AMARILLO, TX – Over the past couple of years, I have written articles on the convergence of DME suppliers, lead generation companies (“LGCs”), and telehealth companies. An LGC can also be a “telemarketer.” What we have been witnessing in the DME space is the following:

• The DME supplier will enter into a contract with an LGC. The LGC will generate “leads” for the supplier. The LGC will do so in a number of ways. For example, the LGC will generate leads “organically” by managing websites. Prospective customers (the “leads”) will visit the website and if the lead is interested in the products offered on the website, then the lead will input his information…after which the LGC or the DME supplier will contact the lead. In addition, or in lieu of, managing websites, the LGC will purchase leads from other LGCs. The selling LGCs are sometimes referred to as “lead brokers.” The LGC might run television commercials; these are often in the form of infomercials. A lead will view the commercial and then call the LGC’s toll-free number. Or the LGC might obtain lists of leads and cold call them.
• The LGC will sell the leads to the DME supplier.
• On behalf of the supplier, the LGC will forward the leads to a telehealth company. The telehealth company will set up telephone conferences between the leads and telehealth physicians.
• A lead will have a telephone conversation with the telehealth physician. If the physician determines that the lead needs a product advertised by the LGC, then the physician will order the product. The order will go to the DME supplier that hired the LGC.

Here is how the money flows: (i) DME supplier pays the LGC; (ii) the LGC pays the telehealth company; (iii) the telehealth company pays the physician; and (iv) Medicare pays the DME supplier for the product ordered by the physician. As discussed in prior articles, there are a number of potential problems with the above arrangement:

• If the LGC only gathers the name, address and phone number for the lead, then the lead will be classified as a “raw” or “unqualified” lead. The odds of the raw lead purchasing a product from the supplier are low. From a kickback standpoint, it is low risk if the supplier purchases the raw leads on a “per lead” basis.
• Now let us assume that the LGC gathers additional information on the lead such as physician’s name, insurance coverage, diagnosis, and health care products currently being used. This type of lead is not a “raw” lead. Rather, it is a “qualified” lead. The odds of the qualified lead purchasing a product from the supplier increases. The kickback risk substantially increases if the DME supplier purchases qualified leads on a per lead basis. Such payments will likely be construed to be “payments for referrals.” The safest way for a DME supplier to purchase qualified leads is for the arrangement to comply with, or substantially comply with, the Personal Services and Management Contracts safe harbor to the federal anti-kickback statute (“AKS”). Among other requirements, (i) the parties must sign a contract with a term of at least one year; (ii) the compensation by the supplier to the LGC needs to be fixed one year in advance (e.g., $60,000 per year or $5000 per month); and (iii) the compensation must be the fair market value (“FMV”) equivalent of the LGC’s services.
• The next issue pertains to the telehealth encounters between the physicians and the leads. The first question is whether the physician is licensed to practice medicine in the state where the lead resides. The second question is whether the telehealth encounter complies with the laws of the state in which the lead resides. Each state regulates telehealth conducted within the state’s borders. In some states, the telehealth physician must have an initial face-to-face encounter with the lead before the physician can start providing telehealth services. In a number of states, a phone call is not sufficient; these states require both a visual and an audio encounter.
• And then we come to a potential kickback problem. Look at the “flow of money” described above. It is a self-contained loop. The DME supplier pays the LGC…the LGC pays the telehealth company…the telehealth company pays the physician…and Medicare pays the DME supplier (with such payment being based on the order from the telehealth physician). In reality, the DME supplier is paying the ordering physician…hence, a kickback. In order to avoid this kickback problem, the money being paid to the telehealth physician cannot directly or indirectly come from the DME supplier. Rather, the money needs to come from the lead, the lead’s insurance company, or the lead’s employer.
• The final issue pertains to what Medicare will pay for. Medicare law is several years behind technology. At present, Medicare will pay for DME, in which the physician order arises out of a telehealth encounter, only when several conditions are met, including the following: (i) the lead must get out of his sofa, get in his car, and drive to an “originating site” (e.g., hospital or physician office) at which the telehealth encounter will occur; (ii) the originating site must be located in a health professional shortage area or in a rural area; and (iii) the telehealth encounter must be both visual and audio. See 42 C.F.R. 410.78. Over the past several years, Medicare has been paying for DME – mostly orthotics – in which these conditions have not been met. However, the CMS contractors are recouping this money pursuant to post-payment audits.

The above serves as the backdrop for the latest CMS guidance. MLN Matters Number SE18009 (December 18, 2018) states:

Orders From Telemarketers and Telemedicine Companies

Section 1834(a)(17)(A) of the Social Security Act imposes a payment prohibition on DMEPOS suppliers that make unsolicited phone calls to Medicare beneficiaries regarding furnishing covered DMEPOS items. This prohibition is subject to several exceptions, such as a beneficiary providing a DMEPOS supplier with written permission to initiate contact regarding the furnishing of a covered DMEPOS item. In addition, violation of the above provision can result in a possible exclusion from the Medicare program. Also, the provision on unsolicited telephone contacts also [sic] is a DMEPOS supplier enrollment standard set forth at 42 C.F.R. 424.57(c)(11). The DMEPOS supplier is responsible for verifying whether marketing activities performed by themselves [sic] OR a third party under contract with the DMEPOS supplier, comply with the Federal statutes [and] regulations cited above. If a claim for payment is submitted for items or services generated by a prohibited solicitation, both the DMEPOS supplier and the telemarketer may be potentially liable for criminal, civil and/or administrative penalties for filing a false claim…It is worth noting that any contact between an ordering practitioner and a beneficiary related to an order for a DMEPOS item does not constitute a telehealth service. Federal regulations at 42 C.F.R. 410.78 define what constitutes a clinical encounter between a beneficiary and ordering physician that would be covered by Medicare. (Emphasis added)

There are a number of issues arising out of this MLN Matters article, including the following:

• Assume that the DME supplier purchases leads from the LGC. Under the telephone solicitation statute and Supplier Standard #11, the supplier cannot call the leads, nor can another entity (e.g., the LGC or telehealth company) call the leads on behalf of the supplier, unless one of three conditions are met: (i) the lead is a patient of the supplier and the supplier (or entity on behalf of the supplier) calls the lead about a Medicare-covered item that the lead has previously obtained from the supplier; (ii) the lead is a patient of the supplier, the lead has purchased a Medicare-covered item within the previous 15 months, and the supplier (or entity on behalf of the supplier) calls the lead about a different health care product offered by the supplier; or (iii) the lead is not a patient of the supplier, but the lead has given his written consent (blue ink or electronic) to be called by the supplier. In light of this restriction against calling, the best course of action is for the LGC to obtain a written consent from the lead for the specifically-named supplier to call the lead. If claims are submitted by the supplier, in which such claims arise from a scenario in which the statute and standard are violated, then there is a risk that the claims will construed to be false claims.
• As discussed earlier in this article, for there to be a valid telehealth encounter the requirements of 42 C.F.R. 410.78 must be met: (i) the lead must go to an “originating site” (e.g., hospital or physician office) at which the telehealth encounter will occur; (ii) the originating site must be located in a health professional shortage area or in a rural area; and (iii) the telehealth encounter must be both visual and audio. If the supplier determines (or reasonably should have determined) that telehealth encounters, resulting in physician orders, did not comply with 42 C.F.R. 410.78, then under the “60 day rule,” the supplier (i) has six months to investigate and quantify the faulty claims and (ii) has 60 days thereafter to report and refund the claims to Medicare. If the supplier should fail to do so, then such claims become “false claims.”

AAHOMECARE’S EDUCATIONAL WEBINAR

“Hub and Spoke,” Centralized Intake, and Other Steps to Streamline Operations

Presented by: Jeffrey S. Baird, Esq., Brown & Fortunato, P.C. & Markus P. Cicka, Esq., Brown & Fortunato, P.C.

Tuesday, January 15, 2019

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

The DME industry is in a transition period. Competitive bidding is on hiatus for two years and then it will reappear in a modified form. Reimbursement continues to be ratcheted down and suppliers are responding to TPE audits. Increasingly, Medicare and Medicaid patients are moving to managed care plans. And yet, with the aging of 78 million Baby Boomers, the demand for DME is increasing. In order to succeed, the DME supplier needs to implement “economies of scale” that allow it to serve patients in a cost-effective manner. This webinar will discuss specific examples of ways that suppliers can streamline their operations. For example, the webinar will discuss centralized intake in which a supplier with multiple PTANs can have only one intake office. The webinar will also discuss the “hub and spoke” model that allows a supplier to expand geographically without having to go through the expense of obtaining additional PTANs. Increasingly, in order to reduce expenses, suppliers are utilizing off-shore contractors. The webinar will discuss the requirements the supplier must meet in order to work with such contractors. These and other examples will be discussed that are designed to allow the supplier to provide quality services and products in a cost efficient manner.

Register for “Hub and Spoke,” Centralized Intake, and Other Steps to Streamline Operations on Tuesday, January 15, 2019, 2:30-3:30 p.m. ET, with Jeffrey S. Baird, Esq. and Markus P. Cicka, Esq., of  Brown & Fortunato, PC.

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

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 [email protected].