LEEDer Group Inc.
8508 North West 66th St.
Miami, Florida 33166 USA

Phone: 305.436.5030
Fax: 305.436.0086
E-mail Address: info {at] LEEDerGroup [dot] com

2012-12 OIG Fraud Advisory Compilation

AMARILLO, TX – 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 the DME and pharmacy industries concerning fraudulent and/or abusive practices that the OIG has observed and is observing in the industry. These documents reflect the OIG’s opinions regarding the application of the fraud and abuse laws.

Some of the Special Fraud Alerts and Special Advisory Bulletins relevant to the supplier are the following:
  • Special Fraud Alert: Joint Venture Arrangements
    The OIG’s first Fraud Alert, issued in 1989, concerned joint venture arrangements between clinical laboratories, suppliers, other providers, and their referral sources. In the 1980s, it was common for suppliers to enter into a partnership with a hospital or other entity to form a new supplier.
    The investors would invest little capital in the partnership, which would contract out substantially all of its operations to the DME investor. In the OIG’s view, these ventures were not legitimate businesses, but simply mechanisms to lock up referral streams and compensate referral sources for referring business, in violation of the anti-kickback statute.
    The Fraud Alert included a list of “questionable features? which could suggest an anti-kickback violation. Those questionable features included selection of investors on the basis of their ability to generate referrals; an investor engaged in the same line of business as the venture and acting as a subcontractor; and disproportionately large returns on small investments.
  • Special Fraud Alert: Routine Waiver of Copayments or Deductibles under Medicare Part B
    In this Special Fraud Alert, the OIG stated that routine waiver of Medicare cost-sharing amounts “is unlawful because it results in (1) false claims, (2) violations of the anti-kickback statute, and (3) excessive utilization of items and services paid for by Medicare.? It listed some “suspect marketing practices? including advertisements stating “Medicare Accepted As Payment in Full? or “No Out-Of-Pocket Expense;? routine use of “financial hardship? forms with no good faith attempt to determine the beneficiary’s actual financial condition; and collection of copayments and deductibles only from beneficiaries who have Medicare supplemental insurance. Waiver of copayments is a significant issue for suppliers of high-cost DME, particularly power wheelchairs and scooters, because high copayments (approximately $1000.00 in the case of a K0011 power wheelchair) are a major disincentive to potential customers.
  • OIG’s April 2003 Special Advisory Bulletin: Contractual Joint Ventures
    In April 2003, the OIG published a Special Advisory Bulletin entitled “Contractual Joint Ventures.? The Advisory Bulletin focuses on a situation where a health care provider in one line of business (“Owner?) expands into a related line of business by contracting with an existing provider (“Manager?). The Owner’s line of business is to provide new products to the Owner’s existing patient base. The Manager not only manages the new line of products, but also supplies the Owner with inventory, employees, physical space, billing and other services. In essence, the Owner contracts out substantially the entire operation to the Manager and the Owner pockets the profits from this new line of business. These ventures are very similar to those described in the 1989 Special Fraud Alert, except that the supplier does not own equity in the venture.
    According to the bulletin, the practical effect of the relationship between the Owner and the Manager is for the Owner to have the opportunity to bill for business that is, in reality, provided by either the Manager or by a “joint venture? formed by the Owner and Manager. According to the bulletin, the OIG looks at this type of arrangement as nothing more than a kickback, with remuneration (in form of profits retained by the Owner) flowing back to the Owner.
    Therefore, if a supplier desires to open up a mail order respiratory pharmacy, then it must assume financial risk and operational responsibilities in operating the pharmacy, Likewise, if a hospital contracts with a supplier for management services for the hospital’s DME operation, then while the supplier can provide certain management and administrative services, the financial risk and operational responsibilities of the DME operation must be borne by the hospital.
  • Special Fraud Alert: Rental of Space in Physician Offices by Persons or Entities to Which Physicians Refer
    A number of suppliers rent space in the offices of physicians or other practitioners. The OIG is concerned that in such arrangements, the rental payments may be disguised kickbacks to the physician in violation of the anti-kickback statute. One of the specific concerns of the OIG is “consignment closet? arrangements between suppliers and physicians. It is common for suppliers to place certain items of equipment and supplies in physicians’ offices for the convenience of physicians and patients. If a patient needs crutches, for example, the physician can dispense the crutches at the time of the office visit. The physician’s office then informs the supplier, which bills for the crutches and replenishes the consignment closet inventory. These arrangements serve a legitimate purpose, but in the past some suppliers paid excessive amounts of rent to the physicians for the space used to store the consignment inventory, as a way of disguising payments for referrals.
    The questionable features of suspect rental arrangements for space in physicians’ offices may be reflected in three areas: (1) the appropriateness of rental agreements; (2) the rental amounts; and (3) time and space considerations. Separately or together, specific details of these arrangements may result in an arrangement that violates the anti-kickback statute. The Space Rental safe harbor to the anti-kickback statute can protect legitimate arrangements. Arrangements for office equipment or personal services of physicians’ office staff can also be structured to comply with the Equipment Rental safe harbor and Personal Services and Management Contracts safe harbor.
  • Offering Gifts and Other Inducements to Beneficiaries
    A person who offers or transfers to a Medicare or Medicaid beneficiary any remuneration that the person knows or should know is likely to influence the beneficiary’s selection of a particular provider, practitioner, or supplier of Medicare or Medicaid payable items or services may be liable for civil money penalties. The statute and implementing regulations contain a limited number of exceptions.
    Unless a supplier’s practices fit within an exception or are the subject of a favorable advisory opinion, any gifts or free services to beneficiaries should not exceed $10 per item and $50 annually. The OIG is considering the possibility of safe harbors for two kinds of arrangements: complimentary local transportation and government-sponsored clinical trials.
  • Telemarketing by DME Suppliers
    The beneficiary inducement statute prohibits suppliers from making unsolicited telephone calls to Medicare beneficiaries regarding the furnishing of a covered item, except in three specific situations: (i) the beneficiary has given written permission to the supplier to make contact by telephone; (ii) the contact is regarding a covered item the supplier has already furnished the beneficiary; or (iii) the supplier has furnished at least one covered item to the beneficiary during the preceding fifteen months. The statute also specifically prohibits payment to a supplier that knowingly submits a claim generated pursuant to a prohibited telephone solicitation. Accordingly, such claims for payment are false and violators are potentially subject to criminal, civil, and administrative penalties, including exclusion from federal health care programs.
    Suppliers cannot do indirectly that which they are prohibited from doing directly. A supplier is responsible for verifying that marketing activities performed by third parties with whom the supplier contracts or otherwise does business do not involve prohibited activity and that information purchased from such third parties was neither obtained, nor derived, from prohibited activity. If a claim for payment is submitted for items or services generated by a prohibited solicitation, both the supplier and the telemarketer are potentially liable for criminal, civil, and administrative penalties for causing the filing of a false claim.

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. He can be reached at (806) 345-6320 or jbaird@bf-law.com.