AMARILLO, TX – To establish a steady stream of referrals, it is important that the DME supplier develop relationships with physicians, hospitals, long-term facilities and other referral sources. This article discusses how arrangements with referral sources can be structured to comply with applicable federal laws.

Federal Statutes

• Physician Self-Referral Statute (“Stark”) – This statute provides that if a physician (or an immediate family) has a financial relationship with an entity providing designated health services (“DHS”), then the physician may not refer patients to the entity unless an exception is met. DHS includes DME.
• 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 (or arrange for the referral of) an individual for an item or service covered by a federal health care program.
• Beneficiary Inducement Statute – This statute imposes civil monetary penalties upon a person or entity that offers or gives something of value to prospective customers covered by a government health care program.

Safe Harbors

The Office of Inspector General (“OIG”) has issued a number of “safe harbors” to the AKS. If an arrangement falls within a safe harbor, then, as a matter of law, the arrangement does not violate the AKS. If the arrangement does not fall within a safe harbor, it does not mean that the AKS is violated. Rather, it means that a stringent analysis of the arrangement must be made. Two important safe harbors are:

• Personal Services and Management Contracts Safe Harbor – This states that prohibited remuneration does not include any payment made to an independent contractor as long as a number of conditions are met, including the following: (i) the parties must sign an agreement with a term of at least one year; (ii) the methodology to calculate the compensation paid must be fixed one year in advance and (iii) the compensation must be the fair market value (“FMV”) equivalent of the payee’s services.
• Employee Safe Harbor – This states that prohibited remuneration does not include any amount paid by an employer to a bona fide employee “for employment in the furnishing of any item or service for which payment may be made in whole or in part under [federal health care programs].”

OIG Guidance

• Fraud Alerts and Advisory Bulletins – The OIG publishes alerts and bulletins that discuss business arrangements that the OIG believes may be abusive.
• Advisory Opinions – A DME supplier may submit to the OIG a request for an advisory opinion concerning whether a current or future arrangement will violate the AKS.

Legally Compliant Arrangements with Referral Sources

• Use of Employees – The DME supplier can pay bona fide employee marketing reps as follows: base salary + discretionary bonuses based on a number of factors.
• Use of Independent Contractors – Under a Stark exception, the supplier can compensate 1099 independent contractors for marketing to government program patients so long as the arrangement complies with the Personal Services and Management Contracts Safe Harbor.
• Expenditures for Physicians – Under a Stark exception, the supplier can spend up to $452 in 2022 on a physician for non-cash/non-cash equivalent items such as meals and golf. This amount is tied to inflation and so it will increase each year.
• Expenditures for Physicians’ Staffs, Hospital Discharge Planners, and Other Referral Sources – It is permissible for the supplier to provide non-cash/non-cash equivalent items to non-physicians so long as the amount spent is modest.
• Medical Director Agreement – It is permissible for a supplier to enter into a Medical Director Agreement (“MDA”) with a referring physician so long as the MDA complies with the Personal Services and Management Contracts Safe Harbor and the personal services exception to Stark.
• Employee Liaison – The supplier can place an employee liaison at a facility so long as the liaison does not perform services that the facility would normally have to perform.
• Waiver of Copayments – A supplier must make a reasonable attempt to collect copayments. The supplier can waive a patient’s copayment only if the patient’s financial condition justifies the waiver.
• Charitable Contributions – Charitable contributions are proper so long as (i) they are for a bona fide charitable purpose, (ii) the contributions are made in a manner that does not take into account the value or volume of referrals, and (iii) the arrangement incorporates safeguards to ensure that contributions are not tied to referrals or other business generated between the organizations.
• Joint Venture with Referral Source (e.g., Hospital) – A DME supplier and a hospital can jointly own a DME supplier (“joint venture” or “JV”). Preferably, the JV will comply with the Investment Interest Safe Harbor to the AKS. If this is not possible, then the JV needs to comply with the OIG’s 1989 Special Fraud Alert entitled “Joint Ventures” and the OIG’s April 2003 Special Advisory Bulletin entitled “Contractual Joint Ventures.”
• Gifts to Prospective Customers – Under an exception to the Beneficiary Inducement Statute, a supplier can provide gifts of minimal value ($15 or less) to prospective customers.

Arrangements with Referral Sources That Are Not Legally Compliant

• Improper Use of Independent Contractors – If an independent contractor is generating government program patients for the supplier, then the supplier cannot pay percentage compensation to the independent contractor.
• Patient Recruiters – Paying “patient recruiters” violates the AKS.
• Improper Use of Marketing Companies – If a marketing company is generating government health care program patients for the supplier, and if the supplier is paying production-based compensation to the marketing company, then the AKS will likely be violated.
• Expenditures for Physicians – The supplier cannot give cash or cash equivalents to physicians. The supplier cannot give non-cash/non-cash equivalent gifts to physicians that exceed $452 in value during 2022.
• Expenditures for Non-Physician Referral Sources – The supplier should not spend more than a modest amount on non-cash/non-cash equivalent items on physicians’ staffs, hospital discharge planners, and other referral sources.
• Medical Director Agreements – The compensation paid by the supplier to a Medical Director cannot vary based on the number of referrals from the Medical Director to the supplier.
• Sham Clinical Studies – If a clinical study is not associated with a hospital, medical school, or Institutional Review Organization (“IRO”), then there is a risk that the study is a subterfuge designed to funnel money to referring physicians.
• Sham Telehealth Arrangements – If a supplier receives physician orders resulting from telehealth encounters between patients and physicians, then the supplier needs to be aware that it cannot directly or indirectly pay the telehealth physician.
• Sham Copayment Insurance Programs – In a “sham” copayment insurance program, patients pay a small monthly amount to suppliers or intermediaries. These monthly payments are called “insurance premiums” and are designed to allow the patients to obtain “insurance” to pay copayments. In reality this type of program is a “sham” designed to routinely waive copayments.
• Gifts to Prospective Customers – The supplier cannot provide gifts to prospective government program customers in which the value of the gift exceeds $15.

This article provides an overview of potentially applicable federal laws. We recommend that providers/suppliers entering into arrangements with referral sources consult a health care attorney to ensure it is structured in compliance with applicable laws.

AAHOMECARE’S EDUCATIONAL WEBINAR

Gifts to, and Collaborative Arrangements With, Physicians

Presented by: Jeffrey S. Baird, Esq., Brown & Fortunato

Tuesday, May 3, 2022

 1:30-2:30 p.m. CENTRAL TIME

Any person or entity can be a referral source to a DME supplier. However, the most important referral source is a physician. He/she writes the order that triggers the whole process. A DME supplier can enter into arrangements with physicians, but in so doing, the DME supplier needs to adhere to federal and state laws that govern such arrangements. Examples of arrangements with physicians include (i) Medical Director Agreement; (ii) Consulting Agreement; (iii) service by physician on an advisory board; (iv) Preferred Provider Agreement; (v) loan closet; (vi) Space Rental Agreement; and (vii) sponsoring a physician to present education programs. In structuring an arrangement with a physician, DME suppliers need to be careful to avoid the federal anti-kickback statute, the federal physician self-referral statute (“Stark”), and other federal and state anti-fraud laws. This webinar will (i) discuss the applicable legal guidance governing arrangements with physicians, (ii) give examples of legally acceptable arrangements with physicians, and (iii) give examples of arrangements that need to be avoided.

Register for Gifts to, and Collaborative Arrangements With, Physicians on Tuesday, May 3, 2022, 1:30-2:30 p.m. CT, with Jeffrey S. Baird, Esq. of Brown & Fortunato.

Members: $99
Non-Members: $129

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. 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].