Moving the HME Industry Forward

General Healthcare

Recognizing and Avoiding Fraud Landmines (Part I of Five)

Jeffrey S. Baird, JD • May 12, 2018

AMARILLO, TX – DME suppliers operate in a highly regulated environment. They must comply with (i) federal anti-fraud laws, (ii) state anti-fraud laws, (iii) supplier standards, (iv) accreditation requirements, and (v) guidance from Medicare, Medicaid and commercial insurers. If a DME supplier is doing something it should not be doing, then “someone knows about it.” That “someone” can be an employee, a competitor, a referral source, or a government agency/contractor.

If a DME supplier violates one or more of the federal anti-fraud laws, then it can (i) have potential criminal liability, (ii) potential civil liability, and (iii) be subject to payment supervision and PTAN revocation. The risks are too high for the supplier to be cavalier regarding compliance with anti-fraud laws. It is important that on a day-to-day basis, the supplier (i) be aware of the applicable federal and state anti-fraud laws and (ii) be aware of whether it is in compliance with the laws.

Part I summarizes federal and state anti-fraud laws. Parts II – V will discuss fraud landmines to avoid.

Federal Anti-Fraud Statutes

Federal Anti-Kickback Statute (“AKS”) – This statute 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 a federal health care program (e.g., Medicare, Medicare Advantage, Medicaid, Medicaid Managed Care, TRICARE), or to induce such person to purchase or lease or recommend the purchase or lease of any item or service reimbursable by a federal health care program.

Beneficiary Inducement Statute – This statute imposes civil monetary penalties upon a person or entity that offers or gives remuneration to any Medicare/Medicaid beneficiary that the offeror knows or should know is likely to influence the recipient to order an item for which payment may be made under a federal health care program. This statute does not prohibit the giving of incentives that are of “nominal value” (nor more than $15 per item or $75 in the aggregate to any one beneficiary on an annual basis).

Anti-Solicitation Statute – A DME supplier may not call a Medicare beneficiary regarding the furnishing of a Medicare-covered item unless: (i) the beneficiary has given written permission (“blue ink” or electronic) for the call; (ii) the supplier has previously provided the covered item to the beneficiary and the supplier is contacting the beneficiary regarding the covered item; or (iii) if the telephone call is regarding the furnishing of a covered item other than an item previously furnished to the beneficiary, then the supplier has furnished at least one covered item to the beneficiary during the preceding 15 months.

Stark Physician Self-Referral Statute – This statute states that if a physician (or an immediate family member) has a financial relationship with an entity providing designated health services (“DHS”), then the physician may not refer patients to the entity unless a Stark exception applies. DHS includes DME. A “financial relationship” includes ownership (i.e., the physician has an ownership interest in the DME supplier) and compensation (i.e., the DME supplier provides “something of value” – such as payments or gifts or subsidization of expenses – to the physician).

Federal Safe Harbors

Because of the breadth and scope of the AKS, the Office of Inspector General (“OIG”) has published a number of “safe harbors.” If an arrangement meets the requirements of a safe harbor, then as a matter of law the arrangement does not violate the AKS. If an arrangement does not meet the requirements of a safe harbor, then it does not mean that the arrangement automatically violates the AKS. Rather, the arrangement must be carefully scrutinized under the wording of the AKS, court decisions, and published OIG guidance. There are five safe harbors that are particularly applicable to DME suppliers:

Small Investment Interest – For investments in small entities, “remuneration” under the AKS does not include a return on the investment if a number of standards are met, including the following: (i) no more than 40% of the investment can be owned by persons who can generate business for or transact business with the entity and (ii) no more than 40% of the gross revenue may come from business generated by investors.

Space Rental – “Remuneration” under the AKS does not include a lessee’s payment to a lessor as long as a number of standards are met, including the following: (i) the lease agreement must be in writing and signed by the parties; (ii) the lease must specify the premises covered by the lease; (iii) if the lease gives the lessee periodic access to the premises, then it must specify exactly the schedule, the intervals, the precise length, and the exact rent for each interval; (iv) the term must be for not less than one year; and (v) the aggregate rental charge must be set in advance, be consistent with fair market value, and must not take into account business generated between the lessor and the lessee.

Equipment Rental – “Remuneration” under the AKS does not include any payment by a lessee of equipment to the lessor of equipment as long as a number of standards are met, including the following: (i) the lease agreement must be in writing and signed by the parties; (ii) the lease must specify the equipment; (iii) for equipment to be leased over periods of time, the lease must specify exactly the scheduled intervals, their precise length, and exact rent for each interval; (iv) the term of the lease must be for not less than one year; and (v) the rent must be set in advance, be consistent with fair market value, and must not take into account any business generated between the lessor and lessee.

Personal Services and Management Contracts – “Remuneration” under the AKS does not include any payment made to an independent contractor as long as a number of standards are met, including the following: (i) the agreement must be in writing and signed by the parties; (ii) the agreement must specify the services to be provided; (iii) if the agreement provides for services on a sporadic or part-time basis, then it must specify exactly the scheduled intervals, their precise length and the exact charge for each interval; (iv) the term of the agreement must be for not less than one year; (v) the compensation must be set in advance, be consistent with fair market value, and must not take into account any business generated between the parties; and (vi) the services performed must not involve a business arrangement that violates any state or federal law.

Employees – Remuneration does not include any amount paid by an employer to an employee, who has a bona fide employment relationship with the employer, for employment in the furnishing of any item or service for which payment may be made, in whole or in part, under Medicare or under a state health care program.

Advisory Opinions

A DME supplier may submit to the OIG a request for an advisory opinion concerning a business arrangement that the supplier has entered into or wishes to enter into in the future. In submitting the advisory opinion request, the supplier must give to the OIG specific facts. In response, the OIG will issue an advisory opinion concerning whether or not there is a likelihood that the arrangement will implicated the AKS.

Special Fraud Alerts and Special Advisory Bulletins

From time to time, the OIG publishes Special Fraud Alerts and Special Advisory Bulletins that discuss business arrangements that the OIG believes may be abusive, and educate health care providers concerning fraudulent and/or abusive practices that the OIG has observed and is observing in the industry. A number of the Fraud Alerts and Advisory Bulletins are specific to a particular group of providers: physicians, hospitals, ambulance companies, home health agencies…and DME suppliers.

States

All states have enacted statutes prohibiting kickbacks, fee splitting, patient brokering and self-referrals. Some state anti-kickback statutes only apply when the payer is a government health care program (e.g., the state Medicaid program), while other state anti-kickback statutes apply regardless of the identity of the payer (e.g. they apply even if the payer is a commercial insurer or a cash-paying patient). Many states have physician self-referral statutes that are similar to Stark. All states have statutes that are specific to physicians; these physician-specific statutes may include prohibitions against kickbacks and self-referrals.

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. Baird is Board Certified in Health Law by the Texas Board of Legal Specialization, and can be reached at (806) 345-6320 or jbaird@bf-law.com.