AMARILLO, TX – 2022 has been an eventful year and 2023 will certainly not be boring. With 78 million Baby Boomers retiring at the rate of 10,000 per day, and with many Boomers living well into their 80s, the demand for DME will only increase. And technology is always a couple of years ahead of the law, meaning that federal and state legislators and regulators are constantly scrambling to keep up with what is taking place in the marketplace. This program will discuss important compliance issues DME suppliers will face in 2023.

Anti-Fraud Laws

Federal Anti-Kickback Statute
It is a felony for a DME supplier to knowingly and willfully offer, pay, solicit or receive any remuneration to induce a person/entity to refer an individual for the furnishing or arranging for the furnishing of any item for which payment may be made under a federal health care program (“FHCP”), or the purchase or lease or the recommendation of the purchase or lease of any item for which payment may be made under an FHCP.

Federal Beneficiary Inducement Statute
This statute prohibits a supplier from offering or giving anything of value to an FHCP patient that the supplier knows, or should know, is likely to persuade the person to purchase an item covered by an FHCP. In the preamble to the regulations implementing this statute, the Office of Inspector General (“OIG”) stated that the inducement statute does not prohibit the giving of non-cash/non-cash equivalent gifts that are of “nominal value.” The OIG defines “nominal value” as no more than $15 per item or $75 in the aggregate to any one beneficiary on an annual basis.

“Nominal value” is based on the retail purchase price of the item.

Federal Physician Self-Referral Statute (“Stark”)
This statute provides that if a physician has a financial relationship with an entity providing “designated health services,” then the physician may not refer Medicare/Medicaid patients to the entity unless a Stark exception applies. Designated health services include DME. One of the exceptions to Stark provides that a DME supplier may provide non-cash equivalent items to a physician if such items do not exceed an annual amount established by CMS.  For 2022, such amount is $452.

Safe Harbors
Because of the breadth of the AKS, the OIG has published a number of “safe harbors.” A safe harbor is a hypothetical fact situation such that if an arrangement falls within it, then the AKS is not violated. If an arrangement does not fall within a safe harbor, it does not mean that the arrangement violates the AKS.  Rather it means that the arrangement needs to be carefully scrutinized under the language of the AKS, applicable case law, and other published guidance.

Advisory Opinions
A supplier may submit to the OIG a request for an advisory opinion concerning a business arrangement that the supplier has entered into or wishes to enter into in the future. In submitting the advisory opinion request, the supplier must give to the OIG specific facts and agree to pay OIG $176 per hour for the review. In response, the OIG will issue an advisory opinion concerning whether or not there is a likelihood that the arrangement will implicate the AKS.

Special Fraud Alerts and Special Advisory Bulletins
From time to time, the OIG publishes Special Fraud Alerts and Special Advisory Bulletins that discuss business arrangements that the OIG believes may be abusive and educate health care providers concerning fraudulent and/or abusive practices that the OIG has observed and is observing in the industry.

States
All states have enacted statutes prohibiting kickbacks, fee splitting, patient brokering, and/or self-referrals. Some state statutes only apply when the payor is a state health care program. Other state statutes that apply regardless of the identity of the payor.

Marketing Reps and Marketing Companies

1099 Independent Contractor
The OIG has repeatedly expressed concern about percentage-based compensation arrangements involving 1099 independent contractor sales agents. In Advisory Opinion No. 06-02, the OIG stated that “[p]ercentage compensation arrangements are inherently problematic under the Anti-Kickback Statute, because they relate to the volume or value of business generated between the parties.” A number of courts have held that marketing arrangements (involving 1099 independent contractors) are illegal under the AKS and are, therefore, unenforceable.

Prohibited Carve-Out
The OIG has taken the position that even when an arrangement will only focus on commercial patients and “carve out” beneficiaries of federally-funded health care programs, the arrangement will still likely violate the AKS.

W-2 Employee
Under the Employee safe harbor to the AKS, it is permissible for a supplier to pay to a bona fide W-2 employee (full-time or part-time) a base salary plus discretionary bonuses based on a number of factors, including the generation of business.

Utilization of a Marketing Company
In the real world, it is common for a business to outsource marketing to a marketing company.

Unfortunately, what works in the real world often does not work in the health care universe. An example of this has to do with marketing companies. If a marketing company generates patients for a DME supplier, when at least some of the patients are covered by an FHCP, the supplier cannot pay commissions to the marketing company. Such an arrangement is prohibited by the AKS.

Expenditures on Physician

What a DME Supplier Can Spend on a Physician
While the Stark non-monetary compensation exception allows a supplier to spend up to a set amount per year (e.g., $452 in 2022) for non-cash/non-cash equivalent items for a physician, the AKS does not include a similar exception. Nevertheless, if the Stark exception is met, it is unlikely that the government will take the position that the non-cash/non-cash equivalent items provided by the supplier to the physician violate the AKS.

In addition to complying with Stark and the AKS, the supplier and the physician also need to comply with applicable state law. Even though the supplier and the physician will need to confirm this, it is likely that compliance with the Stark non-monetary compensation exception will avoid liability under state law.

While the Stark non-monetary compensation exception applies to expenditures on behalf of a physician, the exception does not apply to expenditures on behalf of the physician’s staff. In fact, Stark does not apply to the physician’s staff. Expenditures on behalf of the physician’s staff must be examined in light of the AKS. Separate from furnishing gifts and entertainment, the supplier can pay the physician for legitimate services. For example, if the supplier has a legitimate need for a Medical Director, the supplier and physician can enter into a Medical Director Agreement (“MDA”) that complies with both the Personal Services and Management Contracts(“PSMC”) safe harbor to the AKS and the Personal Services exception to Stark.

Paying Physician to Provide Education Program
It is permissible for a supplier to pay a physician to present an education program if the following requirements are met:

• The program is substantive and valuable to the audience.
• The compensation paid to the physician is the fair market value (“FMV”) equivalent of the time and effort the physician expended to (i) prepare for the program and (ii) present the program.

Criminal Case
Over the past couple of years, a number of executives of Insys Therapeutics, Inc. have been convicted of engaging in a large kickback scheme. According to a Department of Justice (“DOJ”) statement, Insys used bogus educational events as a “cover” for paying kickbacks to physicians in exchange for their increased prescriptions of Subsys®, a spray version of the opioid fentanyl. The DOJ alleges that Insys arranged sham “speaker programs” that were billed as gatherings of physicians to educate them about Subsys®.

In reality, according to the DOJ, the events – usually held at high-end restaurants – mostly consisted of friends and co-workers who lacked the ability to prescribe the drug, and there was no educational component. According to the DOJ, the “speakers” were physicians who were paid fees ranging from $1000 to several thousand dollars to attend the dinners. The DOJ alleged that these payments were kickbacks to the speakers “who were prescribing large amounts of Subsys® and to incentivize those [physicians] to continue to prescribe Subsys® in the future.”

EHR for Long Term Care Facility

Paying for a Facility’s EHR

Many DME suppliers work with skilled nursing facilities (“SNFs”) and custodial care facilities (collectively referred to as “Facilities”). A Facility is a referral source to the supplier. Even though the Facility may give patient choice, if the supplier furnishes a product to a Facility patient, the law considers the patient to be a referral from the Facility. If the supplier gives anything of value to the Facility, the supplier is at risk of being construed to be paying for a referral … hence, a “kickback.”

In order for a Facility to serve Medicare and Medicaid patients, federal law imposes a number of requirements on the Facility. These requirements cost the Facility money in order to comply. One such requirement is for the Facility to have a pharmacy perform a monthly drug regimen review (“DRR”) on each patient.

Electronic medication administrative records (“eMARs”) are not required for DRR; hard copy records are acceptable. Nevertheless, a Facility may desire to utilize eMAR software (“Software”) for DRR and for other purposes. The Facility and a DME supplier (that receives referrals from the Facility) may wish to enter into an arrangement in which the supplier pays for the Software. It is at this juncture that the Facility and supplier find themselves on the proverbial “slippery slope.” Assume that the supplier receives referrals from the Facility and desires to pay for the Software. By virtue of paying for the Software, the supplier is providing “something of value” to the Facility … hence, the AKS is implicated.

The applicable safe harbor is the Electronic Health Records safe harbor. It states than an entity may donate software and training services “necessary and used predominantly to create, maintain, transmit, or receive electronic health records” if a number of requirements, set out in the safe harbor, are satisfied.

Medical Director Agreement
A DME supplier can enter into an independent contractor Medical Director Agreement (“MDA”) with a physician. The MDA must comply with the (i) PSMC safe harbor to the AKS and (ii) the Personal Services exception to Stark.

Among other requirements:

• The MDA must be in writing and have a term of at least one year.
• The physician must provide substantive services.
• The methodology for calculating the compensation to the physician must be fixed one year in advance and be the FMV equivalent of the physician’s services.

AWV/RPM/CCM
Assume that the physician (i) has Annual Wellness Visits (“AWV”) with patients, (ii) provides Remote Physiological Monitoring (“RPM”) to patients and/or (iii) provides Chronic Care Management (“CCM”) to patients. Assume that the DME supplier assists the physician in (i) conducting AWV and (ii) providing RPM and CCM. It is the physician that is paid for AWV, RPM and CCM. If the supplier assists with AWV, RPM and CCM for free, such assistance constitutes “something of value” to a referral source, thereby implicating the AKS and Stark. In order to avoid AKS and Stark problems, the physician must pay FMV compensation to the supplier for the supplier’s services.

Value-Added Services
Under the Hospital Readmissions Reduction Program (“HRRP”), if a patient is readmitted after discharge within a certain period of time, for a particular disease, the hospital can be subjected to future payment reductions from Medicare. To reduce its risk under the HRRP, the hospital can enter into an arrangement with a DME supplier to monitor/work with discharged patients so that they are not readmitted soon after being discharged. In working with discharged patients, the supplier can collaborate with a pharmacy, home health agency, primary care physician, etc.

Examples of Proper Value-Added Services
Once a quarter, the DME supplier puts on a workshop, covering a particular disease state, for existing and prospective patients. Once a quarter, the supplier puts on a workshop for physicians’ staffs. On a patient’s birthday, the supplier mails to him a cookbook that is specific to the type of foods the patient needs to eat in order to help the patient overcome a particular health problem. Twice a year, the supplier sponsors lunch at a retirement home during which the supplier provides an educational program. Twice a year, the supplier sponsors lunch for a physician’s staff during which the supplier provides an educational program.

In order to encourage patients to return oxygen concentrators to the DME supplier after third party payment coverage ceases, the supplier offers a $25 gift card to the patient if he will deliver the concentrator to the supplier. The supplier places an employee liaison at a facility. After a patient, before he is discharged, selects the supplier for post-discharge products and services, the liaison will facilitate a smooth transition to the supplier. The employee liaison will not perform any services that the facility is required to perform. The physician sets up times during the year in which the patients can come to the physician’s office and attend a class taught by a DME supplier that covers treatment of a particular disease state.

AAHOMECARE’S EDUCATIONAL WEBINAR

Six-Year Lookback Audits: How to Prepare and Respond

Presented by: Denise M. Leard, Esq., Brown & Fortunato & Jeffrey S. Baird, Esq., Brown & Fortunato

Tuesday, December 13, 2022

1:30-2:30 p.m. CENTRAL TIME

The Affordable Care Act includes the 60-day overpayment rule that requires DME suppliers to refund overpayments within 60 days of identification. What many suppliers are not aware of is that if an overpayment is identified, either internally or externally, suppliers are mandated by law to perform a six-year lookback audit. If suppliers do not comply with this rule, they are at risk for false claim penalties. This webinar will (i) discuss the 60-day overpayment rule and the six-year lookback obligation; (ii) discuss steps that suppliers can take to reduce the risk of being subjected to the 60-day overpayment rule; and (iii) set out the steps the supplier should take to successfully fulfill its obligations under the rule. 

Register for Six-Year Lookback Audits: How to Prepare and Respond on Tuesday, December 13, 2022, 1:30-2:30 p.m. CT, with Denise M. Leard, Esq., and Jeffrey S. Baird, Esq., of  Brown & Fortunato.

Members:  $99
Non-Members:  $129

Jeffrey S. Baird, JD, is chairman of the Health Care Group at Brown & Fortunato, PC, 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. 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].