AMARILLO, TX – What is perfectly legal in the non-health care space (auto parts stores, clothing stores, ice cream shops) can constitute a crime in the health care space. There have been instances when a person leaves the non-health care space, starts working for a DME supplier, and says: “What do you mean I can’t do that? That is what I always did when I worked at ABC Auto Parts!”

A case in point has to do with purchasing internet leads from lead generation companies (“LGCs”). The concept is relatively simple. The LGC manages multiple websites from which it collects information from prospective customers (“leads”) who have an interest in purchasing certain types of DME. The LGC sells the leads to a DME supplier. The DME supplier pays $____ per lead to the LGC. This type of arrangement makes perfect sense in the non-health care space…but in the DME space there are laws that make such an arrangement very tricky. While it is acceptable for a DME supplier to “pay for a lead,” a prohibited kickback can occur if the supplier is “paying for a referral.” Let me first summarize statutory and regulatory guidance…and then I will discuss the “dos and don’ts.”

Federal Anti-Kickback Statute
A lead generation agreement (“LGA”) needs to be examined within the context of 42 U.S.C. § 1320a-7b(b), commonly known as the federal anti-kickback statute (“AKS”). This statute provides that it is a felony for a person or entity to knowingly and willfully offer, pay, solicit or receive any remuneration to induce a person to refer an individual for the furnishing or arranging for the furnishing of any item for which payment may be made under a federal health care program (“FHCP”), or the purchase or lease or the recommendation of the purchase or lease of any item for which payment may be made under an FHCP. Many courts have adopted the “one purpose” test: if one purpose of a payment is to induce referrals, then the AKS is violated regardless of whether the payment is fair market value (“FMV”) for legitimate services rendered. Because of the breadth of the AKS, the Office of Inspector General (“OIG”) has published a number of safe harbors. If an arrangement falls within a safe harbor, then as a matter of law, the arrangement does not violate the AKS. An arrangement that does not fall within a safe harbor, however, does not automatically violate the AKS. Rather, a careful analysis of the arrangement must be conducted in light of the language of the AKS, OIG guidance, and court decisions.

OIG Guidance
On November 5, 2008, the OIG issued Advisory Opinion (“Opinion”) 08-19 discussing internet leads in the context of the AKS. The proposed arrangement involved one or more websites to which patients interested in chiropractic services would enter their zip code. The website would display assigned phone numbers and e-mail addresses of chiropractors within the zip code indicated. When the patient calls the phone number or sends an e-mail, the call or e-mail is routed to the listed chiropractor (and electronically tracked by the advertiser). The advertiser is paid a “per lead” fee based on the routed call or e-mail. In the Opinion, the OIG indicated that it would not seek enforcement action against the parties for the arrangement proposed in the Opinion.

The OIG listed several factors that led the OIG to its conclusion. First, the advertiser in the Opinion does not collect “health care information” on the potential patient. Second, the arrangement in the Opinion passively routes calls/e-mails initiated by the lead. Third, the arrangement in the Opinion does not actively “steer” patients to a particular provider. Fourth, the website contains a disclaimer notifying potential patients that the website is a directory where the providers listed pay a fee to be listed. In the Opinion, the OIG noted that “health care information” included information “such as payer information, medical history, diagnosis, and the like.”

Looking at the AKS and Opinion 08-19 together, it is unlikely that the OIG and/or Department of Justice (“DOJ”) will seek enforcement action against a supplier paying compensation, on a per lead basis, for “unqualified” leads. Generally, an “unqualified” lead will consist of name, address, phone number, and the prospective customer’s interest in talking to the supplier about its product.  An “unqualified” lead will start moving into the “qualified” category as the LGC gathers specific information from the prospective customer. In Opinion 08-19, the OIG implies that the collection of “health care information, such as payer information, medical history, diagnosis, and the like” would make the lead a “qualified” lead. While the purchase of an unqualified (or “raw”) lead is exactly what it is…the purchase of a lead, the purchase of a qualified lead can be construed as the payment for a “referral.” The OIG will likely see payment for a “qualified” lead as payment for a “referral” under the AKS and, therefore, such payment will violate the AKS unless the arrangement fits squarely within a safe harbor to the AKS.

On June 21, 2011, the OIG issued Opinion 11-08 discussing an arrangement between a DME supplier and various independent diagnostic testing facilities (“IDTFs”) in the context of the AKS. The proposed arrangement involved the IDTF providing services, on behalf of the DME supplier, to non-FHCP patients of the DME supplier. The IDTF would not perform the services when the patient is an FHCP patient. The IDTF would refer both FHCP and non-FHCP patients to the DME supplier.  However, the DME supplier would pay the IDTF a “per patient” fee only for the services rendered to the non-FHCP patients. In the Opinion, the OIG expressed its “longstanding concerns” about arrangements that “carve out” referrals for FHCP beneficiaries. Such arrangements may violate the AKS if the parties are disguising remuneration for FHCP beneficiaries through the payment of amounts purportedly related to non-FHCP business. In scrutinizing the arrangement, the OIG concluded that IDTFs involved in the arrangement may still influence referrals of FHCP beneficiaries to the DME supplier and, therefore, the OIG stated, “we cannot conclude that there would be no nexus between the Requestor’s payments to the IDTF for services provided to non-Federal patients and referrals to the Requestor of Federally insured patients.”

Government enforcement agencies (i.e., DOJ/OIG) are scrutinizing LGCs…and the providers/suppliers that use them. There is a confluence of (i) aging Baby Boomers, many of whom will live well into their 80s, (ii) the ability of Boomers to search the internet for health care products/services, (iii) the massive amount of money spent by Medicare on aging Boomers (through traditional Medicare and Medicare Advantage), (iv) LGCs that are able to corral large numbers of leads, and (v) DME suppliers that want access to leads. This is a combustible mix that can lead to fraud.

For example, in the Operation Brace Yourself takedown, the DOJ/OIG came down on hard on the following: (i) DME supplier purchases leads from LGC, (ii) LGC works with sham telehealth company to set up phone calls between leads and telehealth physicians (often, physicians with their own practices who moonlight as telehealth physicians), (iii) telehealth physicians have two minute phone calls with the leads, (iv) telehealth physicians write orders for back braces and send the orders to the telehealth company and/or the LGC, (v) the orders go to the DME supplier that instigated the process, (vi) the DME supplier sends the brace to the lead, (vii) the DME supplier bills and collects from Medicare, (viii) the DME supplier pays the LGC…which pays the telehealth company…which pays the telehealth company. This is simply a kickback scheme. At the end of the day, it is the DME supplier that is paying the telehealth physician. The payment “flows through” the LGC and telehealth company.

During Operation Brace Yourself, while some LGCs and sham telehealth companies were targeted by the DOJ/OIG, the focus was on the telehealth physicians and DME suppliers.

Keep in mind that when dealing with an LGC, the DME supplier has a lot to lose (i.e., its PTAN and ability to bill Medicare). If the DME supplier loses its PTAN, then it will likely not be able to bill commercial insurers. The LGC, on the other hand, has little to lose. It does not have a PTAN…or a DME license…or commercial insurance contracts…or a Medicaid provider number…or accreditation. Figuratively, the LGC can “fold up its tent and move to the next county.” This is a long way of saying that a DME supplier must be careful in dealing with LGCs.

When it comes to working with LGCs, here are the takeaways for DME suppliers:

• It is my opinion that most LGCs are not focused on what is legally compliant for their customers (e.g., DME suppliers). It is my opinion that most LGCs simply want to sell a product (leads) and get paid for it. It is my opinion that LGCs “do not have DME suppliers’ backs.”
• It is the responsibility of the DME supplier to determine what is…and what is not…legally compliant.
• It is legally acceptable for the DME supplier to purchase “raw” or “unqualified” leads on a per lead basis. A raw/unqualified lead consists of the lead’s name, contact information, and his/her stated interest in purchasing a particular product.
• It is a violation of the AKS for the DME supplier to pay for a referral. A “qualified” lead is tantamount to a referral. A qualified lead appears when the LGC collects more than the lead’s contact information…such as medical condition, physician’s name and contact information, current treatment, products/services currently being used, and insurance information. Picture a continuum. On the left side of the continuum is a raw lead (name and contact information). As the LGC starts collecting qualifying information about the lead, the lead starts moving from the left to the right. Somewhere along this continuum is an invisible line. When the lead crosses that line, it is no longer a raw lead; it is a qualified lead.
• One more thing. Assume that the DME supplier has compliantly purchased leads. The supplier cannot call the leads unless the leads have, in writing (blue ink or electronic) consented to be called by the DME supplier. This is a requirement of Supplier Standard #11 and the telephone solicitation statute.

Jeffrey S. Baird, JD, is chairman of the Health Care Group at Brown & Fortunato, PC, 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 [email protected].

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.

Register for Copayment Collection and Patient Assistance Programs on Tuesday, February 13, 2024, 1:30-2:30 p.m. CT, with Jeffrey S. Baird, Esq., and Matthew D. Earl, Esq., of  Brown & Fortunato.

Members:  $99
Non-Members:  $129

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.

Members:  $99
Non-Members:  $129