AMARILLO, TX – In 1965, when the Medicare law was signed, there were 23 million of the Greatest Generation. The Greatest Generation has pretty much left us. That generation has been replaced by 78 million Baby Boomers…who are retiring at the rate of 10,000 per day. Unlike earlier generations, many Boomers will live well into their 80s.
One of the by-products of aging Boomers is the increased demand for skilled nursing facilities (SNFs) and the increased demand for DME for patients of SNFs. At the end of the day, a SNF is a referral source for the DME supplier.
If the supplier provides “something of value” (cash, equipment, supplies, services, etc.) to the SNF, and the SNF does not pay fair market value (“FMV”) compensation to the supplier, both the DME supplier and the SNF run the risk of violating the federal anti-kickback statute (“AKS”). Likewise, if the DME supplier provides a gift to a SNF patient, the supplier runs the risk of violating the federal beneficiary inducement statute (Inducement Statute”).
What all of this means is that the DME supplier “lives in the proverbial glass house.” If the supplier is doing something it should not be doing, someone knows about it. That “someone” can be an employee, a government agency or a third party payor (“TPP”). In everything it does, the supplier has no choice but to comply with federal and state anti-fraud laws.
Anti-Fraud Legal Guidelines
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 (“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.
Imposes civil monetary penalties upon a person or entity that offers or gives remuneration (in the form of a gift or otherwise) to any FHCP 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 an FHCP. This statute does not prohibit the giving of non-monetary/non-monetary equivalent gifts that are of “nominal value” (no more than $15 per item or $75 in the aggregate to any one beneficiary on an annual basis).
Physician Self-Referral Statute (“Stark”)
Provides that if a physician (or an immediate family member) has a financial relationship with an entity providing designated health services (“DHS”), the physician may not refer Medicare/Medicaid patients to the entity unless a Stark exception is met. Note that the term “physician” includes other types of clinicians, such as dentists and chiropractors. DHS includes DME.
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, as a matter of law the arrangement does not violate the AKS. If an arrangement does not meet the requirements of a safe harbor, 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 guidance by the OIG.
A health care provider may submit to the OIG a request for an advisory opinion concerning a business arrangement that the provider has entered into or wishes to enter into in the future. In submitting the advisory opinion request, the provider 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 implicate 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.
All states have enacted statutes prohibiting kickbacks, fee splitting, patient brokering, or self-referrals. Some state anti-kickback statutes only apply when the payor is a government health care program. Other state anti-kickback statutes apply regardless of the identity of the payor.
Arrangements with SNFs
Part A vs. Part B
When a DME supplier provides products and services to a skilled nursing patient, CMS will pay the SNF under Part A and the SNF will, in turn, pay the supplier. On the other hand, when a DME supplier provides products and services to a custodial care resident, the supplier will bill CMS directly under Part B.
A DME supplier may be tempted to provide products and services to a skilled nursing patient for below FMV compensation in order to motivate the facility to refer Part B patients to the supplier. Doing so will result in “something of value” flowing from the supplier to the facility in exchange for the referral of FHCP patients. This, in turn, will violate the AKS. And so it is important that the SNF pay FMV compensation to the supplier for products and services that the supplier renders to skilled nursing patients.
More broadly, a DME supplier may be tempted to donate products and services to a SNF, or to engage in activities that will save the SNF money. The supplier needs to avoid these actions because they will violate the AKS.
Failure of SNF to Pay
It is not uncommon for a DME supplier to provide a product/service to a facility’s Part A patient and then discover that the facility refuses to pay the supplier for the product/service. The facility’s reasoning may be that because it is granting the supplier access to the facility’s Part B patients, the DME supplier should not expect payment from the facility for the supplier’s products and services to the facility’s Part A patients. This scenario violates the AKS because free products/services to Part A patients constitute “something of value” provided by the supplier to the facility … in exchange for referrals of Part B patients by the facility to the supplier. Both the facility and the DME supplier are liable under the AKS.
The challenge for the supplier is that if it does not provide products and services to Part A patients for no charge … or for a charge that is below FMV … the facility may be inclined to switch to another DME supplier that is willing to provide Part A products and services at no charge or for a charge that is below FMV. This results in the proverbial “uneven playing field.”
If the DME supplier elects to acquiesce to the facility’s expectation that the supplier not charge for Part A products and services (or charge less than FMV for such products and services), then the supplier assumes the following risks:
- The Department of Justice (“DOJ”) may bring a criminal action against the supplier and facility for violating the AKS.
- The Part B claims submitted by the supplier to CMS, resulting from products sold by, and services rendered by, the supplier to the facility’s Part B patients, may be construed to be “false claims” in violation of the federal False Claims Act. It is the DOJ’s position that a claim that arises from a violation of the AKS constitutes a “false claim.”
To reduce the risk of the facility expecting the DME supplier to provide free (or below FMV) products and services to the facility’s Part A patients, the supplier and facility should enter into an unambiguous written agreement that obligates the facility to pay FMV compensation to the supplier for the supplier’s Part A products and services.
Jeffrey S. Baird, JD, is chairman of the Health Care Group at Brown & Fortunato, PC, 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. Baird is Board Certified in Health Law by the Texas Board of Legal Specialization and can be reached at (806) 345-6320 or email@example.com.