AMARILLO, TX – If a lead generation company contacts a DME supplier, then the supplier needs to either (i) run for the hills or (ii) contact a health care attorney who understands the legal pitfalls pertaining to working with a lead generation company. In the same vein, a DME supplier needs to be very cautious if it is approached by a telehealth company.

Over the past several years, lead generation companies and sham telehealth companies have come together and promoted quick money to DME suppliers. All too often, the arrangement proposed by lead generation companies and sham telehealth companies violate the federal anti-kickback statute…and the DME supplier is the first to take the fall. This article discusses lead generation companies and sham telehealth companies…and the pitfalls that DME suppliers need to avoid.

Internet Leads
When a lead generation company (“LGC”) sells leads to a DME supplier, and when those leads include patients covered by a federal health care program (“FHCP”), then it is important that the arrangement not violate the federal anti-kickback statute (“AKS”).

The AKS 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 FHCP; (ii) arranging for the referral of FHCP patients; or (iii) recommending the purchase of a product that is reimbursed by a FHCP.

It is acceptable for the DME supplier to “purchase a lead.” However, it is a violation of the AKS 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?

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 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, physician name and contact information, 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, the AKS is likely not implicated. However, if the supplier purchases qualified leads on a per lead basis, the AKS 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,” there is a potential kickback problem. Conversely, if the answer is “no,” the AKS 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. 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 (“FMV”) equivalent of the services rendered by the LGC. Fixed annual FMV compensation is an important element of the Personal Services and Management Contracts safe harbor to the AKS.

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 response to this challenge, some DME suppliers enter into arrangements that 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 AKS. 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 AKS 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 FHCP, 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

Several years ago, 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

This arrangement is a kickback. 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 AKS. 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. Kickback arrangements involving back and knee braces exploded into public view with Operation Brace Yourself, a large criminal takedown of DME suppliers, LGCs, telehealth companies, and telehealth physicians.

A pharmacy, that was engaged in a similar LGC/sham telehealth arrangement, 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 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.
• 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 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.”

Jeffrey S. Baird, JD, is Chairman of the Health Care Group at Brown & Fortunato, a law firm with a national health care practice based in Texas. 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

Hospices, SNFs and Part A: Opportunities for DME Suppliers 

Presented by: Jeffrey S. Baird, Esq., Brown & Fortunato and Blinn E. Combs, Esq., Brown & Fortunato

Thursday, November 30, 2023

1:30-2:30 p.m. CENTRAL TIME
Because it primarily serves patients covered by Medicare, DME suppliers are accustomed to billing Medicare Part B directly (traditional Medicare) and indirectly (Medicare Advantage). There is an opportunity for DME suppliers to supplement their Part B income: this is through billing hospices and skilled nursing facilities (“SNFs”). Hospice providers and SNFs are paid under Medicare Part A for their services to Medicare patients. Hospices and SNFs are paid on a per patient per day basis. Out of the Part A reimbursement they receive, hospice providers and SNFs are required to pay health care providers (including DME suppliers) for products/services furnished by the providers to the hospice and SNF patients. This provides an opportunity for DME suppliers to enter into contracts with hospice providers and SNFs in which (i) the suppliers will furnish DME (including soft goods) to the hospice/SNF patients and (ii) the hospices/SNFs pay the suppliers for their products and services. This program will discuss the type of contact a DME supplier should enter into with a hospice provider and SNF. The program will focus on the most important provisions of the contract. The program will also focus on actions that can cause the DME supplier problems under the federal anti-kickback statute. In particular, the supplier cannot offer “anything of value” to hospices/SNFs in exchange for referrals of Part A patients. Lastly, the program will discuss the types of “value-added” services the DME supplier can provide to the hospice/SNF without expecting compensation in return … and the types of value-added services for which the hospice/SNF must compensate the DME supplier. 

Register for Hospices, SNFs and Part A: Opportunities for DME Suppliers on Thursday, November 30, 2023, 1:30-2:30 p.m. CT, with Jeffrey S. Baird, Esq., and Blinn E. Combs, Esq., of  Brown & Fortunato.

Members:  $99
Non-Members:  $129