Moving the HME Industry Forward

General Healthcare

If It Looks Like a Duck…

February 2, 2015

AMARILLO, TX – The DME supplier lives in a glass house. Many people/organizations know what the supplier is doing. These include current employees, past employees, the DME MACs, the NSC, and the supplier’s accrediting organization. If the supplier is doing something it should not be doing, then someone knows about it. The supplier cannot engage in fraudulent acts and expect to get away with them for very long.

There is an old saying: “If it looks like a duck, walks like a duck, and sounds like a duck……then it is a duck.” Or as the old Charles Schwab commercial used to say: “You can put lipstick on a pig all you want…..but it is still a pig.” Even though these slogans are humorous, they are deadly serious when determining whether a supplier is committing fraud. For example, assume that Dr. Jones is a referral source for ABC Medical Equipment, Inc. Assume that ABC places back braces, on a consignment basis, in Dr. Jones’ office.

Assume that Dr. Jones orders back braces for a number of his patients; he pulls them out of ABC’s inventory; he fits the patients with the braces; ABC bills Medicare for the braces; and ABC pays Dr. Jones a “patient education and fitting fee” on a per patient basis. ABC might argue that it is paying Dr. Jones for his education/fitting services, and is not paying him for referrals. However, such an argument will fall on deaf ears. Any reasonable person will conclude that at least “one purpose” (if not the main purpose) behind the payments is to reward Dr. Jones for referrals. Hence, a violation of the Medicare anti-kickback statute.

Let’s look at another example. Assume that ABC is a provider under an Aetna commercial insurance contract. Assume that XYZ Medical Equipment, Inc. is not a provider under the contract. Assume that XYZ has a number of loyal physicians who refer all of their DME patients to XYZ. XYZ does not want to tell its loyal physicians to refer all of their DME patients to XYZ except for Aetna patients.

And so ABC and XYZ reach an agreement in which (i) the physicians refer the Aetna patients to XYZ; (ii) XYZ provides the products to the Aetna patients; (iii) ABC bills Aetna for the patients serviced by XYZ; and (iv) ABC pays XYZ 90% of what ABC collects from Aetna. At the end of the day, all that ABC is doing is “renting out its Aetna contract to XYZ.” This is likely prohibited by the Aetna contract itself and/or by Aetna’s coverage criteria.

If these were Medicare patients, then this would be a clear violation of the Medicare anti-kickback statute. However, because these are commercial insurance patients, then the Medicare anti-kickback statute will not be implicated. However, this arrangement may very well violate applicable state anti-kickback statutes. Additionally, this arrangement may be construed as insurance fraud. By this I mean that when ABC is submitting claims to Aetna, ABC is representing that it is the supplier. However, this is not true. In fact, XYZ is the supplier. And so ABC is billing Aetna for products provided by XYZ.

In “fraud and abuse land,” there are no such things as technical loopholes. ABC may have a lengthy, beautifully worded contract with Dr. Jones and XYZ. On paper, the arrangement may look legitimate. But if the “duck” test says otherwise, then ABC needs to walk away from the arrangement.

All of this is a long way of saying that if your brain tells you that an arrangement is OK, but if your stomach hurts, then ignore your brain and trust your stomach. As humans, all of us are capable of rationalizing a dishonest or unethical decision. In other words, our brains can fool us. But our stomach never lies…….

Jeffrey S. Baird, JD, is chairman of the Health Care Group at Brown & Fortunato PC, Amarillo, Tex.