AMARILLO, TX – In prior Medtrade Monday articles, we have discussed the danger of a DME supplier (i) paying production-based compensation (e.g., commissions) to 1099 independent contractor marketing reps (individuals and marketing companies), (ii) not making a reasonable effort to collect copayments, and (iii) indirectly paying telehealth physicians.

The federal anti-kickback statute (“AKS”) prohibits a supplier from paying any money to a person or entity in exchange for (i) the referral of a federal health care program (“FHCP”) patient, (ii) arranging for the referral of an FHCP patient, or (iii) recommending the purchase or lease of a product covered by an FHCP. There is an “employee” exception and an “employee” safe harbor to the AKS that state that, if certain conditions are met, then the supplier can pay production-based compensation to W2 employees. However, there is not a similar exception/safe harbor to 1099 independent contractors.

Over the past several years, the Department of Justice (“DOJ”) and Office of Inspector General (“OIG”) have been aggressive in pursuing health providers that have engaged in the acts described above.

A recent case involves a health care provider that entered into a civil settlement with the DOJ. In announcing the settlement, the DOJ stated that the settlement resulted from a whistleblower lawsuit filed by ex-employees of the provider. According to the DOJ:

• The provider allegedly paid kickbacks to “marketers” who targeted military members and their families.
• Allegedly, the marketers, in turn, paid telehealth physicians who wrote orders…that ended up going to the provider.
• Allegedly, (i) the provider and marketers paid copayments owed by the patients and (ii) some of the payments were disguised as coming from a sham charitable organization.
• The owner of the provider allegedly knew, and agreed to, the provider’s actions.

There are a number of lessons, arising out of this settlement:

• Do Not Pay Commissions to 1099 Independent Contractor Marketing Reps – As discussed above, the AKS prohibits a DME supplier from paying commissions to 1099 independent contractors that generate FHCP patients for the supplier. If a supplier desires to pay compensation to a marketing rep that is based, at least in part, on production, then the rep must be a bona fide W2 part-time or full-time employee of the supplier. Note that only a human being can be an employee. A marketing company is not a human being; it is an “it.” Therefore, as a matter of law, the marketing company is a 1099 independent contractor of the supplier.
• Do Not Play Games When it Comes to Collecting Copayments – Years ago, the U.S. Supreme Court defined pornography as follows: “You know it when you see it.” The same principle applies to defining fraud: “You know it when you see it.” A DME supplier is legally obligated to make a reasonable effort to collect copayments. This means that when the supplier hands the product over to the customer, the supplier needs to say: “Here is your product. Pay me 20%.” It is that clear cut. The supplier cannot, as part of its marketing strategy, say (or suggest) to potential customers and referral sources that if the customers obtain products from the supplier, the supplier will waive the copayment. The only time that the supplier can waiver the copayment is if (i) the customer volunteers to the supplier that the customer does not have the financial ability to pay the copayment and (ii) the customer submits information to the supplier that establishes an inability to pay. And the supplier cannot “play games” by (i) having a sham charitable organization pay copayments or (ii) having a sham “insurance” program pay copayments.
• If the Supplier is Doing Something it Should Not Be Doing, Then Someone Knows About It – That “someone” is usually a current or former employee. In the settlement referenced above, the government found out about the actions of the provider pursuant to a whistleblower lawsuit filed by two former employees of the provider. Virtually all employees of health care providers are aware of their right to file a whistleblower lawsuit if they discover wrongdoing by their employer. Such a lawsuit shows the plaintiffs (or “relators”) to be the employee, individually, “and in the name of the United States.” When the lawsuit is filed, it initially “goes under seal,” meaning that nobody knows about the lawsuit except for the government. A civil Assistant U.S. Attorney (“AUSA”) will examine the lawsuit and may assign OIG/FBI agents to investigate the allegations set out in the lawsuit. If the civil AUSA determines that the whistleblower lawsuit has merit, then the DOJ will “intervene.” This means that the DOJ will take over pursuing the civil action against the defendant. It is at this point in time that the lawsuit is unsealed and is served on the defendant. If the government ultimately recovers money from the defendant, then the whistleblower will receive 15% to 20% of the proceeds. One more thing: if the civil AUSA concludes that the facts are particularly egregious, then the civil AUSA may “hand the file” over to a criminal AUSA. The criminal AUSA will then determine whether or not the DOJ will bring criminal charges against the defendant. And so in a worse case scenario, the defendant may face both civil and criminal charges at the same time.
• Be Careful With Telehealth – Unless the DME supplier has a competent health care attorney who can advise the supplier on how to be involved with telehealth, then the supplier needs to stay away from it. There have been a number of recent arrests of DME supplier owners, lead generation company owners, telehealth company owners, and physicians who have been involved with fraudulent telehealth arrangements. There are a number of requirements that must be met in order for a telehealth arrangement to be legally compliant, one of which is this: the patient, the patient’s employer, or the patient’s insurance company must pay for the telehealth encounter. The DME supplier cannot indirectly pay for the telehealth encounter by funneling money through a lead generation company.
• Owners of the DME Supplier Are Not Immune – The settlement referenced above is unique because not only was the provider and its officers liable, but the company that owned the supplier was liable. The DOJ took the position that the owner was aware of…and encouraged…the provider’s actions. The message is that owners of a DME supplier, who are aware that the supplier is engaging in questionable conduct, cannot “bury their heads in the sand” and say “I didn’t know.”

AAHOMECARE’S EDUCATIONAL WEBINAR

What Constitutes a HIPAA Breach and How to Respond

Presented by: Jeffrey S. Baird, Esq., Brown & Fortunato, P.C.

Thursday, October 3, 2019
2:30-3:30 p.m. EASTERN TIME
HIPAA has been with us for enough years that health care providers, including DME suppliers, know that they need to follow HIPAA guidelines…and avoid HIPAA breaches. A HIPAA breach can be small and relatively uneventful. On the other hand, a larger breach can cause all kinds of trouble for the supplier. HIPAA enforcement is handled by the Office for Civil Rights (“OCR”). And during recent years, the OCR has been flexing its muscles in bringing enforce­ment actions against health care providers that experience HIPAA breaches.

This webinar will discuss

1. what exactly a HIPAA “breach” is;
2. the types of breaches that are relatively minor and those that are more serious;
3. the types of liability that the supplier can face in the event of a HIPAA breach; and
4. how the supplier should respond to a HIPAA breach.

Equally as important, this webinar will discuss

5. the importance of a HIPAA compliance program;
6. the roles that HIPAA compliance officers should take;
7. the provisions that must be contained in a HIPAA compliance program; and
8. the type of HIPAA training that the supplier should provide to its employees.

Register for What Constitutes a HIPAA Breach and How to Respond on Thursday, October 3, 2019, 2:30-3:30 p.m. ET, with Jeffrey S. Baird, Esq., of Brown & Fortunato, PC.

FEES:
Member: $99.00
Non-Member: $129.00

Jeffrey S. Baird, JD, is chairman of the Health Care Group at Brown & Fortunato, PC, a law firm based in Amarillo, Texas. He represents pharmacies, infusion companies, HME companies 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].