AMARILLO, TX – The DME industry, in its present form, has been around for about 35 years. We are a young industry. The DME industry grew up unregulated. Hardly anybody on Capitol Hill, or in Baltimore, knew what the industry did. It is as if Congress and CMS woke up about seven years ago and declared: “What is this industry and why are we paying it money?” As the government seems to always do, it overreacted.

Now the DME industry is being hit with a “perfect storm” of events: (i) competitive bidding; (ii) stringent documentation requirements; (iii) post-payment audits; and (iv) prepayment reviews. In addition, the U.S. Department of Justice and the Office of Inspector General are becoming much more aggressive in bringing investigations against DME suppliers.

Part 1 of this 3 part series discussed qui tam lawsuits. Part 2 discusses prosecutorial discretion, how to avoid being a target, and signs that you are a target. Part 3 will discuss responsive steps, resolution of a civil proceeding, and resolution of a criminal proceeding.

Prosecutorial Discretion
Federal anti-fraud laws are broad and somewhat vague. An Assistant United States Attorney (“AUSA”) can compare acts of a DME supplier to a law and conclude that the law has been violated. Conversely, a defense attorney can look at the same set of facts, and the same law, and conclude otherwise. Unfortunately, the AUSA has unlimited resources and time and can make life miserable for a DME supplier if the AUSA chooses to do so. The take-away is that the AUSA has a great deal of “prosecutorial discretion.”

Even if a target of a federal investigation (civil or criminal) believes that it has done nothing wrong, then it will nevertheless likely choose to reach a settlement (civil case) or plea (criminal case) because the risk of going to trial is too high. The vast majority of criminal cases that go to trial result in a conviction. The reason for this is because the statute is so broadly worded, it is easy to violate it. Plus, a typical indictment will include everything but the kitchen sink.

For example, the indictment may contain 75 separate “counts,” any one of which can result in a prison term of five years. A common approach of an AUSA is to threaten to bring a multi-count indictment (e.g., 75 counts) but offer to drop all but one count if the target will plead to the one count. Even though the target may not want to do so, it may not want to run the risk of going to trial. The same approach holds true with civil False Claims Act (“FCA”) cases. The target may believe that it owes no money, but will be inclined to pay money in order to avoid the catastrophic damages under the FCA.

How to Avoid Being a Target
The DME supplier needs to understand the principle that in fraud and abuse land, there is no such thing as a technical loophole. It is substance over form. If your head tells you one thing, and your stomach tells you something else, then ignore your head and trust your stomach. If it “looks like a duck, walks like a duck…..” You choose the metaphor. Understand the principle that the supplier “lives in a glass house.” Understand the principle that if the supplier is doing something wrong, then someone knows about it.

It is important that the DME supplier implement a functioning corporate compliance plan (“CCP”). A CCP is an approximate 50 page document that summarizes the most important anti-fraud laws and sets out procedures that will help the DME supplier avoid violating such laws. As part of the CCP, the supplier will need to continually train its employees regarding compliance with anti-fraud laws. The supplier needs to appoint a dedicated, and thick skinned, corporate compliance officer (“CCO”).

For a large DME supplier, the CCO can be dedicated to only being the CCO. For a smaller DME supplier, the CCO can wear several hats. Normally, the CCO is not an attorney. The main job of the CCO is to be the “canary in the mine shaft.” The CCO does not have to know all of the nuances of the anti-fraud laws, but needs to know enough to have a Pavlovian reaction when he sees something that he does not like.

The principle benefit of having a CCO is that there is a person in the organization who is focusing on the various anti-fraud laws. As mentioned earlier, the CCO needs to have “thick skin.” By that we mean that he needs to be able to go “nose to nose” with the supplier’s CEO and say: “No, we cannot do what you want to do.” In addition, the CCO needs to be a “safe person” for employees to go to if they believe that the supplier is doing things it should not be doing. Often, fraudulent activities are discovered by rank and file employees.

The DME supplier would much rather have the employee go to the CCO than go to a qui tam attorney. The DME supplier needs to investigate the concern raised by the employee. If the employee’s concern is well founded, then the CCO needs to report back to the employee, thank him, and explain what corrective steps the supplier is taking. Conversely, if the facts show that the supplier has done nothing wrong, the CCO needs to report back to the employee, thank him, and explain why the supplier’s actions are proper.

Use an Experienced Health Care Attorney
This sounds self-serving. Nevertheless, while the DME supplier can use its local attorney for day-to-day business matters, the supplier needs to also have a relationship with an experienced health care attorney who has the ability to instantly recognize kickback, Stark, inducement, and false claims issues. By bouncing ideas off of a health care attorney, the DME supplier can avoid problems down the road.

Signs that the Supplier is a Target
The DOJ will normally not let the supplier know that it is a target until the investigation is substantially completed. The DOJ will likely have obtained records (e.g., claims submissions) from DME MACs and other CMS contractors. The investigative agents (FBI, OIG) will interview ex-employees, current employees, patients and physicians. Normally, one of these interviewees will tell the DME supplier of the interview.

Jeffrey S. Baird, JD, is chairman of the Health Care Group at Brown & Fortunato PC, a law firm based in Amarillo, Tex. Bradley W. Howard, JD, is chairman of the Litigation Group at Brown & Fortunato PC. They represent pharmacies, 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. Howard is Board Certified in Labor and Employment law by the Texas Board of Legal Specialization. Baird can be reached at (806) 345-6320 or [email protected]. Howard can be reached at (806) 345-6310 or [email protected].