AMARILLO, TX – An important component of the successful DME supplier is an innovative marketing program that results in the generation of patients. In implementing a marketing program the supplier must adhere to multiple federal anti-fraud laws. This article discusses what those laws are, how marketing programs can be properly structured, and what types of marketing programs must be avoided.
Federal Anti-Fraud Statutes
- Federal Anti-Kickback Statute (“AKS”) – This statute makes it a felony to knowingly and willfully offer, pay, solicit, or receive any remuneration to induce a person or entity to refer (or arrange for the referral of) an individual for an item or service covered by a federal health care program.
- Beneficiary Inducement Statute – This statute imposes civil monetary penalties upon a person or entity that offers or gives something of value to prospective customers covered by a government health care program. However, this statute does not prohibit the giving of a gift that is of “nominal value” (no more than $15 per item or $75 in the aggregate over 12 months).
- Stark Physician Self-Referral Statute (“Stark”) – This statute provides that if a physician (or an immediate family) has a financial relationship with an entity providing designated health services (“DHS”), then the physician may not refer patients to the entity unless an exception is met. DHS includes DME. One of the exceptions states that a provider can spend up to a certain amount in a calendar year, on behalf of a physician, for non-cash/non-cash equivalent items. For 2019, the amount is $416.
Federal Safe Harbors
The Office of Inspector General (“OIG”) has issued a number of “safe harbors” to the AKS. If an arrangement falls within a safe harbor, then, as a matter of law, the arrangement does not violate the AKS. If the arrangement does not fall within a safe harbor, it does not mean that the AKS is violated. Rather, it means that a stringent analysis of the arrangement must be made. Two important safe harbors are:
- Employee Safe Harbor – This states that prohibited remuneration does not include any amount paid by an employer to a bona fide employee.
- Personal Services and Management Contracts Safe Harbor – This states that prohibited remuneration does not include any payment made to an independent contractor as long as a number of conditions are met, including the following: (i) the parties must sign an agreement with a term of at least one year; (ii) the compensation paid must be fixed one year in advance (e.g., $24,000 over the next 12 months); and (iii) the compensation must be the fair market value (“FMV”) equivalent of the payee’s services.
- Advisory Opinions – A health care provider may submit to the OIG a request for an advisory opinion concerning whether a current or future arrangement will violate the AKS.
- Fraud Alerts and Advisory Bulletins – The OIG publishes alerts and bulletins that discuss business arrangements that the OIG believes may be abusive.
“Dos” of Marketing
- Use of Employees – The DME supplier can pay commissions to full-time or part-time bona fide employees.
- Use of Independent Contractors – The supplier can compensate 1099 independent contractors for marketing to government program patients so long as the arrangement complies with the Personal Services and Management Contracts Safe Harbor. This applies to (i) individual marketing reps and (ii) marketing companies (e.g., corporations and LLCs).
- Expenditures for Physicians – The supplier can spend up to $416 in 2019 on a physician for non-cash/non-cash equivalent items such as meals and golf.
- Expenditures for Physicians’ Staffs, Hospital Discharge Planners, and Other Referral Sources – It is permissible for the supplier to provide non-cash/non-cash equivalent items to non-physicians so long as the amount spent is modest. For example, while it is permissible for the supplier to sponsor lunch (with an in-service) for the physician’s staff twice a year, it is notpermissible for the supplier to sponsor lunch every month. In determining whether an arrangement amounts to a kickback, the “duck” test applies: “If it looks like a duck, walks like a duck, and sounds like a duck, then it is a duck.”
- Medical Director Agreement – It is permissible for a supplier to enter into a 1099 independent contractor Medical Director Agreement (“MDA”) with a referring physician so long as the MDA complies with the Personal Services and Management Contracts Safe Harbor and the personal services exception to Stark. The safe harbor and exception essentially say the same thing.
- Employee Liaison – The supplier can place an employee liaison at a facility so long as the liaison does not perform services that the facility would normally have to perform.
- Waiver of Copayments – A supplier must make a reasonable attempt to collect copayments. The supplier can waive a patient’s copayment only if the patient’s financial condition justifies the waiver.
- Purchase of Internet Leads – The supplier can purchase “raw” or “unqualified” leads (i.e., name, address and phone number) on a per lead basis. If the supplier desires to purchase “qualified” leads, then the arrangement must comply with the Personal Services and Management Contracts Safe Harbor.
- Charitable Contributions – The OIG will approve charitable contributions so long as (i) the contributions are for a bona fide charitable purpose, (ii) the contributions are made in a manner that do not take into account the value or volume of referrals, and (iii) the arrangement incorporates safeguards to ensure that contributions are not tied to referrals or other business generated between the organizations.
- Joint Venture with Referral Source (e.g., Hospital) – A supplier and a hospital can jointly own a DME supplier (“joint venture” or “JV”). Preferably, the JV will comply with the Investment Interest Safe Harbor to the AKS. If this is not possible, then the JV needs to comply with the OIG’s 1989 Special Fraud Alert entitled “Joint Ventures” and the OIG’s April 2003 Special Advisory Bulletin entitled “Contractual Joint Ventures.” In essence, these say that a JV cannot be a “sweetheart deal” for the hospital.
- Use of Protected Health Information (“PHI”) – PHI, as defined by HIPAA, is essentially any information that a supplier has on a patient. The supplier cannot use or disclose PHI unless a specific HIPAA exception is met. Under HIPAA, a supplier can“use” a patient’s PHI by educating the patient about other health care products and services offered by the supplier.
- Gifts to Prospective Customers – A supplier can provide gifts of minimal value ($15 or less) to prospective customers.
“Don’ts” of Marketing
- Use of Independent Contractors – If a 1099 independent contractor (individual marketing rep or marketing company) is generating government program patients for the supplier, then the supplier cannot pay percentage compensation to the independent contractor. Rather, the compensation must comply with the Personal Services and Management Contracts Safe Harbor to the AKS. The supplier and independent contractor cannot engage in a “carve out” arrangement in which the supplier pays (i) the independent contractor percentage compensation for commercial insurance patients and (ii) nothing for government program patients.
- Do Not Use Patient Recruiters – A number of DME suppliers and other providers have made the mistake of paying “patient recruiters.” Doing so violates the AKS. In press releases, the DOJ has given us some examples of what not to do:
- In August 2019, Ayodeji Temitayo Fatunmbi, who owned and/or operated a DME company, was sentenced to 46 months in prison for, among other things, paying patient recruiters who generated wheelchair patients.
- In July 2019, Dominic Trumbo, a patient recruiter, was found guilty (after a six day trial) of violating the AKS. The evidence showed that Trumbo’s company (Trumbo Consulting Agency) was paid by home health agencies to recruit patients.
- In June 2019, Sophia Eggleston (a patient recruiter) was sentenced to 60 months in prison. As with Trumbo, Eggleston was paid by home health agencies to recruit patients.
- In May 2019, Egondu Koko was sentenced to 188 months in prison. Like Trumbo and Eggleston, Koko was paid by home health agencies to recruit patients.
- Be Careful with Using Marketing Companies – If a marketing company is generating government health care program patients for the supplier, and if the supplier is paying production-based compensation to the marketing company, then the AKS will be violated. For example, according to a recent DOJ press release, David Lovelace, owner of a marketing company, was found guilty of violating the AKS. Lovelace’s company was paid, on a per patient basis, by a lab.
- Expenditures for Physicians – The supplier cannot give cash or cash equivalents (e.g., gift cards) to physicians. The supplier cannot give non-cash/non-cash equivalent gifts to physicians that exceed $416 in value during 2019.
- Expenditures for Non-Physician Referral Sources – The supplier should not spend more than a modest amount on non-cash/non-cash equivalent items (e.g., meals with an in-service) on physicians’ staffs, hospital discharge planners, and other referral sources.
- Medical Director Agreements – The compensation paid by the supplier to a Medical Director cannot vary based on the number of referrals from the Medical Director to the supplier. The services by the Medical Director must be important and substantive, not “made up.”
- Sham Clinical Studies – In a “sham” clinical study, a clinical study company (“CSC”) brings referring physicians and suppliers together. The physicians sign orders that go to the suppliers. The suppliers pay the CSC “X” dollars per patient per month. The CSC retains part of the payments as administrative fees and remits the balance to the physicians. The physicians gather (mostly unnecessary) information from the patients regarding the effectiveness of the products provided by the DME supplier, the physicians transmit the information to the CSC, and the CSC transmits the information to the suppliers. These clinical studies are not associated with hospitals, medical schools, or Institutional Review Organizations (“IROs”). These types of studies are subterfuges designed to funnel money from the suppliers to the referring physicians.
- Sham Telehealth Arrangements – If a supplier receives physician orders resulting from telehealth encounters between patients and physicians, then the supplier needs to be aware of the following. First, the supplier cannot directly or indirectly pay the telehealth physician. Doing so will violate the AKS. For example, the following is unacceptable: (i) the supplier pays a lead generation company for leads; (ii) the lead generation company pays a telehealth company; (iii) the telehealth company pays a telehealth physician; and (iv) the physician has a telehealth encounter with the patient, the physician orders DME, and the order ends up going back to the DME supplier. Secondly, Medicare will not pay for DME, arising out of a telehealth encounter, unless certain conditions are met. These include: (i) the patient must live in a rural area or in a health professional shortage area; (ii) the patient must travel to a hospital or other type of “originating site” where the telehealth encounter will occur; and (iii) the telehealth encounter must be both audio and visual. In its press releases, the DOJ gives us examples of how providers can get into trouble by engaging in sham telehealth arrangements:
- In July 2019, Scott Roix and his multiple companies agreed to pay $2.5 million in a settlement with the DOJ. Among other allegations, the DOJ contended that Roix’s companies arranged for sham telehealth orders. According to U.S. Attorney Chapa Lopez: “Telemedicine is a valuable service for our citizens, but it must not be abused. We will take action against individuals who break the law to make a profit at the expense of our federal healthcare programs and ultimately at the expense of the American taxpayer.”
- In July 2019, Anna Steiner, M.D. was indicted for, among other things, signing sham telehealth orders. According to the press release: “Steiner participated in a health care fraud scheme in which she and others ordered and prescribed durable medical equipment (DME) and prescription drugs in connection with purported telemedicine services. As alleged in the indictment…Steiner and other providers signed prescriptions and order forms for DME and drugs that were not medical necessary and that were induced by kickbacks, and provided for beneficiaries whom Steiner and others had not examined and evaluated.”
- Sham Copayment Insurance Programs – In a “sham” copayment insurance program, patients pay a small monthly amount to suppliers or intermediaries. These monthly payments are called “insurance premiums” and are designed to allow the patients to obtain “insurance” to pay copayments. In reality this type of program is a “sham” designed to routinely waive copayments.
- Purchasing Internet Leads – The supplier cannot purchase “qualified” leads on a per lead basis. The only way that a supplier can purchase qualified leads is if the arrangement complies with the Personal Services and Management Contracts Safe Harbor.
- Disclosing PHI – The supplier cannot disclose PHI to another company in order to allow that company to market to the supplier’s customers.
- Gifts to Prospective Customers – The supplier cannot provide gifts to prospective customers in which the value of the gift exceeds $15.
Medicare Fraud Strike Force
Each of the above press releases make the following statement:
“[T]he Medicare Fraud Strike Force…is part of a joint initiative between the Department of Justice and HHS to focus their efforts to prevent and deter fraud and enforce current anti-fraud laws around the country. Since its inception in March 2007, the Medicare Fraud Strike Force, which maintains 14 strike forces operating in 23 districts, has charged nearly 4,000 defendants who have collectively billed the Medicare program for more than $14 billion.”
Webinar sponsored by HME Business
Understanding How to Negotiate Medicare and Medicaid Managed Care Contracts
Presented by: Jeffrey S. Baird, Esq., Brown & Fortunato, P.C.
Thursday, September 5, 2019
1:00 p.m. CENTRAL TIME
At the end of the day, DME suppliers primarily serve the elderly (Medicare) and those on the lower end of the socio-economic scale (Medicaid). Both the Medicare and Medicaid programs are gravitating towards “managed care.” Approximately 35% of Medicare beneficiaries are signed up with Medicare Advantage Plans, while approximately 70% of Medicaid beneficiaries are signed up with Medicaid Managed Care Plans. These percentages are increasing. Medicare and Medicaid Plans work essentially the same way: (i) the government health care program contracts with a “Plan” that is owned by an insurance company; (ii) the Plan signs up patients; (iii) the Plan signs contracts with hospitals, physicians, DME suppliers and other providers…these providers will take care of the Plan’s patients; and (iv) the government program pays the Plan that, in turn, pays the provider. Increasingly, DME suppliers will be asked to sign managed care contracts. In so doing, the supplier needs to be careful. Not only must the contract provide sufficient reimbursement to the supplier, but the contract will have some “trap” provisions that may be harmful to the supplier. This program will discuss the most important provisions that are contained in managed care contracts. The program will discuss how the supplier can negotiate with Plans; and the discussion will point out the provisions that are often non-negotiable and the provisions that are open to negotiation.
AAHomecare’s Retail Work Group
The Retail Work Group is a vibrant network of DME industry stakeholders (suppliers, manufacturers, consultants) that meets once a month via video conference during which (i) an expert guest will present a topic on an aspect of selling products at retail, and (ii) a question and answer period will follow. The next Retail Work Group video conference is scheduled for September 12, 2019, at 11:00 a.m. Central. Kevin Brown, All-Star Medical, will present “Finding Your Retail Niche.” Participation in the Retail Work Group is free to AAHomecare members. For more information, contact Ashley Plauché Manager of Government Affairs, AAHomecare (firstname.lastname@example.org).
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@example.com.