AMARILLO, TX – At this point, most savvy individuals in the DME space have at least a passing awareness of federal anti-kickback statute (“AKS”) and the federal physician self-referral statute (“Stark”)—at least sufficient to know that they can avoid the applicability of these statutes so long as they do not receive money from federal healthcare programs like Medicare and Medicaid. However, many in the DME space take this to mean that, so long as they don’t take federal money, all bets are off and engaging in referral-based business is fair game. More often than not, that is not the case.
Many states have laws prohibiting kickbacks and regulating physician self-referrals. These laws create a patchwork of regulatory requirements across the United States. Some state laws adopt a generic “All-Payor Stark” or “All-Payor AKS” approach that takes the federal framework and applies it to all patients regardless of payor. Other states adopt carveouts for specific programs, like New York’s law specific to the No-Fault program, that prohibits patient solicitation activities when the provider accepts payment from the state No-Fault program.
Some state laws regulate patient brokering or marketing, rather than focusing on what we typically think of as kickbacks or self-referrals. For example, the New York and Delaware laws discussed below have broad definitions of fee-splitting that limit the options DME companies have to create incentive-based marketing arrangements or create affiliations with other companies. Many of these laws were passed a long time ago in response to a specific problem that arose at that time, but use broad, general language that implicates modern business structures that the authors of the laws would not have anticipated. Guidance in relation to the applicability of these laws is often limited and/or antiquated, and enforcement patterns are all over the place, from being strictly enforced, to being untouched.
Take the Texas Patient Solicitation Act for example. This Act is, fundamentally, an All-Payor AKS statute that was passed in the early 1990s in response to abusive practices in the mental health industry that occurred in Texas in the 1980s. Due to an oversaturation of private mental health hospitals, coupled with reflexive decreased coverage in mental health hospitalizations by insurers, private mental health hospitals began to pay kickbacks for referrals, often called “bounties” at the time, on a widespread basis in order to sustain their operations.
However, after its passage, the law largely collected dust for over 20 years until the Texas Attorney General sought to investigate a potential kickback scheme involving physician investment in compounding pharmacies. While the motivation for the law was narrow, the application is broad and must be taken into consideration in structuring DME business operations. Additionally, while the law remained dormant for a long time, enforcement can come at any time and is not limited to the original problem or industry that resulted in the law’s adoption.
In another instance, in New York, the blanket prohibition on Medical Referral Services arose in response to the influx of out-of-state patients seeking abortion services after the legalization of abortion services in New York in 1970 and prior to the Roe v. Wade decision in 1973. At the time, middlemen were charging potential patients a flat fee that was inclusive of room, board, travel, and medical services pursuant to arrangements with specific hospitals and medical providers.
In response, New York passed a law banning these for-profit businesses in 1971, but in doing so framed the law in very expansive language that impacts the relationships between providers today. Just two years after the passage of the law, Roe v. Wade was decided and the purpose for which the law was passed became moot for a long time. As a result, despite the fact that enforcement and interpretation of the law has been largely dormant for nearly 50 years, this law still dictates how the business of DME is conducted in New York.
For a more modern example, Delaware recently passed a statute aimed at eliminating patient brokering in 2019. The motivation for the passage of this statute was to curb “body brokering,” a practice where substance abuse, mental health, and addiction treatment facilities pay marketers to convince marginalized patients (with good insurance) to come to the facilities they represent, often by bribing the patients directly. However, the scope of this law is not limited to recovery facilities, nor is it limited by payor. In sweeping terms, it prohibits inducements through kickbacks or split-fee arrangements between anyone and a health care provider or facility for a referral or acceptance for treatment. Yet again, we have a state law passed for a particular purpose. However, the scope and application is unlimited, and must be taken into account by DME companies operating in Delaware.
Nearly every single one of the 50 states in this country have specific laws that could impact the relationships between a DME company and other health care providers, especially when marketing or referrals are involved, or where the relationship involves a physician. Many of these laws are unique, and even if the law is not unique, the enforcement pattern may be. Considering the examples above, even if a DME supplier chooses to operate in a manner that does not involve accepting money from federal health programs, it is important to ensure that state law has been adequately reviewed by a qualified attorney for each state in which the supplier intends to engage in business.
Jeffrey S. Baird, JD, is Chairman of the Health Care Group at Brown & Fortunato, PC, 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. Mr. 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].
Amanda F. Hobbs, JD, is an attorney with the Health Care Group at Brown & Fortunato, PC, a law firm with a national health care practice based in Texas. She represents pharmacies, infusion companies, HME companies, manufacturers and other health care providers throughout the United States. Ms. Hobbs can be reached at (806) 345-6312 or [email protected].
AAHOMECARE’S EDUCATIONAL WEBINAR
Compliance Program: Mistake Avoidance, Company Valuation, Audits, and 60 Day Rule
Presented by: Jeffrey S. Baird, Esq., Brown & Fortunato & Wayne van Halem, The van Halem Group
Tuesday, December 3, 2024
1:30-2:30 p.m. CENTRAL TIME
Implementation of a formal compliance program has a “real world” impact on DME suppliers. A compliance program is a blueprint (“roadmap”) for the supplier’s employees to follow as they fulfill their employment responsibilities. The program (i) anticipates the multiple daily decisions the supplier must make and (ii) erects guardrails to follow in making the decisions. In short, a functioning compliance program helps DME suppliers avoid mistakes. If a DME supplier decides to sell, the purchaser will conduct due diligence, meaning that it will examine the supplier’s operations to determine if they are legally compliant. A noncompliant operation (e.g., providing CPAPs in violation of the Medicare CPAP Payment Prohibition) will greatly reduce the selling supplier’s value to a prospective buyer. DME suppliers are audited by multiple sources. If the supplier operates within the compliance program’s guardrails, the risk of an audit leading to a bad outcome is greatly reduced. And then there is the 60 Day Rule and Six-Year Lookback. If a DME supplier determines that it has been improperly submitting claims to Medicare, the supplier is obligated to investigate the matter and then report and refund the claims to Medicare. Depending on the circumstances, the supplier may have to conduct a Six-Year Lookback. A functioning compliance plan will reduce the risk of improperly submitting claims that result in in applicability of the 60 Day Rule and Six-Year Lookback.
This program will examine (i) how a compliance program should be drafted and adopted by the DME supplier, (ii) how the program should be updated on a regular basis, and (iii) how following the guardrails contained in the program will reduce the number of mistakes, maintain the value of the supplier, reduce bad audit outcomes, and reduce the risk of having to conduct a Six-Year Lookback.
Register for Compliance Program: Mistake Avoidance, Company Valuation, Audits, and 60 Day Rule on Tuesday, December 3, 2024, 1:30-2:30 p.m. CT, with Jeffrey S. Baird, Esq. and Wayne van Halem.
Members: $99
Non-Members: $129
