Moving the HME Industry Forward

General Healthcare

Road to Medtrade – Structuring Relationships with Referral Sources

July 28, 2014

AMARILLO, TX – The upcoming Medtrade (Oct 20-23, 2014 in Atlanta) has an excellent line-up of speakers who will present programs addressing the most important topics faced by DME suppliers today. Every issue of Medtrade Monday, leading up to Medtrade, will highlight a Medtrade program.

How You Can Legally Structure Relationships with Physicians, Hospitals, and Other Referral Sources
The lifeblood of any successful business is innovative marketing and building referral networks.  However, unlike non-healthcare industries, the federal government has set out a number of restrictive guidelines that DME companies must follow.

Under the Medicare anti-kickback statute (42 U.S.C. § 1320a-7b), it is a felony for a provider to knowingly or willfully offer or pay any remuneration to induce a person to refer a person 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.

The beneficiary inducement statute (42 U.S.C. § 1320a-7a (a)), imposes civil monetary penalties upon a provider that offers or gives remuneration to any Medicare 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 a federal or state health care program.  This statute does not prohibit the giving of incentives that are of “nominal value.”  The OIG defines “nominal value” as no more than $10.00 per item or $50.00 in the aggregate to any one beneficiary on an annual basis.  “Nominal value” is based on the retail purchase price of the item.

Under the telephone solicitation statute (42 U.S.C. § 1395m(a)(17)), a DME supplier may not contact a Medicare beneficiary by telephone regarding the furnishing of a covered item unless (i) the beneficiary has given written permission for the contact, or (ii) a supplier has previously provided the covered item to the beneficiary and the supplier is contacting the beneficiary regarding the covered item, or (iii) if the telephone contact is regarding the furnishing of the covered item other than an item already furnished to the beneficiary, the supplier has furnished at least one covered item to the beneficiary during the preceding 15 months.

The Stark physician self-referral statute (42 U.S.C. § 1395nn)) provides that if a physician has a financial relationship with an entity providing designated health services (“DHS”), then the physician may not refer patients to the entity unless one of the statutory or regulatory exceptions applies.  Designated health services include (i) durable medical equipment, (ii) parenteral and enteral nutrients, (iii) prosthetics, orthotics and prosthetic devices and supplies, and (iv) outpatient prescription drugs, among others.

Safe harbor regulations issued under the anti-kickback statute provide “bright line” tests defining arrangements that do not violate the statute.  If a business arrangement clearly falls within a safe harbor, then it is not violative of the anti-kickback statute.  If the arrangement does not clearly fall within a safe harbor, then it must be examined in light of the anti-kickback statute and related court decisions to determine if it violates the statute.

A 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 response, the OIG will issue an advisory opinion concerning whether or not there is likelihood that the arrangement will implicate the anti-kickback statute.

The OIG publishes Special Fraud Alerts and Special Advisory Bulletins that discuss business arrangements that the OIG believes may be abusive, and educate providers concerning fraudulent and/or abusive practices.

All states have enacted statutes prohibiting kickbacks, fee splitting, patient brokering, or self-referrals.  Some state statutes apply only when the payor is a state health care program, while other statutes apply regardless of the identity of the payor.

This Medtrade program will discuss the legal parameters that must be followed when entering into joint ventures and arrangements with referral sources. Specific examples include medical director agreements, employee liaisons, preferred provider agreements, and loan/consignment closets.

Attendees at this program will:
1) Learn about the federal statutes and regulations governing joint ventures, service agreements, and other arrangements with referral sources.
2) Learn how to properly structure arrangements with referral sources.
3) Learn about the legal pitfalls in setting up arrangements, and how to avoid these pitfalls.

On Monday, October 20, 2014, Elizabeth H. Jepson (pictured), JD (Health Care Group, Brown & Fortunato PC) will present an in-depth program entitled How You Can Legally Structure Relationships with Physicians, Hospitals, and Other Referral Sources.

Providers who wish to register for Medtrade should CLICK HERE.    

• The full link for registration is

• Pricing for events can be found at

Exhibitors have already bought 95% of the floor space at the Georgia World Congress Center in anticipation of what could be the most important Medtrade in the event’s long history. For a complete list of exhibitors and/or additional information about the show, visit