection of specimens. The government explains that low-cost
supplies used solely to collect specimens for the laboratory may
be provided without charge to a physician, however, higher-cost
items used by the physician to perform the underlying surgical
procedure, such as biopsy needles and snares, could violate the

Any violation of the Stark law or the Medicare and
anti-kickback law subjects both parties to civil
and criminal penalties.

Free meals and other non-monetary
Boxed lunches, dinners, or other food
gifts, along with coffee mugs and other small items are commonly
provided by laboratories to referring physicians. These are
subject to the Stark $355 per physician non-monetary
compensation limit. For example, in a clinic with five
physicians, up to $1,775 worth of free meals may be provided
annually, presuming no other monetary compensation is provided
to any of the physicians during the year. It is prudent for the
laboratory to maintain a detailed log of all such meals and
gifts provided during the year, which should include the cost of
the meals/gifts, the date provided, and the physicians for whom
the meals/gifts were provided.

Note that the annual non-monetary
compensation limit would cover all non-monetary items provided
to physicians, including giveaways such as coffee mugs, pens,
and other incidental supplies, in addition to meals. Gift
certificates are strictly prohibited.

Pap results and reminders.
The provision of Pap-results cards and annual
appointment-reminder cards poses difficult compliance issues. If
a laboratory bears the expense of printing Pap-result cards or
reminder cards with the name and address of the referring
clinician, and/or if the laboratory bears the postage expense
involved in sending these cards, the government would likely
view such activities to violate the federal fraud and abuse
laws. There is less concern, however, if a lab sends its own
notice (referencing only the laboratory) informing the patients
of the results of the test performed. Similarly, the risk is
minimal if a laboratory sends a reminder card to patients for
whom it has provided testing in the past, reminding them to
contact their clinicians (who should remain unnamed on the card)
to schedule their annual examinations.

Speculums, biopsy needles, and
Disposable speculums are a clear compliance risk. Stark
II regulations state that laboratories may only provide low-cost
items that are used solely for collection purposes. A speculum
is used as part of the pelvic examination, for which the
clinician submits a claim for services. The speculum is not used
solely for the collection or transportation of the specimen that
will be sent to the laboratory. Therefore, the provision of
disposable speculums without charge by a laboratory to a
clinician would appear to be a violation of the Stark law,
subjecting both the laboratory and the clinician to the
significant penalties for violation of the Stark law. Similarly,
the provision of biopsy needles and snares without charge would
violate the Stark law.

Any violation of the Stark law or the
Medicare and Medicaid anti-kickback law subjects both parties to
civil and criminal penalties, so clinicians are equally at risk
with the laboratories.

Further guidance is provided by the
Office of the Inspector General with respect to the marketing of
laboratory services. Specific guidelines regarding free goods
provided by and services performed by clinical laboratories can
be found at in the form of fraud alerts,
bulletins, and advisory opinions.


Published: May, 2010

Jane Pine Wood is an attorney at McDonald Hopkins
in Dennis, MA. She has represented physicians, clinical and anatomic
laboratories, and other healthcare providers in corporate, regulatory,
reimbursement, contractual, and other legal matters.