1. “Navigating Labs to Make Informed Decisions”
COMPLIANCE ROAD TRIP
“Navigating Labs to Make Informed Decisions”
David W. Gee and Kristen R. Blanchette
David Wright Tremaine LLP

2. COMPLIANCE ROAD TRIP 1. % BASED CONTRACT MARKETING
ST.
2. IN-OFFICE PHLEBOTOMISTS
AVE.
3. MOBILE PHLEBOTOMISTS
BLVD.
4. LEASING SPACE FROM DOCTORS
RD.
5. Lab Pricing PRACTICES
WAY

3. 1. % BASED CONTRACT MARKETING
ST.
FEDERAL
PROHIBITED
Why? AKS and No Safe Harbor CA
PROHIBITED
Why? Medi-Cal AKS
BUT: May be PERMITTED by PORA Safe Harbor Unless Medicare or Medi-Cal Involved
YIELD
AHEAD

4. 1. % BASED CONTRACT MARKETING
REFERENCES
1. % BASED CONTRACT MARKETING
ST.
FEDERAL
42 U.S.C. § 1320-a-7(b) [AKS]
42 C.F.R. § [Safe Harbors]
42 U.S.C. § 1320-a-7b (b)(3)(B); 42 C.F.R. § (i) [Bona Fida Employees]
42 C.F.R. § (d) [Pers. Svs./ and Mgmt.] CA
Cal. Bus. & Prof. Code § 650(a) [CA AKS – PORA]
Cal. Welf. & Inst. Code § (a) + (b) [Medi-Cal AKS]
Cal. Welf. & Inst. Code § (c) [Medi-Cal AKS Safe Harbor]

5. 1. % BASED CONTRACT MARKETING
REFERENCES
1. % BASED CONTRACT MARKETING
ST.
FEDERAL CASE LAW
U.S. v. Polin, 194 F.3d 863 (7th Cir. 1999)
U.S. v. Starks, 157 F. 3d 833 (11th Cir. 1998)
Joint Tech. v. Weaver, CIV M (W.D. Okla. 1/23/14)
Zimmer v. NuTech Medical, 54 F. Supp. 2d (N.D.Ind.1999)
Nursing Home Con. v. Quantum Health Services, 926 F. Supp. 835 (E.D. Ark. 1996)
Modern Med. Labs v. Smith-Kline Beecham Clinical Labs, 1994 U.S. Dist. LEXIS (N.D. Ill. 8/16/94)
CA CASE LAW
People v. Duz-Mor Diagnostic Laboratory, 68 Cal.App.4th 654, 671 (1998)
People v. Palma, 40 Cal.App.4th 1559 (Cal. Ct. App. 1995)
People v. Guiamelon, 205 Cal.App.4th 383, 413, 140 Cal.Rptr.3d 584 (2012)

6. 1. % BASED CONTRACT MARKETING
REFERENCES
1. % BASED CONTRACT MARKETING
ST.
FEDERAL SETTLEMENTS
OIG - Kickback and Physician Self-Referral ( ) [Zimmer-Deptula (ZDI) paid $123K]
OIG - Kickback and Physician Self-Referral ( ) [FCA case; two owners of DME co. agreed to be excluded for 20 yrs]
OIG Archives - Kickback and Physician Self-Referral ( ) [ TLC paid $130K to resolve CMP liability]
CA LEGIS. COUNSEL OPINION
California Legislative Counsel Bureau Opinion # , “Clinical Laboratory Referral Practice” (Apr. 20, 2012) (adresses the legality under both federal and state law of a commission-based contract marketing arrangement)

7. 2. IN-OFFICE PHLEBOTOMISTS
AVE.
FEDERAL
PERMITTED, IF
Solely collecting and processing lab specimens CA
PROHIBITED
Why? LFS has provided guidance on this issue

8. 2. IN-OFFICE PHLEBOTOMISTS
REFERENCES
2. IN-OFFICE PHLEBOTOMISTS
AVE.
FEDERAL
CMS Commentary to Final Stark II Regs., 66 Fed. Reg. 856, (Jan. 4, 2001)
OIG Special Fraud Alert: Special Arrangements for the Provision of Clinical Lab Services, 59 Fed. Reg (Dec. 19, 1994) CA
Legis. Counsel of CA, Clinical Lab Personnel: Placement in Physician’s Offices - #2433 (Feb. 29, 1996)
Memo re: Legal opinions re: phleb. issues from Karen Nickel, Ph.D., Chief, LFS (July 11, 1997) [AKS]

9. 3. MOBILE PHLEBOTOMISTS FEDERAL CA
BLVD.
FEDERAL
NO GUIDANCE (besides authority re: phlebs) CA
CAUTION: LFS – NO “Roving phlebs”
WHY? Prohibited by Bus. & Prof. Code § 650

10. REFERENCES 3. MOBILE PHLEBOTOMISTS BLVD. FEDERAL
42 C.F.R. § (2) CA
Memo re: Legal opinions re: phleb. issues from Karen Nickel, Ph.D., Chief, LFS (July 11, 1997) AKS]
Regs related to phleb: Cal. Bus. & Prof. Code § 1242, § , § 1246

11. 4. LEASING SPACE FROM DOCTORS
RD.
FEDERAL
PERMITTED, SUBJECT TO:
Stark Law
AKS Safe Harbor CA
PERMITTED, SUBJECT TO:
PORA

12. 4. LEASING OFFICE SPACE FROM DOCTORS
REFERENCES
4. LEASING OFFICE SPACE FROM DOCTORS
RD.
FEDERAL
42 C.F.R (b) [AKS Space Rental Safe Harbor]
42 U.S.C. § 1395nn (e) (1)(A); 42 C.F.R. § (a) [Stark Law Space Safe Harbor Exception]
OIG Special Fraud Alert (Feb. 2000) (listing requirements) CA
Cal. Bus. & Prof. Code § (PORA)
Cal. Bus. & Prof. Code § (b)(2) (exception to PORA re: leases)

13. 5. LAB PRICING PRACTICES CA FEDERAL WHAT YOU NEED TO KNOW:
WAY CA
WHAT YOU NEED TO KNOW:
Anti-Markup Rules
Disclosure Rules
Direct Billing
Medi-Cal Lowest Charge Rule
FEDERAL
WHAT YOU NEED TO KNOW:
Medicare Usual Charge Rule
Discounting Rules and AKS

14. REFERENCES 5. LAB PRICING PRACTICES WAY CA FEDERAL
Cal. Bus. & Prof. Code § (anti-markup and disclosure req.)
Cal. Bus. & Prof. Code § (direct billing)
22 C.C.R. § (a) (Medi-Cal “Lowest Charge Rule”)
Hunter Labs v. Quest (settled in 2011)
AB 1494
FEDERAL
42 U.S.C. §1320a-7(b)(6)(A) [Medicare Usual Charge Rule]
Ltr. from K. McAnaney, Chief, OIG (April 26, 2000) [Medicare Usual Charge Rule]
OIG Advisory Opinion 99-13

15. FEDERAL & CA PROHIBITED (BUT SEE CA PORA)
COMPLIANCE ROAD TRIP
SUMMARY
% BASED CONTRACT MARKETING
FEDERAL & CA PROHIBITED (BUT SEE CA PORA)
ST.
IN-OFFICE PHLEBOTOMISTS
FEDERAL = PERMITTED (key word: “solely”)
CA = PROHIBITED (per LFS guidance)
AVE.
AVE.
3. MOBILE PHLEBOTOMISTS
FEDERAL = NO GUIDANCE
CA = PROHBITED (per LFS guidance)
BLVD.
4. LEASING OFFICE SPACE FROM DOCTORS
FEDERAL = PERMITTED, subject to Stark AND AKS
CA = PERMITTED, subject to PORA
RD.
5. Lab Pricing PRACTICES
SEE RULES FOR FEDERAL & CA
WAY

16. QUESTIONS?
David W. Gee & Kristen R. Blanchette David Wright Tremaine LLP and