Purchase of Internet Leads: When a lead generation company (“LGC”) sells leads to a DME supplier, and when those leads include patients covered by a government health care program (e.g., Medicare), then it is important that the arrangement not violate the federal anti-kickback statute.
The anti-kickback statute makes it a crime for Company A to give anything of value (e.g., money) to Company B in exchange for Company B (i) referring patients covered by a government health care program; (ii) arranging for the referral of government program patients; or (iii) recommending the purchase of a product that is reimbursed by a government health care program.
It is acceptable for the DME supplier to “purchase a lead.” However, it is a violation of the anti-kickback statute for the supplier to “pay for a referral.” Assume that the LGC furnishes leads to the supplier and the supplier, in turn, pays the LGC. The question is this: Is the DME supplier only buying leads? Or is the supplier paying for referrals?
The OIG addressed this issue in an Advisory Opinion. The OIG distinguished purchasing “raw leads” from purchasing “qualified leads.” A raw lead is when the LGC only collects the name, address and phone number of the government program patient. A qualified lead is when the LGC collects additional information about the patient such as the physician’s name, Medicare number, diagnosis, products the patient is currently using, etc. The chances of a raw lead becoming a paying customer for the supplier is likely remote. This is akin to the supplier publishing an ad in the newspaper. When a prospective customer calls in response to the ad, then the supplier will have no idea as to whether or not the caller is a serious prospective customer.
On the other hand, the chances of a qualified lead becoming a paying customer increase appreciably. This is akin to a physician referring the lead to the supplier. If the supplier purchases raw leads on a per lead basis, then the anti-kickback statute is likely not implicated. However, if the supplier purchases qualified leads on a per lead basis, then the anti-kickback statute will likely be implicated.
Let’s look at an example: Assume that (i) the LGC will provide leads to the supplier; and (ii) the supplier will pay the LGC $50 for each lead. Assume that the information on each lead includes name, address, phone number, physician information, and Medicare number. The question becomes: Does this additional information regarding the lead (physician information and Medicare number) move the lead from the “raw” category to the “qualified” category? If the answer is “yes,” then there is a potential kickback problem. Conversely, if the answer is “no,” then the anti-kickback statute is not implicated.
The arrangement should be structured one of two ways. First, the only information that the LGC will collect and give to the DME supplier will be the lead’s name, address and phone number. The LGC will not collect additional “qualifying” information such as physician information, Medicare number, diagnosis, products being used, etc. The supplier can pay for these raw leads on a per lead basis. Alternatively, the LGC will also collect the physician information, Medicare number, and any other qualifying information that the LGC deems pertinent. The compensation paid by the supplier for the LGC’s services will be fixed one year in advance (e.g., $36,000 over the next 12 months, or $3000 per month) and will be the fair market value equivalent of the services rendered by the LGC. Fixed annual compensation (fair market value) is an important element to the Personal Services and Management Contracts safe harbor to the anti-kickback statute.
Avoid Sham Telehealth Arrangements
It is not uncommon for a DME supplier to ship products to patients residing in multiple states. When a supplier is marketing to patients in multiple states, the supplier may run into a “bottleneck.” This involves the patient’s local physician. A patient may desire to purchase a product from the out-of-state supplier but it is too inconvenient for the patient to drive to his physician’s office to visit with the physician and obtain an order. Or if the patient is seen by his local physician, the physician may decide that the patient does not need the product and so the physician refuses to sign an order. Or even if the physician does sign an order, he may be hesitant to send the order to an out-of-state DME supplier. In order to address this challenge, we are witnessing some suppliers entering into arrangements that will get them into trouble. This has to do with “telehealth” companies. A legitimate telehealth company has contracts with many physicians who practice in multiple states. The telehealth company contracts with, and is paid by (i) self-funded employers that pay a membership fee for their employees; (ii) health plans, and (iii) patients who pay a per visit fee.
Where a DME supplier will find itself in trouble is when it aligns itself with a telehealth company that is not paid by employers, health plans, and patients but, rather, is directly or indirectly paid by the supplier. Here is an example: DME supplier purchases leads from an LGC. The LGC sends the leads to the telehealth company. The telehealth company contacts the leads and schedules telephone encounters with physicians contracted with the telehealth company. The physicians sign orders for products, and the physicians or telehealth company send the orders to the supplier. The supplier pays compensation to the LGC for the leads. The LGC pays compensation to the telehealth company for its services in contacting the leads and setting up the physician appointments. The telehealth company pays compensation to the physicians for their patient encounters. The supplier bills (and gets paid by) Medicare.
There can be a number of permutations to this example, but you get the picture. Stripping everything away, the DME supplier is paying the ordering physician. This, in turn, implicates the federal anti-kickback statute. This is a very broad statute, and the Department of Justice has substantial latitude in determining whether or not to enforce it against a person/entity. Courts have enumerated the “one purpose” test. This states that if “one purpose” behind a payment is to reward a person/entity for a referral, then the anti-kickback statute is violated notwithstanding that the “main purpose” behind the payment is to pay for legitimate services.
To the extent that a DME supplier directly or indirectly pays money to a telehealth physician who in turn writes an order for a product that will be provided by the supplier and reimbursed by a federal health care program, the arrangement will likely be viewed as remuneration for a referral (or remuneration for “arranging for” a referral). Said another way, the arrangement will likely be viewed as a kickback.
A sham telehealth arrangement differs from a legitimate telehealth arrangement in a critical aspect: the direct or indirect payment by the DME supplier to the telehealth physician. In a proper telehealth arrangement, the telehealth company does not receive any compensation from a health care provider; its revenue comes from self-funded employers, health plans, or patients who pay a per visit fee. Accordingly, with a legitimate telehealth arrangement, there is no direct or indirect financial relationship between the person or entity ordering the product (i.e., the telehealth physician) and the entity furnishing the product (i.e., the supplier).
Indictments and Grand Jury Subpoenas
Over the past several years, DME suppliers, LGCs, and telehealth companies came together to implement the following business model:
- The DME supplier purchases leads from an LGC. The DME supplier pays money to the LGC
- The LGC transfers the leads to a telehealth company. The LGC pays money to the telehealth company
- The telehealth company sets up telephone encounters between the leads and telehealth physicians. The telehealth company pays the physicians for their telephone encounters with the leads
- The physicians write orders for orthotics (mostly back braces). The orders end up going back to the DME supplier that started the process by purchasing the leads
- The DME supplier furnishes the brace to the lead and then bills Medicare
Unfortunately, this arrangement is a kickback. In the above-described arrangement, the DME supplier will likely be construed to be paying the physician who orders the brace. The payment will “flow through” the LGC and the telehealth company. As such, it is likely that the arrangement violates the anti-kickback statute. The way to reduce or eliminate this risk is for no money to be directly or indirectly paid by the DME supplier and LGC to the telehealth company. Rather, payment to the telehealth company for the physician encounter needs to come from the patient, the patient’s employer, or the patient’s insurance company. These kickback concerns came to fruition with a Department of Justice (“DOJ”) criminal takedown in early April. An April 9, 2019 DOJ Press Release stated, in part:
“One of the largest health care fraud schemes investigated by the FBI and the U.S. Department of Health and Human Services Office of the Inspector General (HHS-OIG) and prosecuted by the Department of Justice resulted in charges against 24 defendants, including the CEOs, COOs and others associated with five telemedicine companies, the owners of dozens of durable medical equipment (DME) companies and three licensed medical professionals, for their alleged participation in health care fraud schemes involving more than $1.2 billion in loss, as well as the execution of over 80 search warrants in 17 federal districts.”
Medicare beneficiaries by medical professionals working with fraudulent telemedicine companies for back, shoulder, wrist and knee braces that are medically unnecessary. Some of the defendants allegedly controlled an international telemarketing network that lured over hundreds of thousands of elderly and/or disabled patients into a criminal scheme that crossed borders, involving call centers in the Philippines and throughout Latin America. The defendants allegedly paid doctors to prescribe DME either without any patient interaction or with only a brief telephonic conversation with patients they had never met or seen … ”
“These defendants—who range from corporate executives to medical professionals—allegedly participated in an expansive and sophisticated fraud to exploit telemedicine technology meant for patients otherwise unable to access health care,” said Assistant Attorney General Benczkowski.”
“According to allegations in court documents, some of the defendants obtained patients for the scheme by using an international call center that advertised to Medicare beneficiaries and “up-sold” the beneficiaries to get them to accept numerous “free or low-cost” DME braces, regardless of medical necessity. The international call center allegedly paid illegal kickbacks and bribes to telemedicine companies to obtain DME orders for these Medicare beneficiaries. The telemedicine companies then allegedly paid physicians to write medically unnecessary DME orders. Finally, the international call center sold the DME orders that it obtained from the telemedicine companies to DME companies, which fraudulently billed Medicare … “
A pharmacy, that was engaged in a similar LGC/sham telehealth arrangement, recently received a Federal Grand Jury Subpoena that states, in part:
[You are instructed to produce all] documents, including electronic files, in the possession, custody, or control of [ABC Pharmacy] relating to any of the following:
- Telemedicine, telemarketing, advertising, marketing, lead generating, or referral companies … ;
- Monies owed or paid, directly or indirectly, by [ABC] for third-party services, including accounting, insurance billing, telemedicine, telemarketing, marketing, advertising, lead generation, back office, and other related services … ;
- Preparing and submitting claims to Medicare, Medicare Part D plans, Medicaid, Medicaid Manage Care Organizations, and private-pay insurance programs including, but not limited to, claims, superbills, remittance notices, explanation of benefits, supporting documentation, notes, ledgers, journals, invoices, computer spreadsheets, checks and/or work paper;
- Marketing, public relations, sales, discounts, or other promotions;
- The collection or waiver of patient copays or deductibles;
- Employee training, including but not limited to training materials, records, attendance logs, sign-in sheets, and completion certificates;
- Communications with prescribing physicians;
- Complaints received from patients or customers;
- Complaints received from or physicians, including prescribing physicians.
There are several lessons to be learned from the (i) the criminal takedown in the DME/orthotics space and (ii) the Grand Jury Subpoena to the pharmacy:
- If it seems to be “too good to be true,” then it is – When an LGC approaches a DME supplier and says: “Pay me money and I will deliver orders to you,” then it truly is “too good to be true.” With some minor digging, the supplier will discover that the original source of money paid to the telehealth physician comes from the supplier.
- Spike in claims submissions will garner attention – If the claims submissions by a DME supplier “spikes,” then the supplier will be looked at. This is true regardless of whether the spike occurs with products that the supplier has historically provided or with a new product line. And this is true regardless of whether the supplier is in Dallas, Texas … or is in Muleshoe, Texas.
- For a telehealth company to be legitimate, its money needs to come from patients, their insurance companies, and their employers – It is time consuming, and it takes a great deal of capital investment, to set up a legitimate telehealth company. This is because its money must initially come from its investors and from bank loans…after which the telehealth company will start cash flowing from payments (e.g., subscription agreements) from patients, their employers and their insurance companies. A “sham” telehealth company will bypass all of the hard work involved in setting up a legitimate operation and, instead, fund itself from the health care providers (DME suppliers, pharmacies, labs, etc.) that receive the telehealth orders. In the old Charles Schwab commercial, the voiceover says: “You can put lipstick on a pig…but it is still a pig.” There is simply no getting around the fact that money must come from the patient, the patient’s insurance company, or the patient’s employer.
- It is the DME supplier, not the LGC, that is on the firing line – DME suppliers are licensed; they have Medicare and Medicaid numbers; they have third party payor (“TPP”) contracts; and they bill government programs and commercial insurers. LGCs have none of these responsibilities. LGCs are in the business of making money. They do this by selling leads. LGCs do not have to worry about losing a license or number. At the end of the day, it is the supplier that is on the firing line if an arrangement is not legally compliant. Certainly, the LGC can be liable, but it is the supplier that is the “low hanging fruit.”
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 (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. Mr. 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.