Medicare and Medicaid Anti-Kickback Statute And Clinical Laboratories

An alert issued by the Office of Inspector General (OIG) of the Department of Health and Human Services addressed certain situations involving clinical laboratories that might run afoul of the Medicare and Medicaid anti- kickback statute, 42 U.S.C. § 1320a-7b(b)(G).

The OIG wants all laboratory referrals made by health care providers to be based solely on the best interests of the Medicare and Medicaid beneficiaries. Accordingly, the OIG insists that neither the laboratory nor the health care provider offer or give each other "anything of value not paid for at fair market value." If fair market value is not paid, the OIG states that it can be inferred that the offer was for the purpose of inducing the referral of business and in violation of the anti-kickback statute.

The OIG's alert addressed several examples of questionable conduct. One situation that may run afoul of the anti-kickback statute involves a laboratory providing a phlebotomist to a physician's office to collect patient specimens to be tested by the laboratory. The placement of a laboratory employee does not, alone, necessarily give rise to a violation of the statute. However, the statute may be violated when the phlebotomist performs additional tasks that are normally the done by the physician's office staff, such as taking vital signs or doing clerical chores. When the phlebotomist does anything "not directly related to the collection and processing of laboratory specimens, a strong inference arises" that the services are being performed for the purpose of inducing referrals.

Another example involved the charging by a clinical laboratory of a price below the fair market value of tests for all tests included in the end state renal disease composite rate for Medicare in exchange for the health care facilities agreement "to refer all or most of its non-composite rate testing to the laboratory." The OIG also suggested that the offering of free laboratory services for managed care patients may run afoul of the statute. Where "the provision of free services results in a benefit to the provider, the anti-kickback statute is implicated." There are, however, situations where such an arrangement may not be problematic. The difficulty with the alert is that the OIG is not clear on when such a situation is allowable and when it is not.

Other examples were the free pick-up and disposal of bio-hazardous wast products unrelated to the collection of specimens for the laboratory, the provision of computers or telecopiers to the provider unless the equipment is essential to and used exclusively for the laboratories work, and the provision of free testing for the health care provider and the provider's family and employees. The importance of these examples is that they point up that "[w]here one of the purposes of an arrangement is to induce the referral of program-reimbursed laboratory testing, both the clinical laboratory and the health care provider may be liable under the anti-kickback statute" and subject to prosecution.

March Organizers Cannot Be Required To Permit Marchers Who Convey A Message Contrary To That Which The Organizers Wish To Convey

The much-publicized decision of the United States Supreme Court on this subject of the South Boston Saint Patrick's Day Parade presents a number of very interesting points.

The South Boston Allied War Veterans Council is an association of individuals elected from various veterans organizations and was authorized by the City of Boston to organize and conduct the St. Patricks Day Parade. The Council refused to provide a place in the 1993 parade to the Irish-American Gay, Lesbian and Bisexual Group (GLIB), an organization that was formed for the purpose of marching as openly gay, lesbian, and bisexual individuals in the parade. GLIB sued in the state courts of Massachusetts to compel the Council to permit them to march in the parade. The state Supreme Judicial Court affirmed a decision of the trial court requiring that GLIB be provided a place in the parade.

The United States Supreme Court, however, overruled the state court and held that state law cannot be used to compel private citizens who organize an event to include participants who wish to impart a message that the organizers do not wish to convey. The Supreme Court found that to do so would amount to a violation of the First Amendment to the United States Constitution.

SLAPP Suit Legislation May Have Unexpected Consequences

Strategic Litigation to Limit Public Participation (SLAPP Suits) describes law suits brought, usually by real estate developers, against citizens who take action in opposition to a project. Such litigation has long been regarded as a form of harassment calculated only to interfere with the free exercise of citizens' rights to speak out against projects they oppose.

The Massachusetts legislature sought to protect the citizens' right to oppose projects by enacting General Laws chapter 231, section 59H, which requires an expedited special motion to dismiss in any case in which a party asserts that a claim, counterclaim, or cross-claim is based upon the parties' exercise of a constitutionally protected right. The legislation also stays discovery pending disposition of the motion.

The intent is clearly to prevent a developer from quieting opposition by subjecting his or her opponents to the extreme costs and risks associated with litigation. However, the statute is so broadly drafted as to open the door to its use in other, unintended and inappropriate situations. Thus, the statute may well be applied to a range of situations that extend far beyond SLAPP suits.

Lawyer of Nursing Home Resident Owed No Duty to Nursing Home

A lawyer representing residents of a nursing home is not liable for negligence to the nursing home for delays in obtaining Medicaid coverage. The court ruled, however, that the nursing home could proceed against the lawyer with a claim for fraud because of statements the attorney was alleged to have made about the residents' Medicaid eligibility.

The attorney allegedly told the nursing home administrator, on several occassions, that there were no problems with the patient's Medicaid application. Information from the Department of Public Welfare suggested that the attorney misrepresented the status of the application.

The negligence claim could not stand because negligence requires a showing of a duty of care owed by the defendant to the plaintiff. This requires a showing of either an attorney-client relationship or foreseeable reliance by the plaintiff upon the defendant. In the case before the court, there was clearly no attorney-client relationship. Reliance requires that the attorney know that the non-client would rely on the services of the lawyer and that such reliance was reasonable. In this case, the court found that there could not have been any such reliance since the interests of the real client and the plaintiff are in potential conflict.

Where, however, the attorney may have materially misrepresented the facts to the non-client, the attorney may be liable to the non-client for fraud.

Sexual Harassment Policies Required of Massachusetts Businesses

Companies with six or more employees are now required by Massachusetts Law to have specific sexual harassment
policies in place.

Chapter 278 of the Acts of 1996 requires policies to be adopted and specifies that the policies must include the following:

Employers without policies in place should promptly undertake to adopt policies. Employers having policies in place
should review them to be certain they meet the requirements of the new law.

A model policy has been drafted by the Massachusetts Commission Against Descrimination and is available directly
from the MCAD or a copy can be obtained from Churchill Law Associates.

Workers' Compensation Section 28 Claims Require More Than Mere Negligence

If an employee injured on the job can show that the injury resulted from the serious and willful misconduct of the
employer, the employee can collect double compensation. The excess amount of the compensation must by paid
by the employer rather than the employer's workers' compensation insurance company. The serious and willful
misconduct of an employer or one in superintendence necessary to support an award of Double Compensation
under Massachusetts General Laws Chapter 152, Section 28 has been described as follows:

Serious and willful misconduct is much more than mere negligence, or even than gross or culpable negligence. It involves conduct or a quasi-criminal nature, the intentional doing of something either with knowledge that it is likely to result in serious injury or with a wanton and reckless disregard of its probably consequences. Burn's Case, 218 Mass. 8, 10 (1914) (emphasis added).

In those cases where the standard described in Burn's Case, Id. has been applied and an award of Double
Compensation affirmed there was evidence that the risk to the employee was open and obvious or that it had been
discussed and brought to the attention of the person in superintendence who deliberately ignored the obvious and
noticed risk and ordered a protesting employee to act to his detriment under a threat of termination or dismissal.
See e.g. Scaia's Case, 320 Mass. 432, 433-434 (1946); Thayer's Case, 345 Mass. 36, 40 (1962);
Gleason's Case, 345 Mass. 759 (1962); O'Leary's Case, 367 Mass. 108 (1975); Paccia's
Case, 4 Mass.App.Ct. 830 (1976); McCarthy's Case, 314 Mass. 610 (1943) (Claimant must show
much more than even gross or culpable negligence). Historically, few cases have been found to meet the double
compensation standard of Section 28. See Thayer's Case, supra.

Personnel Manual May Constitute An Employment Contract

Much of the confusion over the status of personnel manuals has been resolved by the recent Massachusetts Supreme
Judicial Court decision of O'Brien v. New England Telephone & Telegraph Co., 422 Mass. 686 (1996).
The court decided that there are many instances in which an employee handbook or personnel manual will create
contractual rights and obligations between an employer and employee.

The case involved the claim of wrongful termination brought by O'Brien against her employer, New England
Telephone & Telegraph Company. O'Brien was awarded judgment on the basis of breach of her implied
employment contract. The contention of the employer that O'Brien was an at-will employee who could be
discharged without cause was reviewed by the court.

In addition to situations in which the parties agree that the employment manual will serve as a contract, a contract may
be found to exist under many other circumstances. The court rejected an analysis that had been in use which
suggested a contract could not be created by an employment manual when the manual was not subject to
negotiations or was open to amendment at will by the employer. The court has now stated that employment
manuals and personnel policies should be evaluated under the terms of standard contract law to determine
whether a contractual relationship has been formed. The court should, most importantly, look at the expectations
of the parties in evaluating whether a manual can be regarded as a contract.

In the O'Brien case, the court rejected the employee's claim against the employer not because it found that a
contract had not been formed by the employment manual but, rather, because the employee failed to comply with
the grievance procedure set forth in the manual. As a result, her claim was barred.

In The Same Case

The court also found the O'Brien's supervisor could be held liable for intentional interference with the employment
relationship between O'Brien and New England Telephone & Telegraph Company.

The court found that, "Screaming at an employee repeatedly to humiliate her in front of other employees, calling her
names, and denying her work to do when work is available could be found both to exceed the protected conduct
of a supervisor and to constitute malicious conduct unrelated to an employer's legitimate business interests."