As a result of the pandemic, many pharmacies have been presented with the opportunity to collect COVID-19 specimens and submit them to laboratories for testing in exchange for payment. Pharmacies that contract with laboratories must be cautious of these arrangements for fraud and abuse reasons, as well as potential contractual implications. There are three main concerns for pharmacies contemplating these relationships:
(1) the collection fee paid from the laboratory to the pharmacy;
(2) the ability of the laboratory to appropriate delegate activities to the pharmacy; and
(3) the qualifications required to collect the specimen subject to the state board of pharmacy laws.
A lab can either bill a two-part code (one for the collection and the other for the analysis of a specimen), or the lab may bill for one code that encompasses both the collection of the sample and the analysis of the sample. Since the pharmacy is not contracted with the medical benefit payor, they cannot bill for the sample collection and analysis independently. Instead, the pharmacy can enter into an arrangement in which they collect the sample, and the testing laboratory analyzes the sample for the presence of the COVID-19 virus. In this arrangement, the pharmacy essentially refers patients to the diagnostic lab, and payments that the pharmacy receives could be viewed as a kickback even though there was a bona fide collection. A pharmacy runs into issues when the arrangement resembles a referral fee well in excess of the service. For example, if the pharmacy had submitted a billing code for the collection of the sample and they would have received a payment of $24, but instead they provided the sample to the lab company and the lab company bills for the collection, it would be reasonable for the lab company to pay the pharmacy a fee of $22 to account for the pharmacy’s collection services. However, if the pharmacy receives payment from the testing company above $24, that model may be suspect.
The first arrangement is more permissible than the second arrangement because, in the first model, the pharmacy is receiving close to what the pharmacy would have received if they had submitted billing for the collection service. The second model is suspect because the pharmacy gets paid more than the lab reimbursed on the claim. Essentially, the pharmacy is not receiving a fair market value for its collection service. The payment could be viewed as a kickback to the pharmacy for its referral to the testing company.
Issues over payor contracts arise because the lab company has a direct contract with the payor, whereas the pharmacy collecting the sample does not. To determine if the arrangement would be permissible under contract terms, the pharmacy must evaluate whether the payor contract permits delegation of payments to third-party beneficiaries. In other words, the fee arrangement might prohibit either the testing company or the pharmacy from getting paid. This issue needs to be evaluated case-by-case after carefully reviewing all terms of the binding contract. Pharmacists should consult with the specific payer to determine whether they are included in the payer’s provider network for COVID-19 services, and if so, what services are covered and what the parameters are for coverage. Further, payment for COVID-19 testing depends on whether the patient receiving the test is insured by Medicare, Medicaid, private insurance, or uninsured and whether the payer recognizes the pharmacy or pharmacist for payment.
Lastly, a pharmacy receiving a collection fee from a lab for collecting PCR samples rests on whether the pharmacy is permitted to collect the specimen in the first place. For example, in New Jersey, pharmacists may perform COVID-19 testing specimen collection at, or immediately outside of, any registered pharmacy in the state, and the pharmacist may send the specimen to an appropriate laboratory for analysis without the need for a prescription or order from another health care provider. Additionally, pharmacists may perform specimen analysis on-site at the pharmacy (without the need to send the specimen to a laboratory for analysis) if (i) the COVID-19 test kit is CLIA-waived and (ii) the pharmacy has obtained a CLIA Certificate of Waiver from the Centers for Medicare and Medicaid Services (CMS).
Please contact a Frier Levitt attorney if your pharmacy is presented with a fee arrangement from a diagnostic testing company to ensure the terms of the contract do not violate any federal/state regulations or prohibit collection fees under payor arrangements.
