The Wild, Wild West of Billing by Out-of-Network Labs and Waivers of Patient Responsibility

  • May 21 2012

O’Connell & Aronowitz attorneys, Jeffrey Sherrin, Kurt Bratten, and Charles Dunham, spoke at a national meeting of clinical laboratories in Las Vegas on May 19, on the complicated issue of referrals to and billing by out- of-network (OON) clinical laboratories, and the waiver of patient responsibility.  Waivers of copays, deductibles and balance billing have been used increasingly by OON labs to compete for the business of patients who have OON benefits.  Labs may be shut out of networks because of exclusive provide agreements or closed panel, or they may find that reimbursement is actually greater as an OON lab and choose not to seek to participate with individual plans.  Many OON labs market that patients will be treated no differently than if they went in-network labs, meaning usually that they will not be billed for any patient responsibility for balance billing or other costs that they would not have if their specimens were tested by an in-network lab.

These billing practices have come under tremendous and aggressive scrutiny by federal and state prosecutors, state regulatory agencies, third-party payers with their special investigations units, and competitors.  Our attorneys presented a comprehensive review of all activities going on around the country, including criminal investigations or prosecutions, litigation brought by third-party payers, the most active being Aetna Health, and litigation and complaints between competitor labs.  They also explained the respective interests of all involved parties to the debate over the legality of waivers or limitations of patient responsibility — those of patients, in-network labs, out-of-network labs, third-party payers, and state governments — as well as a review of key states’s laws that come into play.

While it is commonly stated that routine waiver of copays or deductibles is an anti-kickback violation, our attorneys reflected that while the federal Office of Inspector General has stated that such waivers could constitute illegal inducements, that concept under Medicare did not apply to labs, because of mandatory assignment under Medicare for lab services.  Further, there still are no cases that establish that such waivers actually result in remuneration to the referring physician so as to trigger the anti-kickback statute.

Similarly, while it is commonly alleged that the routine waiver causes a misrepresentation to the payer when the waiver is not disclosed in billing the plan, whether or not that omission is material should be a function of whether it affects what the plan would have paid.  With the increased use by plans of fee schedules and rates based upon their own determination of what is a usual, customary or reasonable fee, it is not at all clear that it would make a difference as to what the reimbursement would be.

Several states have existing or proposed laws that prohibit the waiver of copays or deductibles without a good faith effort to collect or a showing of financial hardship. However, in the states without a direct prohibition, these issues are being fought out and it is not settled what is legal and what is not in the waiver or limitation of patient responsibility in billing by out-of-network labs.  As a result, there is the potential for inconsistent interpretation and application among the states, and there is a debate over what state law should apply.

For additional information, please contact Jeffrey Sherrin, Kurt Bratten or Charles Dunham.

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Posted in: Anti-Kickback Statute, Laboratories



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