Moving the HME Industry Forward

General Healthcare

Offering “Value-Added” Services to Physicians and Patients

August 3, 2015

AMARILLO, TX – The DME industry, as we know it today, has been around for about 40 years. It is a young industry. For the first 30 years of its existence, there was little government oversight on the industry. This has changed. Over the last 10 years, it feels like the government is making up for lost time. In short, the industry is caught in the “perfect storm” of (1) competitive bidding, (2) reimbursement cuts, (3) stringent documentation requirements, (4) aggressive auditors, and (5) proliferation of “whistleblowers.”

To be successful, the DME supplier must think outside the box… must push itself out of its comfort zone. With few exceptions, the successful DME supplier cannot base its business model entirely on Medicare fee-for-service. The DME supplier must look at selling Medicare and non-Medicare covered items for cash. The supplier must look at providing products and services – not necessarily covered by Medicare – that will benefit the aging “Baby Boomers.” And the supplier must offer “value-added” services to physicians and patients. In offering “value-added” services, the supplier must be careful not to violate state and federal anti-fraud laws. Specifically, the supplier cannot cross the line from “value-added” services to “prohibited inducement” or “kickback.”

Federal Laws
The beneficiary inducement statute prohibits a DME supplier from offering or giving anything of value to a Medicare beneficiary that the supplier knows, or should know, is likely to persuade the person to purchase a Medicare-covered item. In the preamble to the regulations implementing the statute, the OIG stated that the inducement statute does not prohibit the giving of incentives that are of “nominal value.” The OIG defines “nominal value” as no more than $10 per item or $50 in the aggregate to any one beneficiary on an annual basis. “Nominal value” is based on the retail purchase price of the item.

The Medicare anti-kickback statute states that it is a felony for a health care provider to knowingly and willfully offer or pay any remuneration to induce a person/entity to refer an individual for the furnishing or arranging for the furnishing of any item for which payment may be made under a federal health care program, or the purchase or lease or the recommendation of the purchase or lease of any item for which payment may be made under a federal health care program. There are a number of “safe harbors” to the anti-kickback statute. If an arrangement falls within a safe harbor, then the arrangement does not violate the anti-kickback statute.

The Stark physician self-referral statute provides that if a physician has a financial relationship with an entity providing “designated health services,” then the physician may not refer Medicare/Medicaid patients to the entity unless a Stark exception applies. Designated health services include DME; parenteral and enteral nutrients; prosthetics, orthotics and prosthetic devices and supplies; and out-patient prescription drugs. One of the exceptions to Stark provides that a health care provider may provide non-cash equivalent items to a physician if such items do not exceed $392 in value during a 12 month period.

A number of years ago, the OIG published a special fraud alert entitled “Routine Waiver of Copayments or Deductibles under Medicare Part B.” In the alert, the OIG stated that routine waiver of Medicare cost-sharing amounts “is unlawful because it results in (i) false claims, (ii) violations of the anti-kickback statute, and (iii) excessive utilization of items and services paid for by Medicare.” The OIG listed some “suspect marketing practices” including an advertisement stating “Medicare Accepted As Payment in Full;” routine use of “financial hardship” form 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.

Examples of Proper “Value-Added” Services
• The health care delivery system is moving to the Cleveland Clinic model. This is a “clinical outcomes” model in which multiple clinicans/providers work collaboratively to solve a patient’s health care problem. The forward-thinking DME supplier will gather “outcomes data” that it can present to physicians, other clinicians and, perhaps most importantly, to third party payers. The outcomes data will show how the supplier’s products and services are helping the patient and saving money for the payer.
• Under the Hospital Readmissions Reductions Program, if a patient is readmitted after discharge within a certain period of time, for a particular disease, then the hospital can be subjected to future payment reductions from Medicare. The hospital can enter into an arrangement with a DME supplier to monitor/work with discharged patients so that they are not readmitted soon after being discharged. In working with discharged patients, the supplier can collaborate with a pharmacy, home health agency, primary care physician, etc.
• The DME supplier uses a financial hardship form that asks a number of questions regarding the patient’s ability to pay his copayment. The supplier decides, on a patient-by-patient basis, whether or not to waive the copayment.
• The supplier has several RTs on staff. On a quarterly basis, each of the supplier’s COPD patients will have the opportunity to meet with an RT. The supplier advertises that all of its COPD patients have the opportunity to meet with an RT once a quarter.
• Once a quarter, the DME supplier puts on a two-hour workshop, covering a particular disease state, for existing and prospective customers.
• After a customer decides to obtain an oxygen concentrator from the DME supplier, the supplier allows the customer to use oxygen tanks (free of charge) as emergency back-up.
• On a customer’s birthday, the DME supplier mails to him a cookbook that is specific to the type of foods the customer needs to eat in order to help the customer overcome a particular health problem.
• Once a year, the DME supplier sponsors lunch at a retirement home during which the supplier provides an educational program.
• The supplier places a fax machine in a physician’s office. Title to the fax remains with the supplier. The fax is set up so that the physician’s office can use it only to fax orders to the DME supplier. The physician’s office is unable to use the fax for anything else.
• To encourage patients to return oxygen concentrators to the supplier after coverage ceases, the DME supplier offers a $25 gift card to the patient if he will deliver the concentrator to the supplier.
• The supplier assigns an employee liaison to the physician’s office. If the physician orders DME for the patient, and if the patient selects the supplier, then the liaison will facilitate a smooth transition to the services to be provided by the DME supplier. The employee liaison will not perform any services that the physician is required to perform.
• The physician sets up times during the year in which his patients can come to the physician’s office and attend a class taught by the DME supplier that covers treatment of a particular disease state.
• The supplier rents oxygen concentrators, pulse oximeters, and home sleep testing devices to the physician. The supplier charges rent that is fair market value and is fixed one year in advance.

Examples of “Value-Added” Services That End Up Being Prohibited Inducements/Kickbacks
• The DME supplier advertises that if a patient chooses to obtain an oxygen concentrator from the supplier, then the supplier will provide (free of charge) back-up oxygen tanks.
• The supplier assigns an employee liaison to the physician. The liaison performs some duties that the physician’s employee would normally be obligated to perform.
• The supplier advertises that if the patient purchases from the supplier, then the patient will not have to pay anything out-of-pocket.
• The DME supplier advertises: “If you quality for a hardship waiver, then you will pay nothing out-of-pocket.”
• The DME supplier has, on paper, a protocol that addresses when the supplier will….and will not….waive a copayment. Notwithstanding what is on paper, the evidence shows that the supplier collects very few copayments.
• 12 times per year, the DME supplier sponsors lunch at a particular retirement home during which the supplier provides an education program.
• The DME supplier provides iPads to a physician’s employees. The iPads are to be used to collect and transmit data to the supplier. However, the physician’s employees are capable of using the iPads for personal use.
• The DME supplier places several oxygen concentrators at the physician’s office. The physician uses the concentrators for in-office procedures. The supplier charges no rent…..or charges rent that is substantially below fair market value.
• The DME supplier places several pulse oximeters and home sleep testing devices at the physician’s office. The physician uses these devices to conduct tests. The supplier charges no rent…..or charges rent that is substantially below fair market value.

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, DME suppliers, infusion 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