Over the past year, our firm has seen an increase in requests from healthcare providers seeking to evaluate the viability of physician-laboratory billing relationships. Many practitioners are interested in exploring whether they can structure arrangements that allow them to bill for laboratory services provided by third-party labs.
Common questions related to these inquiries include:
- How, if at all, does a practitioner-laboratory relationship differ from a typical reference laboratory relationship for billing purposes?
- Does the type of CLIA license held by a practitioner / laboratory affect the permissibility of a billing arrangement?
- Can either the practitioner or the laboratory bill for their own services and the services of the other party?
While these arrangements can present certain benefits, they are complex and require careful consideration to ensure compliance with federal and state regulations. These arrangements typically arise from a practitioner’s referral to a laboratory, the physician’s billing for the laboratory’s analysis, and the transfer of money between the practitioner and the laboratory. When not structured correctly, these dynamics can trigger various regulatory concerns. Depending on the nature of the relationship, such arrangements may raise red flags under billing guidelines and the Anti-Kickback Statute (AKS) or state parities, or be subject to state-level pass-through billing restrictions. Other potential sources of risk include federal and state self-referral laws (such as the Stark Law), the Eliminating Kickbacks in Recovery Act of 2018 (EKRA), the False Claims Act, and various healthcare fraud statutes.
I. Differentiating Practitioner-Laboratory Relationships from Reference Laboratory Arrangements
Although independent clinical laboratories frequently maintain reference lab relationships with other laboratories, a key distinction exists when a practitioner enters a similar arrangement with a laboratory. From a Center for Medicare and Medicaid Services (CMS) perspective, only independent clinical laboratories are permitted to use reference laboratory billing modifiers. Modified claims submitted by other entities, including practitioners billing for lab services, are likely to be rejected, as they do not meet the required standards for processing by CMS. Therefore, a medical practice typically cannot treat a laboratory as its own reference laboratory for billing purposes. Moreover, given that the prescribing practitioner is not just a referral source, but also a party to a billing in these arrangements, risk can arise under federal and state fraud and kickback prohibitions.
II. CLIA Certification and Its Role in Physician-Laboratory Billing Arrangements
A Clinical Laboratory Improvement Amendments (CLIA) certification is crucial to offering any laboratory services, as it indicates that laboratories meet federal standards for testing. In the context of physician-laboratory billing, CMS reviews laboratory claims based on the CLIA certificate number to ensure that CMS reimbursements are only made for services provided by labs with a valid, current CLIA certificate.
The question of whether a practitioner or their practice can bill for laboratory tests performed by a CLIA-certified lab will hinge on CMS billing rules. Practitioners must ensure they fully understand the compliance and eligibility requirements when seeking reimbursement from payors, as billing incorrectly could result in rejection, recoupment, or more significant scrutiny pursuant to the False Claims Act or similar statutes. Proper documentation and adherence to billing standards are essential in such arrangements to avoid legal risks.
III. Challenges of Practitioner Billing for Laboratory Services
While some healthcare practices may be permitted to submit billing for services rendered by an affiliated or contracted laboratory under certain circumstances, these arrangements are closely monitored and subject to strict scrutiny. For example, practitioners must ensure they make the necessary disclosures to the payor with respect to the laboratory that ultimately performed the analysis.
Additionally, state-level regulations or commercial payor standards may impose restrictions or prohibitions on the ability of a third party to bill for services rendered by a laboratory. Consequently, each potential arrangement must be evaluated on a case-by-case basis to ensure compliance with local laws and payor requirements.
IV. Key Takeaways for Structuring Practitioner-Laboratory Billing Arrangements
For organizations contemplating joint ventures where a practitioner will bill on behalf of a laboratory performing tests, it is important to consult with regulatory counsel to ensure the arrangement is structured correctly. Regulatory counsel can assist with:
- Determining the legal viability of the proposed billing structure
- Identifying necessary disclosures to ensure transparency to payors
- Assessing state-level prohibitions that may affect the arrangement or prevent it altogether
- Ensuring compliance with federal laws, including anti-kickback regulations, Stark law, EKRA, and other fraud, waste and abuse regulations
Physician-laboratory billing arrangements can be beneficial for both practitioners and laboratories, but they require careful planning and compliance with a complex array of regulations and billing guidelines. If you are considering a physician-laboratory billing arrangement, contact Frier Levitt to evaluate the specific regulatory requirements and potential risks in your model.
