AMARILLO, TX – On August 2, 2021, the Department of Justice (“DOJ”) issued a press release that states, in part:

Arriva Medical LLC (Arriva), at one point the nation’s largest Medicare mail-order diabetic testing supplier, and its parent, Alere Inc. (Alere), have agreed to pay $160 million to resolve allegations that they violated the False Claims Act.

Until it ceased business operations in December 2017, Arriva was a mail-order diabetic testing supply company based in Coral Springs, Florida. Alere is a medical device company now based in Abbott Park, Illinois. Alere acquired Arriva in November 2011. The settlement resolves allegations that Arriva and Alere made, or caused, claims to Medicare that were false because kickbacks were paid to Medicare beneficiaries, patients were ineligible to receive meters, or patients were deceased.

“Paying illegal inducements to Medicare beneficiaries in the form of free items and routine copayment waivers can result in overutilization and waste taxpayer funds,” said Acting Assistant Attorney General Brian M. Boynton for the Justice Department’s Civil Division. “We will continue to protect the integrity of the Medicare program by pursuing fraudulent claims arising from violations of the Anti-Kickback Statute or other applicable reimbursement requirements.”

The United States alleged that, from April 2010 until the end of 2016, Arriva, with Alere’s approval, paid kickbacks to Medicare beneficiaries by providing them “free” or “no cost” glucometers and by routinely waiving, or not collecting, their copayments for meters and diabetic testing supplies. Specifically, the United States alleged that Arriva advertised that glucometers would be “free,” and then during intake calls offered Medicare beneficiaries a “no cost guarantee,” under which Arriva would provide the meters at “no cost” if Medicare denied payment, which typically happened because the beneficiaries were not yet entitled to a new glucometer paid for by Medicare.

Arriva also allegedly offered and provided existing customers “free” additional meters to induce them to reorder testing supplies from Arriva. Arriva also allegedly routinely waived, and failed to make reasonable efforts to collect, Medicare copayments. It allegedly failed to send invoices to beneficiaries, and failed to take other basic steps, like sending collection letters or making phone calls, to collect copayments. Specifically, Arriva allegedly systematically waived “small” dollar copayments without informing beneficiaries of their copayment obligations by sending them an invoice, and allegedly automatically waived other unpaid copayments after sending no more than three invoices seeking payment and making no other collection efforts. Arriva also allegedly waived copayments when customers complained that Arriva had advertised and otherwise indicated that their supplies would be free or at no cost.

“The False Claims Act and related statutes exist to protect the public and to ensure companies do not benefit from unfair competition by gaining an illegal advantage over competitors,” said Acting U.S. Attorney Mary Jane Stewart for the Middle District of Tennessee. “When companies engage in such practice, they can expect to be held accountable for their actions.”

“Engaging in activities that result in the submission of false claims to Medicare diverts funding from the necessary treatment and medical supplies beneficiaries need,” said Special Agent in Charge Derrick L. Jackson of the U.S. Department of Health and Human Services Office of Inspector General (HHS-OIG). “We will continue working with our law enforcement partners to hold accountable those who seek to enrich themselves by submitting false claims to federal health care programs.”

“The TBI is diligent in pursuing false claims allegations such as these,” said Director David Rausch of the Tennessee Bureau of Investigation. “The partnership we have with our federal counterparts is key in combating healthcare fraud.”

The settlement also resolves allegations that Arriva and Alere caused the submission of false claims to Medicare for glucometers because Arriva, with Alere’s approval, allegedly systematically provided to all of its new patients, and billed Medicare for, a meter without regard to the patients’ eligibility for one. Medicare beneficiaries are only eligible to seek reimbursement for a new meter once every five years. Arriva also allegedly repeatedly billed Medicare for new meters for existing patients where Arriva itself had previously billed Medicare for meters for those patients within the five-year window.

Finally, the settlement resolves claims that Arriva submitted false claims to Medicare on behalf of deceased beneficiaries. In November 2016, the Medicare program revoked Arriva’s Medicare supplier number for doing so.

The civil settlement includes the resolution of claims brought under the qui tam or whistleblower provisions of the False Claims Act by Gregory Goodman, a former employee at an Arriva call center in Antioch, Tennessee. Under those provisions, a private party can file an action on behalf of the United States and receive a portion of any recovery. The Act also permits the United States to intervene and take over the litigation of such actions, as the United States did here. Mr. Goodman will receive $28,548,749 as his share of the recovery.

There are several important lessons to be learned from this settlement:

• Every Employee is a Potential Whistleblower – If a DME supplier is doing something it should not be doing, someone knows about it. It is virtually impossible to hide fraud. That “person” is normally an employee. In the Arriva/Alera settlement, the whistleblower was Greg Goodman, a former employee of Arriva’s Antioch, Tennessee call center. As a result of his actions, Mr. Goodman will receive $28,548,749.
• Importance of Robust Compliance Program – Every DME supplier, large or small, needs to have a robust compliance program. By “robust” I mean that not only should the compliance program look good on paper, but it needs to be an integral part of the supplier’s operations. The supplier should conduct routine compliance self-audits. Each self-audit can focus on a particular issue such as collection of copayments, the provision of free products, payments of commissions to sales reps, etc. In addition to self-audits, it is important that the supplier hire an outside consultant/attorney to conduct a compliance audit on a periodic basis. Human nature is such that a self-audit (conducted by the supplier’s employee) may not be totally objective. On the other hand, a compliance audit conducted by an outsider will be objective.
• Collection of Copayments – Often, when I discuss collection of copayments, people roll their eyes and say “here we go again.” However, collection of copayments is “low hanging fruit” for the DOJ. The law is clear that a DME supplier must make a reasonable effort to collect copayments. If the supplier does not do so, it runs the very real risk of violating the federal anti-kickback statute (“AKS”), the beneficiary inducement statute, and the False Claims Act. And it is relatively easy to show whether or not a supplier is making a reasonable effort to collect copayments. At the end of the day, the evidence needs to show that the supplier is collecting a healthy percentage of its copayments. The supplier can implement a policy of reducing or waiving copayments, on a patient-by-patient basis, when a patient shows a financial inability to pay. In advance, the supplier cannot let patients know of the existence of such a policy. When the supplier sells the product to the patient, the supplier’s policy should be that the patient owes the copayment. Only if the patient voluntarily states that he does not have the ability to pay the copayment should the supplier determine if the patient qualifies for a reduction or waiver of the copayment.
• Be Cautious About Using the Word “Free” in Advertisements – Using the word “free” in advertising can lead the supplier down a “slippery slope.”
• Nominal Value Exception – The federal beneficiary inducements statute prohibits a supplier from offering “anything of value” to a patient in order to induce the patient to purchase an item reimbursable by a federal health care program. The nominal value exception to the inducement statute does allow the provision of a gift so long as the gift has a retail value of $15 or less … and if the supplier provides multiple gifts to the patient, the gifts (in the aggregate) cannot have a retail value in excess of $75 over a 12 month period.

AAHOMECARE’S EDUCATIONAL WEBINAR

Buying and Selling a DME Supplier

Presented by: Jeffrey S. Baird, Esq., Brown & Fortunato & Alfonso Zambrano, Esq., Brown & Fortunato

Tuesday, August 17, 2021

1:30-2:30 p.m. CENTRAL TIME
When a person intends to buy or sell a DME supplier, there are a number of documentation and regulatory issues that must be addressed. First, the seller must take a number of steps to make itself more “attractive.” The buyer and seller need to decide whether the transaction will be an “asset” sale or a “stock” sale. The parties will need to engage in the normal transactional steps: mutual nondisclosure agreement, letter of intent, stock purchase agreement/asset purchase agreement, and other closing documents. The buyer will need to engage in three types of due diligence: financial, corporate, and regulatory. And, the parties will need to meet a number of regulatory requirements such as submitting change of ownership notifications. This program will discuss all of these (and other) issues associated with the purchase and sale of a supplier.

Register for Buying and Selling a DME Supplier on Tuesday, August 17, 2021, 1:30-2:30 p.m. CT, with Jeffrey S. Baird, Esq., and Alfonso Zambrano, Esq., of Brown & Fortunato.

Members:  $99
Non-Members:  $129

Jeffrey S. Baird, JD, is chairman of the Health Care Group at Brown & Fortunato, a law firm with a national health care practice based in Texas.  He represents pharmacies, infusion companies, HME companies, manufacturers, and other health care providers throughout the United States.  Mr. Baird is Board Certified in Health Law by the Texas Board of Legal Specialization and can be reached at (806) 345-6320 or [email protected].