AMARILLO, TX – DME suppliers operate in a highly regulated environment. They must comply with (i) federal anti-fraud laws, (ii) state anti-fraud laws, (iii) supplier standards, (iv) accreditation requirements, and (v) guidance from Medicare, Medicaid and commercial insurers. If a DME supplier is doing something it should not be doing, then “someone knows about it.” That “someone” can be an employee, a competitor, a referral source, or a government agency/contractor.

If a DME supplier violates one or more of the federal anti-fraud laws, then it can (i) have potential criminal liability, (ii) potential civil liability, and (iii) be subject to payment supervision and PTAN revocation. The risks are too high for the supplier to be cavalier regarding compliance with anti-fraud laws. It is important that on a day-to-day basis, the supplier (i) be aware of the applicable federal and state anti-fraud laws and (ii) be aware of whether it is in compliance with the laws.

Part I summarized federal and state anti-fraud laws. Parts II – V discuss specific fraud landmines to avoid.

Data Mining

DME suppliers are facing a “Perfect Storm” of challenges. These include (i) lower reimbursement; (ii) stringent documentation requirements; and (iii) aggressive audits. To counter these challenges, suppliers are having to be innovative in how they market to patients and deal with third party payors. A supplier may desire to engage in “data mining.” While data mining is not wrong in and of itself, suppliers need to be aware of the pitfalls attendant to certain data mining activities.

Description of Program

In one type of data mining arrangement, a company (“ABC”) assists the supplier in researching alternative product options that result in larger reimbursement. The supplier then approaches physicians and suggests that they switch their orders from the product with lower reimbursement to the product with higher reimbursement. The supplier will educate the physicians regarding the clinical benefits of the more expensive product. If the physicians agree and change orders, then the supplier makes more money, but the physicians do not financially benefit from the arrangement. With some data mining arrangements, the supplier pays ABC a percentage of the net revenue generated by the data mining program.

Applicable Law

In reviewing data mining arrangements, one needs to be mindful of the AKS and comparable state anti-kickback statutes.

Legal Issues

If a supplier engages in a data mining program, the supplier needs to be aware of the following:

Separate and apart from what the law says, does the data mining arrangement pass the “smell test?” If the motivation behind the arrangement is not patient care – but rather – is for the supplier and ABC to make more money, then even if the arrangement does not clearly violate the law…but is nevertheless “offensive”… a governmental agency or commercial third party payor may take steps to shut it down.

Let us assume that a government health care program pays for the replacement product. If the supplier is paying remuneration to ABC (i.e., a percent of net revenue), the question becomes: “Is ABC arranging for the referral of government program patients to the supplier and/or is ABC recommending the purchase of products that are reimbursable by a government health care program?” Both sides of the equation can be argued. On the one hand, one can argue that because ABC is not having any contact with the physicians (i.e., ABC is only working with the supplier), then ABC cannot be construed to be “arranging for the referral” of patients nor “recommending the purchase of products.”

On the other hand, one can argue that by allowing the supplier to use the ABC software platform and by showing the supplier how to find similar products with higher reimbursement, then such acts rise to the level of “arranging for the referral” of patients and “recommending the purchase of products.” This is where the “smell test” comes in. Governmental agencies have a great deal of discretion in deciding whether or not to bring an enforcement action.

If an arrangement falls within a “gray area,” but it is not otherwise abusive or offensive, then the governmental agency will likely leave the arrangement alone. On the other hand, if it looks like the parties to the arrangement are “gaming the system” to substantially increase their revenue, then the governmental agency (and/or a third party payor) will likely be motivated to shut the arrangement down.

Now let’s switch gears and assume that no government program is involved. Assume that the only payors are commercial insurers. If the supplier is operating in a state in which there is a state anti-kickback statute that applies to all payors, then the preceding discussion applies.

Purchase of Internet Leads

When a lead generation company (“LGC”) sells Medicare leads to a DME supplier, then it is important that the arrangement not violate the Medicare anti-kickback statute, nor the telephone solicitation statute.

Anti-kickback statute

The statute makes it a crime for a 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 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 name, address and phone number of the Medicare beneficiary. A qualified lead is when the LGC collects additional information about the beneficiary such as physician’s name, Medicare number, diagnosis, products the beneficiary is currently using, etc. The chances of a raw lead becoming a paying customer for the supplier are pretty 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 beneficiary 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 the lead to the supplier; and (ii) the supplier will pay the LGC $100 for the 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.

Telephone Solicitation Statue

This statute only applies to DME suppliers. The statute essentially says the same thing as Supplier Standard # 11. The statute says that the DME supplier cannot call a prospective customer (Medicare beneficiary) unless the beneficiary has given his permission to be called specifically by the DME supplier. For example, assume that a prospective customer visits the LGC’s website. Assume that the web page has a “consent-to-be-called” box for the beneficiary to click. According to the National Supplier Clearinghouse (‘NSC”), for the electronic consent-to-be-called to be valid, the DME supplier can be the only provider listed on the page and the consent must be specific to the DME supplier.

What all of this means for the supplier and the LGC

The arrangement should be structured one of two ways. First, the only information that the LGC will collect and give to the 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., $60,000 over the next 12 months, or $5000 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.

Assume that the LGC is also the manufacturer

Assume that the LGC is also the manufacturer of the products that the leads will purchase. The more conservative (and, thus, preferable) arrangement is for (i) the LGC and the supplier to enter into a standard product purchase agreement in which the supplier agrees to buy products from the manufacturer/LGC in accordance with a price list; and (ii) the manufacturer/LGC will furnish leads to the supplier (including the physician information, Medicare number and other qualifying information) but the supplier will not pay for the leads. This is a standard arrangement that many manufacturers follow. If the manufacturer/LGC insists that the supplier purchase the leads, and if the supplier agrees to do so, then the arrangement needs to be structured as set out in the preceding paragraph.

Assume that the manufacturer/LGC will also serve as the “fulfillment house” for the DME supplier. The manufacturer/LGC will ship the products to the customer on behalf of the DME supplier. At the end of the day, the DME supplier (not the manufacturer/LGC) is the “supplier.” It is the supplier that submits claims to Medicare. When it submits a claim, the DME supplier is representing to Medicare that the supplier has operational responsibilities and financial risk……that is, the DME supplier is truly acting like a “supplier.” If the supplier essentially does nothing except bill and collect money, then the government will likely consider the arrangement to be nothing but a sham, in which (i) the DME supplier is, in reality, “renting out” its PTAN to the manufacturer/LGC and (ii) the DME supplier is collecting money from Medicare for products that the supplier did not, in reality, furnish. The supplier must have operational responsibilities and financial risk. In other words, the supplier must have “skin in the game.” For example, the supplier must handle the “intake, assessment and coordination of care.” The obligation of the supplier to pay the manufacturer/LGC must be absolute. The supplier must pay the manufacturer/LGC even if the supplier does not get paid by the third party payor. If there is a problem with a product, then the beneficiary should call the supplier. If the supplier wants to direct the manufacturer/LGC to furnish a replacement product, then the supplier can do so. The labels on the boxes (that are shipped to the beneficiaries) must reflect the DME supplier’s name, not the manufacturer’s/LGC’s name.

Collection of Copayments

A “slippery slope” for DME suppliers pertains to waiving copayments. A DME supplier may be inclined to suggest to potential patients that if they purchase from the supplier, then the supplier will waive the patients’ copayments. While it is acceptable for a DME supplier to waive a copayment when a patient establishes an inability to pay, the supplier can be subjected to liability if it routinely waives copayments.

There are two important federal statutes prohibiting routine waivers of copayments for beneficiaries of federal and state health plans. The law that most specifically addresses waiver of copayments is 42 U.S.C. 1320a-7a, sometimes called the beneficiary inducement statute. That statute prohibits the offer or payment of “remuneration” to a beneficiary by any person/entity if the person/entity knows (or should know) that the remuneration is likely to influence the beneficiary to obtain items or services from a particular supplier. The definition of “remuneration” specifically includes waivers or reductions of copayment amounts, except when (1) the waiver is not advertised, (2) the supplier does not routinely waive copayments, and either (a) the supplier in good faith determines that the beneficiary is in financial need, or (b) the supplier fails to collect the copayment after making reasonable collection efforts.

The other relevant federal statute is the federal anti-kickback statute, 42 U.S.C. 1320a-7b(b). The anti-kickback statute prohibits, among other things, the offer or payment of remuneration to induce a person to purchase a Medicare or Medicaid-covered item or service. Unlike the inducement statute, the anti-kickback statute does not include a definition of “remuneration.” However, it is generally accepted that the term includes transferring “anything of value.”

The Office of Inspector General (“OIG”) has long taken the position that routine waivers of copayments violate the anti-kickback statute. In 1991, the OIG issued a Special Fraud Alert on the topic. Although the anti-kickback statute and the related regulations do not contain an explicit exception for financial hardship as the inducement statute does, the OIG stated: “One important exception to the prohibition against waiving copayments and deductibles is that providers, practitioners or suppliers may forgive the copayment in consideration of a particular patient’s financial hardship. This hardship exception, however, must not be used routinely; it should be used occasionally to address the special financial needs of a particular patient. Except in such special cases, a good faith effort to collect deductibles and copayments must be made.”

Violation of either the beneficiary inducement statute or the anti-kickback statute can lead to substantial monetary penalties as well as possible exclusion from the Medicare and Medicaid programs. It is important, therefore, for a DME supplier to adopt and enforce a policy of waiving copayments only in individual cases where the supplier determines that the patient is financially needy. In all other cases, the supplier should pursue normal collection efforts. In addition, the supplier should avoid advertising that could be taken to imply that the supplier will routinely waive copayments.

The following sets out provisions that can be included in a formal Policy for Collections and Patient Assistance. The following provisions are only illustrations. The supplier should consult with its health care attorney to prepare a Policy suitable to the supplier’s specific needs.

Policy Statement

ABC Medical Equipment, Inc. (“ABC”) is committed to complying with federal and state laws concerning accurate billing.  At the same time, ABC is committed to providing access to high quality health care to all patients. ABC has encountered situations in which patients are unable to pay cost-sharing obligations because of financial hardships. In some situations, patients fail to pay cost-sharing obligations despite ABC’s good faith collection efforts. To address these situations, ABC will implement this Policy and Procedure for Patient Assistance.

Purpose

Except under certain circumstances, waivers of deductibles and copayments are not permitted because such waivers misrepresent ABC’s actual charge and may result in false claims. Also, the Office of Inspector General has indicated that such waivers may violate the Federal Anti-Kickback Statute. Accordingly, this policy sets forth procedures that ABC and all ABC employees will follow before any cost-sharing obligation is waived. Under this policy, ABC may waive a patient’s cost-sharing obligation only after the patient demonstrates a financial hardship. Otherwise, ABC will employ good faith efforts to collect copayments and deductibles.

Definitions

Application – The form entitled, “Economic Assistance Request,” that a patient must complete to request a financial hardship waiver.  The application is attached as Attachment A.

Cost-Sharing Obligations – Payment obligations, including copayments, deductibles, and coinsurance, required under a patient’s arrangement with the patient’s third-party payor.

Family – All persons residing in a patient’s home who are related to the patient by birth, marriage, or adoption.

Federal Poverty Guidelines (FPGs) – Often referred to as the “federal poverty level,” FPGs are measures of poverty issued yearly by the Department of Health and Human Services in the Federal Register.  The current FPGs are listed in Attachment B.

Financial Hardship Waiver – Waiver of a cost-sharing obligation provided to a patient because the patient demonstrated a financial need.

Gross Family Income – Gross family income refers to the total yearly value of the family’s income from all sources prior to any tax deduction.

Manager – Under this policy, the Manager is responsible for reviewing applications and determining whether to grant a financial hardship waiver.  _________________ will serve as the Manager under this policy. S/he may delegate his/her responsibilities under this Policy to any employee of ABC.

ABC – In this policy, references to ABC include all employees and representatives authorized to act on behalf of ABC.

Procedure

Private Insurance Companies – ABC will comply with all contracts in place with insurance companies. In the event a contract conflicts with this Policy, the contract will take precedence over this policy. When ABC waives the cost-sharing obligation related to the patient’s private insurance, ABC will notify the affected insurer.

Statements Regarding Waivers – ABC will not advertise or otherwise promote the waiver of deductibles or copayments. No ABC employee may tell the patient or the patient’s representative that the patient does not need to pay the cost-sharing obligation unless the patient has submitted an application and the Manager has authorized a waiver. At the time ABC provides services to a patient, ABC representatives will provide to the patient an estimate of the patient’s cost-sharing obligation. Only when the patient volunteers that he/she cannot pay the cost-sharing obligation may the ABC representatives may inform the patient of the availability of a financial hardship waiver and the application process. ABC will document any waiver provided to a patient on the patient’s invoice or receipt for service.

Financial Hardship Waivers

Application Required – When a patient requests a financial hardship waiver, ABC will require the patient to complete and submit an application entitled, “Economic Assistance Request.” If the patient requests an application for patient assistance, ABC representatives may email, fax, mail, or hand deliver the application to the patient. Alternatively, at the patient’s request, ABC representatives may receive the information verbally and complete the application on behalf of the patient. Any application completed in this manner will be mailed to the patient for the patient to sign and return. The patient will also be required to supplement an application completed verbally with evidence of financial hardship.

Up to Date Information – Upon receipt of the application, ABC will inform the patient of the patient’s responsibility to notify ABC of any changes to the patient’s situation. ABC may rely on the documentation submitted by the patient for 12 months, unless the patient notifies ABC of any changes to his or her situation. At the expiration of the 12 month period, ABC will request that the patient completes a new application.

Documentation Supplementing the Application – ABC need not request documentation to support the patient’s statements on the application in every case.  ABC will require supplemental documentation for applications completed verbally. Also, in the event the Manager has any doubts regarding the accuracy and validity of an application, ABC will require the patient to submit documentation evidencing a financial hardship. In such events, ABC will request a copy of the patient’s tax return and/or other evidence of the patient’s financial need, which may include evidence of (i) homelessness; (ii) enrollment in Women, Infants, and Children (WIC) programs; (iii) receipt of food stamps; (iv) participation in a subsidized school lunch program; (v) participation in an unfunded state or local assistance program; (vi) residence in low income, subsidized housing; and/or (vii) other evidence of financial need, such as pay stubs or medical bills.

Eligibility Criteria for Financial Hardship Waivers – The Manager will review the submitted documentation and determine whether the patient meets the criteria for a financial hardship waiver. The basis for any determination will be documented and kept in ABC’s records. The eligibility criteria for financial hardship waivers are as follows:

• Full Waiver – The patient is eligible for full waiver of the patient’s cost-sharing obligation if the patient’s gross family income is less than or equal to the applicable FPG. Under such circumstances, the patient may receive a full waiver. However, the Manager is not required to grant a full waiver; the Manager may determine that a partial waiver is appropriate.
• Partial Waiver – If the patient’s gross family income is greater than the applicable FPG, but less than or equal to two times the applicable FPG, ABC may reduce the patient’s cost-sharing obligations. The amount waived will depend upon the particular patient’s circumstances. If the patient’s gross family income is greater than two times the applicable FPG, ABC will presume that the patient is not eligible for patient assistance unless (i) the patient’s family has unreimbursed medical expenses that exceed 20% of its gross family income or (ii) the patient demonstrates the existence of other extraordinary circumstances that justify a financial hardship waiver. Under such circumstances, the Manager may grant a partial waiver of the patient’s cost-sharing obligation. The Manager has the authority to grant a full waiver in the event the Manager determines that such a waiver is justified by the patient’s financial situation. The basis for any determination shall be thoroughly documented in ABC’s records.

Provision of Financial Hardship Waivers – If the patient meets the eligibility criteria, ABC may provide a financial hardship waiver unless the Manager determines that a financial hardship waiver is unnecessary or inappropriate in a particular case. For example, the Manager may decide that a financial hardship waiver is inappropriate because the patient falsified documentation or because the evidence of financial need is unreliable. ABC will promptly notify the patient of the Manager’s determination regarding the patient’s application.

Documentation – ABC will maintain copies of all applications and supplemental documentation submitted by patients. ABC will document and maintain records concerning (i) the amount of a waiver provided to a patient and (ii) the basis for ABC’s decision.

Yearly Review of Financial Hardship Waivers Granted – Each calendar year, the Manager will evaluate the number of patients receiving financial hardship waivers from ABC. If the number of such patients is approximately 10% or more of the patient population served by ABC in that year, then the Manager will take steps to ensure that ABC is not unnecessarily waiving cost-sharing obligations. For example, the Manager may retrain staff on this policy and require supplemental documentation for all applications before ABC grants a financial hardship waiver.

Waivers Following Good Faith Collection Efforts

ABC may write off the cost-sharing obligation of a patient who does not qualify for a financial hardship waiver only if (i) the patient’s cost-sharing obligation remains unpaid after 120 days and (ii) ABC exercised and documented the following collection efforts:

• Initial Invoice – After ABC provides services to a patient, ABC will issue to the patient an invoice detailing the amount of the patient’s cost-sharing obligation.
• Second Invoice – If the patient fails to pay the cost-sharing obligation within 30 days, ABC will send to the patient a subsequent statement detailing the patient’s outstanding balance.
• Telephone Contact and Third Invoice – If the cost-sharing obligation remains unpaid after 60 days, ABC will send a third billing statement. Within 10 days following the date of the letter, ABC will contact the patient by phone. Phone calls will be made until affirmative contact is established with the patient or the patient’s representative. During the phone call, an ABC representative will (i) collect information concerning the reason for non-payment, (ii) solicit an agreement for a specific payment plan, and/or (iii) offer to provide an application for patient assistance. If the patient submits an application, ABC will promptly notify the patient of the Manager’s determination. If the application is denied, or the patient does not submit an application, ABC will continue efforts to collect the patient’s cost-sharing obligation.
• Fourth Invoice – If the patient’s obligation remains unpaid after 90 days, ABC will send a fourth billing statement.

All invoices, telephone and in-person contacts regarding the patient’s cost-sharing obligation will be documented in the patient’s billing file. If a patient’s cost-sharing obligation remains unpaid after 120 days, the Manager will review the documentation regarding ABC’s collection efforts. The Manager may then direct an ABC representative to continue collection efforts, turn the account over to a collection agency, bring a collection lawsuit, refuse to provide products and services to the client in the future, or write off the obligation. The Manager may write off the obligation as long as the good faith collection efforts listed above are clearly documented in the patient’s file.

Audits

The billing and waiver procedures of ABC will be audited from time to time. Findings from such audits shall be submitted in writing to ABC’s officers and directors. ABC’s officers and directors may also engage an outside party to conduct an audit of ABC.

Economic Assistance Request

On the Economic Assistance Request Form, the patient will be asked a number of questions, such as:

• Are you married?
• How many dependents do you have?
• What is your current household size? (Include spouse, children, and legal dependents living in your home)
• Are you receiving any type of assistance from local, county, state, or federal government agencies? If so, describe the assistance.
• Is a guardian or anyone else legally responsible for your medical bills? If the answer is “yes,” provide the person’s name and contact information.
• Do you own your house? If yes, is it paid for?
• Do you or anyone in your household have any unpaid medical and/or other bills?
• How much do you have in savings to which you have immediate access (not including qualified retirement)?

• What is your monthly net income from the following: employment, Social Security, child support, retirement, investments, spouse, disability?

• What are your monthly expenses for the following: rent/house payment, prescriptions/medical, insurance, food, car payment, other?

Charitable Contributions

The OIG takes the position that charitable donations to not-for-profit entities are essential to “sustaining and strengthening the health care safety net.”  The OIG believes that most donors, even those with business relationships with donation recipients, are generally motivated by bona fide charitable purposes and desire to help their communities. The fact that a business relationship exists between a donor and recipient does not make the donation automatically suspect. However, where the two entities are in a position to refer to each other, the arrangement does warrant additional scrutiny. Notably, the OIG opinions do not appear to differentiate between not-for-profit (“NFP”) organizations and tax exempt organizations. The OIG appears to use the same standards for both organizations (see e.g., Advisory Opinion No. 00-11 vs. No. 10-17). However if an entity has a tax exempt status, the OIG makes a point to note such status. The OIG has issued several advisory opinions related to the provision of charitable donations from one organization to another where either or both organizations are in a position to refer to the other. These opinions have generally been favorable to the requesting entities where donations to charitable/not-for-profit entities (1) are for a bona fide charitable purpose; (2) are made in a manner that do not take into account the value or volume of referrals; and (3) incorporate other safeguards to ensure that donations are not tied to referrals or other business generated between the organizations.  Notwithstanding the above, in Advisory Opinion No. 08-02 the OIG provides examples of potentially problematic contributions, including:

• Contributions to private foundations or other charitable organizations directed or controlled by referral sources; and
• Contributions determined in any manner that take into account past or expected orders or purchases of items or services payable by any federal health care program.

Jeff Baird and Allison Shelton will present the following the webinar:

AAHOMECARE’S EDUCATIONAL WEBINAR

What Constitutes a HIPAA Breach and How to Respond to the Breach

Presented by: Jeffrey S. Baird, Esq., Brown & Fortunato, P.C. & Allison D. Shelton, Esq., Brown & Fortunato, P.C.

Tuesday, June 12, 2018

2:30-3:30 p.m. EASTERN TIME

HIPAA has been with us for enough years that health care providers, including DME suppliers, know that they need to follow HIPAA guidelines…and avoid HIPAA breaches. A HIPAA breach can be small and relatively uneventful. On the other hand, a larger breach can cause all kinds of trouble for the supplier. HIPAA enforcement is handled by the Office for Civil Rights (“OCR”). And during recent years, the OCR has been flexing its muscles in bringing enforcement actions against health care providers that experience HIPAA breaches. This webinar will discuss (i) what exactly a HIPAA “breach” is; (ii) the types of breaches that are relatively minor and those that are more serious; (iii) the types of liability that the supplier can face in the event of a HIPAA breach; and (iv) how the supplier should respond to a HIPAA breach. Equally as important, this webinar will discuss (i) the importance of a HIPAA compliance program; (ii) the roles that HIPAA compliance officers should take; (iii) the provisions that must be contained in a HIPAA compliance program; and (iv) the type of HIPAA training that the supplier should provide to its employees.

Register for What Constitutes a HIPAA Breach and How to Respond to the Breach on Tuesday, June 12, 2018, 2:30-3:30 pm ET, with Jeffrey S. Baird, Esq. and Allison D. Shelton, Esq., of  Brown & Fortunato, PC.

FEES:

Member:  $99.00; Non-Member: $129.00

 Jeffrey S. Baird, JD, is chairman of the Health Care Group at Brown & Fortunato, PC, a law firm based in Amarillo, Tex. 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 [email protected].