AMARILLO, TX – DME suppliers are aware that they have to be very careful when it comes to providing gifts to physicians. Although any person or entity can be a referral source of federal health care program (FHCP) patients to a DME supplier, the most important referral source…the person who triggers the ultimate payment by an FHCP…is the physician.
When it comes to furnishing gifts to physicians, the DME supplier needs to be aware of the federal anti-kickback statute (“AKS”) and the federal physician self-referral statute (“Stark”). Stark allows a DME supplier to provide non-cash/non-monetary equivalent gifts to physicians so long as the total amount that the supplier spends on the physician does not exceed a certain dollar amount over the course of 12 months ($507 in 2024). The AKS does not have a similar exception (or safe harbor). However, if the DME supplier complies with the Stark non-monetary compensation exception, it is highly unlikely that the DME supplier will face an enforcement action under the AKS.
There is an interesting OIG Advisory Opinion (23-15), recently published, that says that an entity furnishing gift cards to a physician does not implicate the AKS so long as the physician does not generate FHCP patients to the entity providing the gift cards. Here is what the AO says:
Requestor provides consulting services to physician practices. The services include practice optimization services such as helping practices uncover workflow issues, data analytics services, electronic health record consulting services, compliance monitoring services, bi-annual Medicare Merit-Based Incentive Payment System (“MIPS”) eligibility checks, annual MIPS-related training, auditing MIPS-related performance measures, and assistance with submitting MIPS data. Requestor acknowledged that some of these services could result in [physician practices] receiving higher MIPS reimbursements from Medicare, but Requestor certified that it does not advise its [physician practices] to take any action, or otherwise promote any activity, that would violate applicable billing or other rules or regulations. Requestor also certified that it receives a fee for its services that is unrelated to whether a [physician practice] receives a greater or lesser reimbursement as a result of Requestor’s services.
Under the Proposed Arrangement, Requestor would give its current [physician practices that] recommend Requestor’s services to prospective physician practice customers a $25 gift card per recommendation. If the recommendation is successful (i.e., if the potential [physician practice] customer hires Requestor), Requestor would give the physician practice making the recommendation another $50 gift card for that successful recommendation.
Requestor certified that it does not recommend to any [physician practice] the purchasing, leasing, or ordering of any item or service for which payment may be made in whole or in part under a Federal health care program. Requestor further certified that: (i) none of the services that Requestor furnishes are or would be paid for, in whole or in part, directly or indirectly, by a Federal health care program; (ii) Requestor would not provide any items or services outside of the Proposed Arrangement that may be paid for, in whole or in part, directly or indirectly, by a Federal health care program; and (iii) Requestor does not have an ownership or investment interest in any other entity that provides items or services that are paid for, in whole or in part, directly or indirectly, by a Federal health care program.
Federal Anti-Kickback Statute
The Federal anti-kickback statute makes it a criminal offense to knowingly and willfully offer, pay, solicit, or receive any remuneration to induce, or in return for, the referral of an individual to a person for the furnishing of, or arranging for the furnishing of, any item or service reimbursable under a Federal health care program. The statute’s prohibition also extends to remuneration to induce, or in return for, the purchasing, leasing, or ordering of, or arranging for or recommending the purchasing, leasing, or ordering of, any good, facility, service, or item reimbursable by a Federal health care program. For purposes of the Federal anti-kickback statute, “remuneration” includes the transfer of anything of value, directly or indirectly, overtly or covertly, in cash or in kind.
The statute has been interpreted to cover any arrangement where one purpose of the remuneration is to induce referrals for items or services reimbursable by a Federal health care program.
The Proposed Arrangement would involve three potential streams of remuneration: (i) Requestor would give gift cards to physician practice customers who recommend Requestor to potential physician practice customers; (ii) physician practice customers would pay Requestor for consulting services; and (iii) physician practice customers potentially would receive an opportunity to earn a fee as a result of the consulting services in the form of higher MIPS reimbursements from Medicare. However, the Proposed Arrangement does not implicate the Federal anti-kickback statute. The first stream of remuneration would not implicate the Federal anti-kickback statute because the gift cards Requestor would provide to its customers would not be in return for the physician practices making referrals of, purchasing, arranging for, or recommending services that are reimbursable in whole or in part by a Federal health care program. Requestor certified that: (i) none of the services that Requestor furnishes are or would be paid for, in whole or in part, directly or indirectly, by a Federal health care program; (ii) Requestor would not provide any items or services outside of the Proposed Arrangement that may be paid for, in whole or in part, directly or indirectly, by a Federal health care program; and (iii) Requestor does not have an ownership or investment interest in any other entity that provides any items or services that are paid for, in whole or in part, directly or indirectly, by a Federal health care program.
Similarly, neither the second nor the third stream of remuneration would implicate the Federal anti-kickback statute. Requestor receives payments from physician practice customers for providing consulting services to those customers, but Requestor certified that it does not recommend to any physician practice the purchasing, leasing, or ordering of any item or service for which payment may be made in whole or in part under a Federal health care program. Additionally, those consulting services might result in higher MIPS-related payments from the Medicare program, giving physician practices the opportunity to earn a fee, but any remuneration those physician practices would receive under the Proposed Arrangement would not be in return for referrals for, the purchase of, or arranging for or recommending the purchase of, any item or service for which payment may be made in whole or in part under a Federal health care program.
This was something of a strange AO. The OIG reviewed the facts and then gave a perfunctory answer: the relationship between the Requestor and its physician groups did not generate FHCP patients; thus, the AKS is not implicated. The AO is not directly applicable to DME suppliers…but it does provide a valuable lesson to suppliers.
- If a physician orders DME, covered by an FHCP, that the DME supplier provides to the patient, then any type of gift from the supplier to the physician triggers the AKS and Stark.
- Under the nonmonetary compensation exception to Stark, the DME supplier can spend up to a certain amount of money each year, on behalf of the physician, for nonmonetary/nonmonetary equivalent gifts and entertainment (e.g., a round of golf). In 2024, the dollar amount the DME supplier can spend on behalf of a physician is $507.
- Stark has a large number of exceptions, but no safe harbors. By contrast, the AKS has a couple of exceptions, and a large number of safe harbors. Several Stark exceptions say essentially the same thing as AKS safe harbors.
- The AKS does not have a nonmonetary compensation safe harbor that is similar to the Stark nonmonetary compensation exception. And so technically, a DME supplier can spend $507 in 2024 on a physician and be compliant under Stark … but still be in violation of the AKS. However, from a practical standpoint, if the supplier complies with the Stark exception, it is highly unlikely that the government will bring an enforcement action under the AKS.
- This brings us back to the AO. If a physician is not directly or indirectly generating FHCP patients for the DME supplier, then any types of gifts from the supplier to the physician will not implicate the AKS. However, the DME supplier will need to look at (i) the applicable state kickback statute and (ii) state statutes specific to physicians.
Jeffrey S. Baird, JD, is chairman of the Health Care Group at Brown & Fortunato, a law firm based in Texas with a national health care practice. 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 firstname.lastname@example.org.
Bradley W. Howard, JD, is a Shareholder and Director at Brown & Fortunato, a law firm based in Texas with a national presence. He works in litigation, focusing on health and employment law. Howard handles governmental investigations, business disputes, and litigation involving health care providers including DME companies, home health agencies, pharmacies, and hospitals. He is Board Certified in Labor and Employment Law by the Texas Board of Legal Specialization. Mr. Howard can be reached at (806) 345-6310 or email@example.com.
AAHOMECARE’S EDUCATIONAL WEBINAR
Copayment Collection and Patient Assistance Programs
Presented by: Jeffrey S. Baird, Esq., Brown & Fortunato & Matthew D. Earl, Esq., Brown & Fortunato
Tuesday, February 13, 2024
1:30-2:30 p.m. CENTRAL TIME
Federal law is clear: a DME supplier must make a reasonable effort to collect copayments. All (or virtually all) commercial insurers, including Medicare Advantage Plan, impose the same requirement. If a DME supplier routinely waives or reduces copayments, it can be held liable under the federal anti-kickback statute, federal beneficiary inducement statute, and federal False Claims Act. In fact, many federal criminal and civil cases brough against DME suppliers (often at the instigation of a whistleblower) are based, in whole or in part, on the failure to make a reasonable effort to collect copayments. In the same vein, insurers will terminate agreements with suppliers on the basis of not making a reasonable effort to collect copayments. This program will (i) discuss what it means to “make a reasonable effort” to collect copayments; (ii) discuss how a supplier can implement a financial hardship policy that allows the supplier to waive/reduce a copayment on a patient-by-patient basis; (iii) point out that the existence of such a financial hardship policy cannot be advertised; (iv) discuss how a DME supplier can implement a patient assistance program; and (v) discuss how a supplier can access charities that may be in the position to assist patients in paying their copayments.
AAHOMECARE’S EDUCATIONAL WEBINAR
Cash-Only Retail: How to Succeed
Presented by: Jeffrey S. Baird, Esq., Brown & Fortunato
Tuesday, April 16, 2024
1:30-2:30 p.m. CENTRAL TIME
The DME industry primarily serves the elderly. This means that most DME suppliers are dependent on traditional Medicare and Medicare Advantage for most of their revenue. But as DME suppliers know from experience, it can be challenging to be so tied to Medicare. This is where retail comes in. There are 78 million Baby Boomers who are retiring at the rate of 10,000 per day. Many Boomers are willing to pay cash for “Cadillac” items rather than being limited to the “Cavalier” items paid for by Medicare. This program will present the legal parameters within which DME suppliers can move into the retail space. The issues to be presented will include the following:
- Whether the retail business should be (i) under the supplier’s existing Tax ID # or (ii) operated by a separate legal entity.
- State DME licensure.
- Selling Medicare-covered items at a discount off the Medicare allowable.
- Obtaining physician prescriptions.
- Collection and payment of sales tax.
- Qualification as a “foreign” corporation.
- Required notification to a Medicare beneficiary even though the supplier does not have a PTAN.
Registration coming soon for Cash-Only Retail: How to Succeed on Tuesday, April 16, 2024, 1:30-2:30 p.m. CT, with Jeffrey S. Baird, Esq., Brown & Fortunato.