AMARILLO, TX – In a recent Medtrade Monday article, we discussed the fact that the Department of Justice (“DOJ”) and Office of Inspector General (“OIG”) are targeting genetic testing labs (“GTLs”). By way of background, over the last five years the DME industry witnessed a group of lead generation companies (“LGCs”), DME suppliers, sham telehealth companies, and telehealth physicians “game the system” pertaining to off-the-shelf (“OTS”) orthotics—mostly, back braces. Operation Brace Yourself has pretty much shut down the fraud that occurred in the OTS orthotics space.
The LGCs and sham telehealth companies have reacted by moving into a new scheme: genetic testing. Rather than waiting five years to shut down the genetic testing schemes, the government is aggressively going after the players now. The enforcement actions against these schemes provide valuable lessons for DME suppliers.
An October 9, 2019 DOJ press release states, in part:
The Justice Department announced today that UTC Laboratories Inc. (RenRX) has agreed to pay $41.6 million, and its three principals, Tarun Jolly M.D., Patrick Ridgeway, and Barry Griffith, have agreed to pay $1 million to resolve allegations that they violated the False Claims Act by paying kickbacks in exchange for laboratory referrals for pharmacogenetic testing and for furnishing and billing for tests that were not medically necessary. RenRX, a laboratory company headquartered in New Orleans, Louisiana, also agreed to a twenty-five year period of exclusion from participation in any federal health care program.
“The payment of kickbacks in exchange for medical referrals undermines the integrity of our healthcare system. Today’s settlement reflects the Department of Justice’s commitment to ensuring that taxpayer monies are well spent and not wasted on unnecessary medical testing,” said Assistant Attorney General Jody Hunt of the Department of Justice’s Civil Division.
“Healthcare fraud, in any incarnation, hurts patients, honest medical practitioners, and all of the nation’s taxpayers,” said United States Attorney Peter G. Strasser of the Eastern District of Louisiana. “The favorable resolution of this False Claims Act matter illustrates the collaborative efforts and firm commitment by our federal partners to use all available remedies, both civil and criminal, to address signs of waste and abuse by providers in our healthcare markets.”
The government alleged that between 2013 and 2017, UTC and its principals offered and paid remuneration to physicians to induce the ordering of pharmacogenetic tests, purportedly in return for their participation in a clinical trial known as the Diagnosing Adverse Drug Reactions Registry (DART), clinical trial identifier NCT01970709. The government also alleged that UTC and its principals offered and paid remuneration, including sales commissions, to entities and individuals as part of the scheme, and furnished pharmacogenetic tests that were not medically necessary and billed the Medicare program.
“The payment of cash and thinly-disguised referral bribes, as contended by the government, resulted in a more than $42 million dollar resolution in this case,” said Special Agent in Charge CJ Porter of the Department of Health and Human Services Office of Inspector General (HHS-OIG). “Additionally, my agency barred RenRX from receiving any payments from federal health programs for a full 25 years. Genetic testing scams are becoming all too common … ”
The settlement announced today resolves allegations in six lawsuits pending in the United States District Court for the Eastern District of Louisiana … The lawsuits were filed under the qui tam, or whistleblower, provisions of the False Claims Act, which permit private individuals to sue on behalf of the government for false claims and to share in any recovery. The Act also allows the government to intervene and take over the action, as it did in these cases. The whistleblower shares to be awarded have not yet been determined.
The government’s resolution of this matter illustrates the government’s emphasis on combating health care fraud. One of the most powerful tools in this effort is the False Claims Act. Tips and complaints from all sources about potential fraud, waste, abuse, and mismanagement, can be reported to the Department of Health and Human Services (HHS), at 800-HHS-TIPS (800-447-8477) …
DME suppliers can derive six important lessons from enforcement actions being brought against GTL schemes:
- A Kickback Results in a False Claim – Most DME suppliers understand that if they bill for a product not delivered—or deliver one type of product and deliver another type of product—then a “false claim” arises. Equally as important, however, is that if a DME supplier is engaged in a kickback arrangement, then claims that ultimately arise out of that arrangement are also “false claims.” That is what happened in the RenRX case. Because claims submitted by RenRX allegedly resulted from kickback arrangements (e.g., remuneration to physicians and payments of commissions to 1099 independent contractor marketing reps), then the DOJ asserted that the claims became “false claims.”
- Large Claims Submissions Invite Scrutiny – CMS, through its contractors, has edits in place that spot claims submissions that are “out of the ordinary.” Examples of out of the ordinary claims submissions are:
- A DME supplier has a history of submitting claims (i) at a historically-established dollar level and (ii) for particular products. But then CMS notices a spike in the dollar amount of claims submissions for a particular product.
- A DME supplier submits a noticeably greater number of claims for a particular product category than other DME suppliers.
- Every Employee is a Potential Whistleblower – If a DME supplier is doing something it should not be doing, then someone knows about it. That “someone” is usually an employee. Virtually all employees are aware of whistleblower lawsuits. If an employee witnesses fraudulent actions by his/her employer, then the employee may be motivated to gather information and then hire an attorney who specializes in filing whistleblower lawsuits. The lawsuit will be in the name of the employee and also in the name of the United States. The lawsuit will be filed in federal court and it will “go under seal.” This means that no one knows about the lawsuit except for the government. A civil Assistant U.S. Attorney (“AUSA”) will review the lawsuit and will likely appoint agents to investigate the allegations set out in the lawsuit. This investigation may take 6 to 12 months. After the investigation is completed, or even if it is still ongoing, if the AUSA concludes that the whistleblower lawsuit has merit, then the DOJ will “intervene.” This means that the DOJ will take over prosecuting the lawsuit and the employee (and his/her attorney) can pretty much “sit on the sidelines.” It is at this time that the lawsuit is unsealed and is served on the employer. The lawsuit is based on violation of the federal False Claims Act (“FCA”). Normally, whistleblower lawsuits are settled, with the relator receiving 15% to 20% of the settlement proceeds. If the civil AUSA concludes that the facts indicate that a crime was committed, then the civil AUSA will hand the file over to a criminal AUSA to determine if, in addition to the civil allegations set out in the whistleblower lawsuit, the DOJ wants to bring criminal charges against the employer.
- Avoid Sham Clinical Trials – “If it looks like a duck, sounds like a duck, and walks like a duck, then it is a duck.” This phrase applies to fraudulent arrangements. At the end of the day, a provider cannot hide fraud. The provider may attempt to disguise the fraud, but eventually the existence of fraud will come out. This is true with sham clinical trials. A legitimate clinical trial can be one that is (i) connected to a hospital, (ii) connected to a medical school, and/or (iii) overseen by an Institutional Review Board (“IRB”). A sham clinical trial is one that is merely a subterfuge designed to funnel money to referring physicians.
- 1099 Independent Contractor Marketing Reps – The federal anti-kickback statute (“AKS”) prohibits a provider from giving anything of value (e.g., commissions) to persons/entities in exchange for (i) referring patients covered by a federal health care program (“FHCP”), (ii) arranging for the referral of FHCP patients, or (iii) recommending the purchase of a product or service covered by an FHCP. If a provider pays commissions to 1099 independent contractor marketing reps for generating FHCP patients, then the AKS is likely violated. The safest course of action is for marketing reps to be bona fide employees of the provider. A provider can pay to a W2 employee marketing rep (i) a base salary plus (ii) discretionary bonuses based on a number of factors, including generation of business.
- Products and Services That Are Not Medically Necessary – Let’s talk about back braces. For decades, Medicare beneficiaries got along just fine without back braces. And then beginning about five years ago, a huge number of beneficiaries received back braces. Was this spike in demand driven by the medical needs of the beneficiaries—or was this spike driven by LGCs, the DME suppliers that paid the LGCs, sham telehealth companies, and telehealth physicians? The answer is obvious. The same is true with genetic testing. Is the spike in claim submissions for genetic testing driven by the medical needs of the beneficiaries—or by the LGCs, the labs that pay the LGCs, sham telehealth companies, and and telehealth physicians? Agains, the answer is obvious. And so if a DME supplier finds itself submitting a large number of claims for products and/or services that were not used very much in the past, the DME supplier will find itself in the government’s crosshairs.
AAHOMECARE’S EDUCATIONAL WEBINAR
Managed Care Contracts: How to Negotiate and How to Access Another Supplier’s Contract
Presented by: Jeffrey S. Baird, Esq., Brown & Fortunato, P.C.
Tuesday, November 19, 2019
2:30-3:30 p.m. EASTERN 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.
Register for Managed Care Contracts: How to Negotiate and How to Access Another Supplier’s Contract on Tuesday, November 19, 2019, 2:30-3:30 p.m. ET, with Jeffrey S. Baird, Esq., of Brown & Fortunato, PC.
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 November 14, 2019, at 11:00 a.m. Central. Lisa Wells of Cure Medical and Jenn Wolff, a disability advocate and end-user, will present “Learning the Voice of the Customer/End User with Disabilities.” Participation in the Retail Work Group is free to AAHomecare members. For more information, contact Ashley Plauché Manager of Government Affairs, AAHomecare (email@example.com).
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. Baird is Board Certified in Health Law by the Texas Board of Legal Specialization, and can be reached at (806) 345-6320 or firstname.lastname@example.org.