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Navigating Labs to Make Informed Decisions David W. Gee and Kristen R. Blanchette David Wright Tremaine LLP davidgee@dwt.com kristenblanchette@dwt.com

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

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1. % BASED CONTRACT MARKETING 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 ST.

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REFERENCES 1. % BASED CONTRACT MARKETING FEDERAL 42 U.S.C. 1320-a-7(b) [AKS] 42 C.F.R. 1001.952 [Safe Harbors] 42 U.S.C. 1320-a-7b (b)(3)(B); 42 C.F.R. 1011.952(i) [Bona Fida Employees] 42 C.F.R. 1001.952 (d) [Pers. Svs./ and Mgmt.] CA Cal. Bus. & Prof. Code 650(a) [CA AKS PORA] Cal. Welf. & Inst. Code 14107.2 (a) + (b) [Medi-Cal AKS] Cal. Welf. & Inst. Code 14107.2 (c) [Medi-Cal AKS Safe Harbor] ST.

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REFERENCES 1. % BASED CONTRACT MARKETING 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-11-846-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 11525 (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.4 th 383, 413, 140 Cal.Rptr.3d 584 (2012) ST.

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REFERENCES 1. % BASED CONTRACT MARKETING FEDERAL SETTLEMENTS OIG - Kickback and Physician Self-Referral (08-21-2014) [Zimmer-Deptula (ZDI) paid $123K] OIG - Kickback and Physician Self-Referral (10-21-2013) [FCA case; two owners of DME co. agreed to be excluded for 20 yrs] OIG Archives - Kickback and Physician Self- Referral (02-15-2005) [ TLC paid $130K to resolve CMP liability] CA LEGIS. COUNSEL OPINION California Legislative Counsel Bureau Opinion # 1128674, Clinical Laboratory Referral Practice (Apr. 20, 2012) (adresses the legality under both federal and state law of a commission- based contract marketing arrangement) ST.

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

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REFERENCES 2. IN-OFFICE PHLEBOTOMISTS FEDERAL CMS Commentary to Final Stark II Regs., 66 Fed. Reg. 856, 948-49 (Jan. 4, 2001) OIG Special Fraud Alert: Special Arrangements for the Provision of Clinical Lab Services, 59 Fed. Reg. 65372 (Dec. 19, 1994) CA Legis. Counsel of CA, Clinical Lab Personnel: Placement in Physicians Offices - #2433 (Feb. 29, 1996) Memo re: Legal opinions re: phleb. issues from Karen Nickel, Ph.D., Chief, LFS (July 11, 1997) [AKS] AVE.

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

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REFERENCES 3. MOBILE PHLEBOTOMISTS FEDERAL 42 C.F.R. 493.1242 (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, 1242.6, 1246 BLVD.

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

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REFERENCES 4. LEASING OFFICE SPACE FROM DOCTORS FEDERAL 42 C.F.R. 10001.952(b) [AKS Space Rental Safe Harbor] 42 U.S.C. 1395nn (e) (1)(A); 42 C.F.R. 411.357(a) [Stark Law Space Safe Harbor Exception] OIG Special Fraud Alert (Feb. 2000) (listing requirements) CA Cal. Bus. & Prof. Code 650.01 (PORA) Cal. Bus. & Prof. Code 650.02(b)(2) (exception to PORA re: leases) RD.

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

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REFERENCES 5. LAB PRICING PRACTICES 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 CA Cal. Bus. & Prof. Code 655.5 (anti- markup and disclosure req.) Cal. Bus. & Prof. Code 655.7 (direct billing) 22 C.C.R. 515501(a) (Medi-Cal Lowest Charge Rule) Hunter Labs v. Quest (settled in 2011) AB 1494 WAY

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COMPLIANCE ROAD TRIP SUMMARY 1.% BASED CONTRACT MARKETING FEDERAL & CA PROHIBITED (BUT SEE CA PORA) 1.% BASED CONTRACT MARKETING FEDERAL & CA PROHIBITED (BUT SEE CA PORA) 3. MOBILE PHLEBOTOMISTS FEDERAL = NO GUIDANCE CA = PROHBITED (per LFS guidance) 3. MOBILE PHLEBOTOMISTS FEDERAL = NO GUIDANCE CA = PROHBITED (per LFS guidance) 4. LEASING OFFICE SPACE FROM DOCTORS FEDERAL = PERMITTED, subject to Stark AND AKS CA = PERMITTED, subject to PORA 4. LEASING OFFICE SPACE FROM DOCTORS FEDERAL = PERMITTED, subject to Stark AND AKS CA = PERMITTED, subject to PORA 5. LAB PRICING PRACTICES SEE RULES FOR FEDERAL & CA 5. LAB PRICING PRACTICES SEE RULES FOR FEDERAL & CA ST. AVE. BLVD. RD. WAY 1.IN-OFFICE PHLEBOTOMISTS FEDERAL = PERMITTED (key word: solely) CA = PROHIBITED (per LFS guidance) 1.IN-OFFICE PHLEBOTOMISTS FEDERAL = PERMITTED (key word: solely) CA = PROHIBITED (per LFS guidance) AVE.

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David W. Gee & Kristen R. Blanchette David Wright Tremaine LLP davidgee@dwt.com and kristenblanchette@dwt.com davidgee@dwt.comkristenblanchette@dwt.com