AMARILLO, TX – On February 19, 2019, the Department of Justice (“DOJ”) Office of Public Affairs issued the following press release:

The United States has intervened in a False Claims Act case alleging that Arriva Medical, LLC (Arriva) and its parent, Alere, Inc. (Alere) submitted or caused false claims to the Medicare program for unnecessary glucometers and paid kickbacks to Medicare beneficiaries in the form of free glucometers and copayment waivers, the Justice Department announced today…

Arriva is mail-order diabetic testing supply company based in Coral Springs, Florida, which, at one point, had operations in Antioch, Tennessee. Alere is a large medical device company based in Waltham, Massachusetts, which acquired Arriva in 2011. Both Arriva and Alere were acquired by Abbot Laboratories in September 2017, after the alleged conduct occurred. In October 2016, the Centers for Medicare & Medicaid Services (CMS) revoked Arriva’s billing number for billing Medicare for durable medical equipment that was shipped more than fourteen days after a beneficiary’s death. Arriva subsequently stopped operating in December 2017.

The False Claims Act lawsuit alleges, among other things, that Arriva, with the oversight and approval of Alere, offered “free upgrades” of glucometers to Medicare beneficiaries. Because Arriva required all new customers to receive a new meter, regardless of whether they already had a functioning meter, Arriva allegedly routinely submitted false claims to Medicare for medically unnecessary meters. Arriva also allegedly made no meaningful effort to collect copayments from beneficiaries for the meters or diabetic testing supplies subsequently purchased from Arriva for use in connection with the meters. The waiver of patient copays or provision of other benefits to induce patients to purchase a company’s items or services is prohibited by the Anti-Kickback Statute.

The lawsuit was filed under the qui tam or whistleblower provisions of the False Claims Act, which allow private parties to file suit on behalf of the United States for false claims and to receive a share of any recovery. The act permits the United States to intervene and take over responsibility for litigating these cases, as it has done here in part. A defendant who violates the act is subject to three times the government’s losses, plus applicable penalties.

The claims in which the United States has intervened are allegations only, and there has been no determination of liability.

Because I am not privy to the underlying facts, I do not have an opinion as to whether the allegations set out in the qui tam complaint have merit. Nevertheless, the existence of the allegations and the existence of the qui tam complaint provide several lessons for DME suppliers.

Lesson One – If a Supplier is Doing Something it Should Not be Doing, Then Someone Knows About it

If a DME supplier is engaged in an activity that violates the law, then multiple people likely know about the violation. These people are normally employees of the supplier. Most employees, when they discover questionable activities, will bring the problem to the attention of their supervisor or the supplier’s compliance officer. If the supervisor/compliance officer does not investigate the problem, correct it if necessary, and report back to the employee, then that is usually the “trigger” that motivates the employee to hire an attorney who specializes in filing qui tam lawsuits. However, there may be that one employee that bypasses going to his supervisor/compliance officer and instead goes straight to the attorney to file a qui tam lawsuit.

And so it is important that the supplier understand that it “lives in the proverbial glass house” and, as such, the supplier needs to have procedures in place to (i) prevent fraud and (ii) investigate and resolve fraudulent activities that arise.

Lesson Two – Not Making a Reasonable Attempt to Collect Copayments is “Low Hanging Fruit” to the DOJ

The DME supplier must make a “reasonable effort” to collect copayments. The supplier does not have to collect 100% of copayments, but it must make a reasonable attempt to collect as much of the copayments as possible. Failure to make a reasonable effort to collect copayments can result in:

• Violation of the federal beneficiary inducement statute – This states that a supplier cannot provide (or offer to provide) anything of value to a federal health care program (“FHCP”) patient to induce the FHCP to purchase an FHCP-covered item from the supplier. If a supplier waives the FHCP patient’s copayment obligation without obtaining evidence of the patient’s inability to pay, then such waiver constitutes “something of value” to the FHCP patient. This “something of value” constitutes an inducement in violation of the statute.
• Violation of the federal anti-kickback statute (“AKS”) – This makes it a felony to knowingly and willfully offer, pay, solicit, or receive any remuneration to induce a person or entity to refer an individual for the furnishing or arranging for the furnishing of any item or service reimbursable by an FHCP, or to induce such person to purchase or lease or recommend the purchase or lease of any item or service reimbursable by an FHCP. If a supplier waives the FHCP patient’s copayment obligation without obtaining evidence of the patient’s inability to pay, then such waiver constitutes “something of value” to the FHCP patient and can be construed to induce the patient to purchase an item from the supplier.
• Violation of the federal false claims act – A false claim arises when a supplier submits a claim that is simply not true. An obvious example is when a supplier provides Product A but submits a claim for Product B. Another obvious example is when a supplier bills for something that the supplier never furnished. However, a false claim can arise in another way. If the supplier’s actions, that ultimately results in a claim, violate a federal anti-fraud law (such as the beneficiary inducement statute or the AKS), then the claim can end up being a false claim.

The following are “dos and don’ts” for the DME supplier pertaining to the collection of copayments:

• The supplier should never advertise that if an FHCP patient purchases from the supplier, then (i) the patient will not have to pay a copayment or (ii) if the patient can show an inability to pay, then he will not have to pay a copayment. The supplier’s approach needs to be: “Here is your product. Pay your copayment.”
• If the supplier instructs the FHCP to pay the copayment and if, in response, the patient says that he does not have the ability to pay, then at that time the supplier can inform the patient that the supplier might waive or reduce the copayment if the patient can show the supplier that the patient does not have ability to pay the copayment. The FHCP patient can show such inability to pay by completing a Financial Waiver Hardship Form in which the patient discloses his assets, liabilities, income and expenses. The supplier will then examine the information and make a determination of whether to (i) expect full payment of the copayment, (ii) reduce the copayment, or (iii) waive the copayment. As previously mentioned, the supplier cannot advertise the existence of the copayment waiver program.
• The DME supplier is not required to file a collection lawsuit against a patient who refuses to pay, or even to turn the patient over to a collection agency. However, the evidence needs to show reasonable efforts by the supplier to collect the copayment. These efforts can include letters and phone calls. Ultimately, the supplier may need to tell a “deadbeat” patient to find another DME supplier.

Lesson Three – A Robust Compliance Program and Self-Audits are Critical

It is critically important that a DME supplier adopt and fully implement a compliance program. A compliance program cannot just be a three-ring binder sitting on someone’s credenza. Rather, a compliance program needs to be integrated into everything that the supplier does. The compliance officer needs to be part of the management team. He/she needs to be involved with strategic planning and operational decisions. While the compliance officer does not have to be an attorney (most are not attorneys), and while the compliance officer does not need to have a 100% knowledge of the law, the compliance officer does need to know enough to be the “canary in the mine shaft.” That is, the compliance officer needs to know enough to develop a Pavlovian twitch when the supplier wants to do something that the compliance officer is not comfortable with. This is when the compliance officer can call a health care regulatory attorney and ask him/her to weigh in. These basic steps will prevent many problems from ever occurring.

It is also important that the supplier conduct self-audits on a regular basis throughout the year. These audits can be performed by employees of the supplier. Knowing that it may difficult for the supplier’s employees to be 100% objective, the supplier may want to consider having an outside consultant/auditor come in periodically to conduct an audit. By taking these self-audit steps, the supplier will be able to head off most problems before they end up in front of a qui tam attorney.

Lesson Four – The National Supplier Clearinghouse (“NSC”) is the 800 Pound Gorilla

If the DOJ intervenes in a qui tam lawsuit, or if the DOJ brings an investigation on its own, then it will likely take a couple of years (or longer) to resolve the matter. While the supplier is working to resolve the investigation, the supplier will normally be able to operate as it normally has. On the other hand, the NSC can shut a supplier down, with “flick of the switch,” by suspending/revoking the supplier’s PTAN. And so while it is important that the DME supplier not run afoul of any governmental agency, it is particularly important that the supplier remain in the good graces of the NSC.

Lesson Five – If You Buy the Stock of a Company, Make Sure You Know What You Are Buying

If Company A purchases the assets of Company B, then as a general rule Company A does not assume any liabilities of Company B. On the other hand, Company A might have legitimate business reasons to purchase the stock of Company B, resulting in Company B being the wholly-owned subsidiary corporation of Company A. If closing occurs on 3/1/19 and then on 9/1/19 Company B is hit with a government investigation for actions that occurred prior to 3/1/19, then Company B will have to respond to the investigation. While any liability, arising out of the investigation, should not be imposed directly on Company A, there is a risk that Company A may have paid too much for Company B. Said another way, as a result of the existence of the investigation, the value of Company B on 9/1/19 is likely less than its value on 3/1/19. The message for suppliers that are considering purchasing the stock of another supplier is that their due diligence before closing needs to be thorough.

AAHOMECARE’S EDUCATIONAL WEBINAR

Successfully Moving Into the Retail Market

Presented by: Jeffrey S. Baird, Esq., Brown & Fortunato, P.C. & Todd A. Moody, Esq., Brown & Fortunato, P.C.

 Tuesday, February 26, 2019

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

“Leave it to Beaver” has been replaced by “Modern Family.” The old way of running a DME business no longer works. With competitive bidding, stringent documentation requirements, lower reimbursement, and post-payment audits, Medicare fee-for-service should only be a component of the supplier’s total income stream. There are 78 million Baby Boomers retiring at the rate of 10,000 per day. Boomers are accustomed to paying for things out-of-pocket. And most Boomers want the “Cadillac” product – not the “Cavalier” product – so they can have an active lifestyle well into their 80s. The successful DME supplier will be focused on selling upgrades, utilizing ABNs, and selling “Cadillac” items for cash. These retail sales may take place in a store setting, through a kiosk, or over the Internet.

When selling products for cash, there are a number of requirements that the DME supplier must meet. This program will discuss these requirements, including the following

1. state licensure;
2. selling Medicare-covered items at a discount off the Medicare allowable;
3. obtaining a physician prescription; and
4. collection and payment of sales and/or use tax;
5. qualification as a “foreign” corporation;
6. required notification to a Medicare beneficiary even though the supplier does not have a PTAN;
7. complying with federal and state telemarketing rules.

Lastly, this program will discuss the benefits of setting up a separate legal entity through which the retail business will be operated.

Register for Successfully Moving Into the Retail Market on Tuesday, February 26, 2019, 2:30-3:30 p.m. ET, with Jeffrey S. Baird, Esq. and Todd A. Moody, Esq., of  Brown & Fortunato, PC.

FEES: Member: $99.00; Non-Member: $129.00

2019 Look Ahead for DME Suppliers

Presented by: Jeffrey S. Baird, Esq., Brown & Fortunato, P.C. and Andrea Stark, MiraVista, LLC

Moderated by: Liz Beaulieu, HME News

Thursday, Feb 28, 2019, at 1:00 p.m. EST

This has become an annual event. Towards the beginning of each year, Andrea Stark (MiraVista) and Jeff Baird (Brown & Fortunato) team up with Liz Beaulieu (HME News) to present the “hot topics” that DME suppliers will face during the coming year. On February 28, 2019, Andrea (pictured), Jeff and Liz will present their 9^th “Look Ahead” webinar. With reduced reimbursement, the looming next round of competitive bidding, aggressive audits, and the growth of managed care, the DME industry is having to remake itself. In this webinar, Andrea and Jeff will discuss (i) the most important topics that today’s DME supplier will face and (ii) how the supplier can modify its business model to succeed in 2019 and beyond. In an interactive “back and forth” manner, Andrea and Jeff will discuss the following “hot topics”:

• Billing Multi-Function Ventilators
• Avoidance of Cash Flow Disruption
• MBI Card Distribution
• Audits
• Negotiating Managed Care Contracts
• Telehealth Pitfalls
• Relationship Between the Home Sleep Test and the CPAP Supplier
• Noridian and CGS Lookback Request
• Operating in the Competitive Bidding “GAP” Period
• Predictions for the Next Round of Competitive Bidding

Register for 2019 Look Ahead for DME Suppliers.

AAHomecare’s Retail Work Group

The Retail Work Group is a vibrant network of DME industry stakeholders (suppliers, manufacturers, consultants) that meets once a month via video conference during which (i) an expert guest will present a topic on an aspect of selling products at retail, and (ii) a question and answer period will follow. The next Retail Work Group video conference is scheduled for March 28, 2019, at 11:00 a.m. Central. Jeff Baird, Brown & Fortunato, P.C., will present “Diving Deeper into the Legal Aspects of Retail.” Participation in the Retail Work Group is free to AAHomecare members. For more information, contact Ashley Plauché Manager of Government Affairs, AAHomecare ([email protected]).

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. 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].