AMARILLO, TX – There are two overriding reasons that DME suppliers may wish to collaborate with physicians. The first is coordination of care and the second is to generate referrals.
Coordination of Care
Historically, health care remuneration has been based on the fee-for-service (FFS) model. Under the FFS model, providers are paid for the services and products they provide … regardless of patient outcome. Under this model, there is little coordination among the providers treating the same patient. The FFS model has proven to be expensive and inefficient.
Third party payers (TPPs) are pushing health care providers to the patient outcome/collaborative care model. This model ties reimbursement, in part, to certain metrics being achieved. To achieve these metrics, providers need to work together (to “collaborate”) to achieve the optimal patient outcome.
Physicians are important referral sources for DME suppliers. If a physician knows the supplier and is confident in the supplier’s abilities to service patients, then it is likely that the physician will refer patients to the supplier. However, if the collaborative relationship results in remuneration (“anything of value”) to the physician, then federal and state anti-fraud laws are implicated.
Federal Anti-Fraud Statutes
In entering into a collaborative arrangement with a physician, the DME supplier needs to be aware of the important federal anti-fraud statutes.
Federal Anti-Kickback Statute – The federal anti-kickback statute (“AKS”) prohibits a DME supplier from giving “anything of value” to a physician in exchange for the physician (i) referring federal health care program (“FHP”) patients to the supplier, (ii) arranging for the referral of FHP patients to the supplier, or (iii) recommending the purchase of a service or product from the supplier that is covered by an FHP. The term “anything of value” is quite broad and includes (i) payment of money, (ii) payment of expenses, and (iii) providing gifts. A violation of the AKS is a criminal offense. But there are a number of “safe harbors” to the AKS. If an arrangement falls within a safe harbor, then as a matter of law, the AKS is not violated.
Federal Physician Self-Referral Statute (“Stark”) – Stark prohibits a physician from referring Medicare and Medicaid patients, for designated health services (“DHS”), to a provider with which the physician (or an immediate family member of the physician) has a financial relationship—unless the financial relationship fits within a Stark exception. The term “financial relationship” includes (i) an ownership interest by the physician (or an immediate family member of the physician) in the provider and/or (ii) compensation (or anything else of value) from the provider to the physician (or an immediate family member of the physician). DHS includes DME. Violation of Stark results in civil liability. There are a number of exceptions to Stark, including the Nonmonetary Compensation Exception that allows a DME supplier to spend money each year on gifts, meals and entertainment for a physician—so long as the amount spent does not exceed a set amount. For 2022, that amount is $452.
State Anti-Fraud Laws
In addition to federal laws, there are state laws that need to be examined. These include:
- State anti-kickback statutes – Some statutes apply only when the payor is the state Medicaid program. Other statutes apply even if the payor is a commercial insurer or a cash-paying patient.
- A number of states have physician self-referral statutes that are similar to Stark.
- Each state has a set of statutes that are specific to physicians.
Health care attorneys can fairly easily locate these state laws. The non-attorney can obtain a basic understanding by going to Google, typing in the name of the state, and then typing in the following key words: kickback, anti-kickback, referral, fee splitting, patient brokering, and self-referral.
The DME supplier and physician can participate together in a clinical study. Ideally, the clinical study will be sponsored by a hospital or medical school and will be overseen by an Institutional Review Board (“IRB”). It is important that the clinical study not be a disguised kickback scheme designed to funnel compensation to referring physicians. The supplier can use the results of the clinical study to show physicians, hospitals and TPPs (i) that the supplier has a sophisticated business model and (ii) that the supplier’s products and services are successful in treating conditions and keeping patients out of the hospital.
A physician (regardless of whether or not he is a referring physician) can be a 1099 independent contractor Medical Director for the DME supplier. If the physician refers to the supplier, then the Medical Director Agreement (“MDA”) needs to comply with (i) the Personal Services and Management Contracts safe harbor to the AKS and (ii) the personal services exception to Stark.
Among other requirements, (i) the MDA needs to be in writing, (ii) the MDA must have a term of at least one year, (iii) the methodology for calculating the compensation must be fixed on year in advance, and (iv) the compensation must be the fair market value (“FMV”) equivalent of the physicians’ services … and cannot take into account the anticipated number of referrals from the physician to the supplier. Further, the services provided by the physician to the supplier must be substantive and valuable. They cannot be “made up” services.
The physician can set up times for the DME supplier to send representatives to the physician’s office to educate the physician’s employees regarding (i) products and services offered by the supplier and (ii) how the supplier’s products/services can treat specific conditions. The physician can set up times for the supplier to send representatives to the physician’s office to present workshops to the physician’s patients who have conditions that can be treated by the supplier’s products and services.
Sponsoring the Physician as a Speaker
The DME supplier can pay the physician for speaking at educational workshops and dinners.
In order to avoid problems with the AKS and Stark:
- The topic presented by the physician must be substantive and relevant to the audience.
- The audience must be made up of individuals who will benefit from what the physician has to say.
- The compensation to the physician must be FMV.
Renting Space to/from a Physician
The DME supplier can rent space from or to a physician. The arrangement needs to comply with the Space Rental safe harbor to the AKS and the space rental exception to Stark. The safe harbor and exception say the same thing. Among other requirements:
- The rental agreement must be in writing with a term of at least one year.
- The rent paid must be fixed one year in advance and be FMV.
The DME supplier can place an employee liaison in the physician’s office. The liaison can be present in the physician’s office for as many or as few hours as the physician and supplier agree on.
The employee liaison cannot perform any duties that the physician is responsible to perform. Doing so will save the physician money, which constitutes “something of value” to the physician—hence, a violation of the AKS.
The liaison can educate the physician’s employees regarding the products and services provided by the supplier. The liaison can do so through formal educational lunches and through informal one-on-one conversations with the physician’s employees. The liaison can educate the physician’s patients regarding the products and services provided by the supplier. The liaison can do so by presenting formal educational workshops and through informal one-on-one conversations with the physician’s patients. If a patient of the physician decides that he/she will use the supplier, then the liaison can work with the patient to transition him/her to the supplier.
Unless the physician pays fair market value compensation to the DME supplier for the liaison’s services, the liaison cannot (i) handle preauthorization calls on behalf of the physician; (ii) provide billing services on behalf of the physician; and (iii) provide data input services on behalf of the physician.
Sponsoring Physicians at Educational Events – Hypothetical Scenarios
Scenario #1: Dr. Smith refers federal health care program (“FHCP”) patients to ABC Medical Equipment. Dr. Smith requests ABC to sponsor his trip to a conference in Palm Springs.
Scenario #2: ABC is holding its annual meeting in Aspen in July for its employees. ABC asks Dr. Jones to speak at the annual meeting. Dr. Jones refers FHCP patients to ABC. In so doing, ABC offers to (i) pay Dr. Jones for his time in preparing for and presenting his program and (ii) reimburse Dr. Jones for his travel expenses.
Analysis of Scenario #1: Dr. Smith refers FHCP patients to ABC. If ABC compensates Dr. Smith, then the transaction creates a financial relationship between Dr. Smith and ABC. As such, the arrangement violates Stark unless an exception is met.
ABC would like to reimburse Dr. Smith for his expenses in attending the Palm Springs conference. The Nonmonetary Compensation Exception only applies to compensation paid to a physician in the form of items or services, not cash or cash equivalents. Further, Dr. Smith reached out to ABC to request the compensation. The exception does not apply if the physician solicits an entity for the compensation. Accordingly, the arrangement does not fall within the Nonmonetary Compensation Exception.
This scenario also would likely not meet the Personal Services exception or the FMV exception to Stark. Both exceptions require the physician to provide a service to the entity. Dr. Smith’s attendance at the Palm Springs conference does not constitute a “service” for ABC.
Dr. Smith refers FHCP patients to ABC, and if ABC agrees to cover some of Dr. Smith’s expenses to attend the Palm Springs conference, then Dr. Smith is receiving renumeration … thereby implicating the AKS. To avoid problems under the AKS, the arrangement would need to meet an AKS safe harbor. Because Dr. Smith is not providing a service to ABC, the Personal Services and Management Contracts (“PSMC”) safe harbor is not met.
Analysis of Scenario #2: Like the first arrangement, Dr. Jones refers FHCP patients to ABC and a financial relationship will form if ABC compensates Dr. Jones. As such, the arrangement implicates Stark unless an exception is met.
Unlike the first arrangement, Dr. Jones is providing ABC a service by speaking at an ABC sponsored meeting attended by ABC’s employees. The purpose of his presentation is to educate and train the ABC employees on clinical and related issues.
Since Dr. Jones is providing ABC a service, the arrangement can be structured to fall under the Stark Personal Services exception. The written agreement must include: (i) a detailed description of Dr. Jones’s presentation, how it will be given, and the intended audience; (ii) a set compensation amount that is FMV; and (iii) an agreement term for not less than one year. The Personal Services exception also requires that the service be reasonable and necessary for the legitimate business purposes of the arrangement.
ABC’s arrangement may also fall within the FMV exception. It is reasonable to assume that Dr. Jones’s presentation will be commercially reasonable and furthers a legitimate business purpose. Note that the FMV exception also requires compliance with the AKS. The arrangement can be structured to comply with (or substantially comply with) the PSMC safe harbor. This is so long as the arrangement is put in writing and the agreement includes the safe harbor’s requirements.
To reduce the risk of an enforcement action, ABC should include significant detail on the amount of time Dr. Jones will be paid to prepare and give his presentation. For example, the agreement can require Dr. Jones to submit his presentation for approval by ABC prior to the Aspen meeting. The agreement should also limit Dr. Jones’s expenses to reasonable amounts and require Dr. Jones to submit an invoice of his time and expenses to ABC. This will allow ABC to review Dr. Jones’s expenses and ensure that his costs are reasonable and within the compensation amount set forth in the agreement. Only after ABC’s review and approval of the invoice should ABC compensate Dr. Jones.
Annual Wellness Visits (AWVs)/Remote Patient Monitoring (RPM)/Chronic Care Management (CCM)
Assume that the physician (i) has AWVs with patients, (ii) provides RPM to patients and/or (iii) provides CCM to patients. Assume that the DME supplier assists the physician in (i) conducting AWVs and (ii) providing RPM and CCM. It is the physician that is paid for AWVs, RPM and CCM. If the supplier assists with AWVs, RPM and CCM for free, then such assistance constitutes “something of value” to a referral source, thereby implicating the AKS and Stark. In order to avoid AKS and Stark problems, the physician must pay fair market value compensation to the DME supplier for the supplier’s services.
AAHOMECARE’S EDUCATIONAL WEBINAR
Transitioning from Billing Assigned to Billing Non-Assigned
Presented by: Jeffrey S. Baird, Esq., Brown & Fortunato & Lisa K. Smith, Esq., Brown & Fortunato
Tuesday, February 22, 2022
1:30-2:30 p.m. CENTRAL TIME
Since its inception in the 1970s, the DME industry has been an “assignment” industry. A DME supplier would provide a product to a Medicare beneficiary, take assignment from the beneficiary, bill and collect from Medicare, and bill the beneficiary for the copayment. As a result of lower Medicare reimbursements, and in response to the willingness of aging Baby Boomers to pay cash for “Cadillac” products, an increasing number of DME suppliers are electing to become “non-participating” suppliers and are providing Medicare-covered items on a non-assigned basis. This means that the Medicare beneficiaries pay cash up front to the suppliers. This program will discuss the multiple issues arising out of transitioning from billing assigned to billing on a non-assigned basis, including the following: (i) What does it mean to bill non-assigned? (ii) If the supplier bills an item non-assigned, can the supplier set the price without limitation? (iii) Must the supplier submit a claim to Medicare so that the beneficiary can be reimbursed? (iv) Can the supplier sell a capped rental item for cash? (v) Does the supplier need to obtain documentation supporting medical necessity? (vi) Is the supplier at risk of having to repay Medicare and/or the beneficiary in the event of a subsequent audit?
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 firstname.lastname@example.org.