Integrating Clinical Labs Into Substance Abuse Treatment Programs
By: David Hirshfeld
The recent and drastic cut in reimbursement for point-of-care urinalysis has caused just about all of our substance use treatment program clients to consider integrating clinical
laboratories into their enterprise models. These programs long for a way to restore the revenue stream that urinalysis had generated. For sober living programs, the lost revenue often means the difference between profitability and breaking even. For more comprehensive programs, the lost revenue can hinder their ability to expand or provide scholarships to those who could not otherwise afford treatment. Regardless of their specific goals, our clients are amazed and dismayed at the regulatory minefield that awaits them; especially since their lab consultant (read “reagent salesperson”) makes the process sound so simple.
Up until approximately ten months ago many substance use treatment and sober living programs held waivers under the Clinical Laboratory Improvement Amendments (“CLIA”) and generated significant revenue from urinalysis provided right at the program’s offices or sober living facility. Providers administering CLIA-waived tests only have to adhere to the recommendations of the test manufacturer, and are free from the CLIA regulations and the need for a clinical laboratory license under Florida law. These days those CLIA-waived urinalyses do not yield much revenue.
In order to replace their lost revenue, many programs seek to provide moderate and high complexity urinalyses that are not CLIA-waived, and for which the program requires a clinical laboratory license. There are two fundamental type of laboratory licenses under Florida law: “exclusive use” and “independent.”
An “exclusive use” license is for a laboratory that is operated by a medical doctor, osteopath, chiropractor, podiatrist, naturopath or dentist exclusively for the use of the operator’s patients. An exclusive use lab cannot accept specimen from providers other than the operator, and is subject to less stringent regulatory requirements than is an independent lab.
An “independent lab” license is much more difficult to obtain than is an exclusive use license; and an independent lab has greater requirements with respect to its operations and personnel. An independent lab can accept specimen from providers other than its operator.
Many substance use treatment programs are understandably more interested in forming an exclusive use laboratory, but they are not the sorts of providers listed in the statute (i.e. medical doctor, osteopath, chiropractor, podiatrist, naturopath or dentist). So what’s a treatment program to do? Arguably, a provider within the exclusive use statute could assess and adopt each patient of a program, order a urinalysis of that patient, and that urinalysis could be performed by the laboratory operated by the ordering provider. The lab could then bill and collect for the urinalysis. The tricky bit is how can the provider who operates the exclusive use lab, the program, and the owner of the lab split the revenue generated by the urinalysis.
Florida is very leery of kickback and split-fee arrangements involving clinical laboratories. Not only is there a statute specifically prohibiting kickbacks and split-fees involving clinical labs, but there is also a regulation that embodies the same prohibition. In addition to these lab-specific kickback and split-fee prohibitions, the more general kickback prohibition found in Florida law, as well as the Florida and Federal prohibitions on self-referrals for clinical laboratory services make the integration of a clinical lab into an organization that includes the ordering provider and/or a substance abuse treatment program an arrangement that must be handled gingerly.
There is no structure for this sort of integrated arrangement that is completely free of regulatory risk, but there are things an integrated enterprise can do to help mitigate its risk. Any treatment or sober living program thinking about integrating a clinical laboratory into its enterprise ought to consult a bona fide health care attorney or consultant.
