Moving the HME Industry Forward

General Healthcare

Avoid Sham Telehealth Arrangements

January 18, 2016

AMARILLO, TX – A growing segment of the DME industry involves the sale of back, knee and ankle braces. These are a number of reasons for this, including: braces do not fall under competitive bidding; there is a huge demand for braces by the aging Baby Boomers…..particularly those Boomers who want to remain active; and using a brace is preferable to surgery. DME suppliers are aggressively marketing braces and it is not uncommon for a supplier to mail braces to Medicare patients residing in multiple states.

When a DME supplier is marketing to patients in multiple states, the supplier often runs into a “bottleneck.” This involves the patient’s local physician. A patient may desire to purchase a brace from the out-of-state DME supplier but it is too inconvenient for the patient to drive to his physician’s office. Or if the patient is seen by his local physician, the physician may decide that the patient does not need a brace and so the physician refuses to sign an order. Or even if the physician does sign an order, he may be hesitant to send the order to an out-of-state DME supplier. This kind of “bottleneck” is not uncommon: we see this when DME suppliers mail CPAP supplies, incontinence supplies, and other “soft goods” to patients residing throughout the United States.

To address this challenge, I am seeing some DME suppliers enter into arrangements that are well-intended……but will get them into trouble. This has to do with “telehealth” companies. A typical telehealth company has contracts with many physicians who practice in multiple states. The telehealth company contracts with, and is paid by (i) self-funded employers that pay a membership fee for their employees, (ii) health plans, and (iii) patients who pay a per visit fee.

Where a DME supplier will find itself in trouble is when it aligns itself with a telehealth company that is not paid by employers, health plans and patients – but rather – is directly or indirectly paid by the DME supplier. Here is an example: DME supplier purchases leads from a marketing company…the marketing company sends the leads to the telehealth company……the telehealth company contacts the leads and schedules audio or audio/visual encounters with physicians contracted with the telehealth company…….the physicians sign orders for braces…….the telehealth company sends the orders to the DME supplier…the marketing company pays compensation to the telehealth company for its services in contacting the leads and setting up the physician appointments….the telehealth company pays the physicians for their patient encounters…the DME supplier mails the brace to the patient…….the DME supplier bills (and gets paid by) Medicare. There can be a number of permutations to this example, but you get the picture. Stripping everything away, the DME supplier is paying the ordering physician.

The Medicare anti-kickback statute (“AKS”) is a criminal statute, and it applies to all federal health care programs. The statute says that a person/entity cannot pay anything to another person/entity in exchange for referring, or arranging for the referral of, a patient covered by a government health care program. This is a very broad statute, and the Department of Justice has substantial latitude in determining whether or not to enforce it against a person/entity. Courts have enumerated the “one purpose” test. This states that if “one purpose” behind a payment is to reward a person/entity for a referral, then the AKS is violated notwithstanding that the “main purpose” behind the payment is to pay for legitimate services.

To the extent that a DME supplier directly or indirectly pays money to a telehealth company, which in turn writes an order for braces that will be dispensed by the DME supplier and reimbursed by a federal health care program, the arrangement will likely be viewed as remuneration for a referral (or remuneration for “arranging for” a referral). Said another way, the arrangement will likely be viewed as a kickback.

A sham telehealth arrangement differs from a proper telehealth arrangement in a critical aspect: the direct or indirect payment by the DME supplier to the telehealth company. In a proper telehealth arrangement, the telehealth company does not receive any compensation from a supplier; its revenue comes from self-funded employers that pay a membership fee for their employees, health plans, or patients who pay a per visit fee. Accordingly, in a proper telehealth arrangement, there is no direct or indirect financial relationship between the person or entity ordering the product (i.e., the telehealth company) and the entity furnishing the product (i.e., the DME supplier).

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

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