Moving the HME Industry Forward

Manufacturer/Provider

Recent Legal Issues Involving HME Supplier and Manufacturer Relationships

Bradley W. Howard • November 12, 2017

AMARILLO, TX – In recent years the HME industry has actively sparred with the Federal Government (the “Government”) over the process and reimbursement of direct to patient care. Now the Government has moved their way up the HME chain, and instead of limiting their attention to HME entities involved in direct to patient care, they are turning their gaze to the HME Provider-Manufacturer relationship.

And just like the Eye of Sauron, the Government would like to examine every detail, contract, or verbal agreement between a HME entity and manufacturer. No relationship is safe from scrutiny, and as such, how does a HME entity stay safe and sane? The purpose of this article is to identify the “hot spots” of most Government investigations into the HME Provider-Manufacturer relationship, and to offer some practical tips for avoiding the Government’s deep scrutiny. Please note that this article is written from the perspective of a HME provider, but the information within may apply to both HME providers and manufacturers.

Comparing the Government’s attention to J.R.R. Tolkien’s all-knowing entity may seem extreme, but consider the breadth of agencies emotionally/financially/mentally invested in the HME industry. Starting from the top: the Department of Justice (“DOJ”), the Federal Bureau of Investigation (“FBI”), the Office of Inspector General (“OIG”), United States Attorney’s Offices (“AUSAs”), Medi-Cal Fraud Control Unit, Medicaid Fraud Control Units, and any other parallel state agency or enforcement agency tasked with seeking and preventing fraud. In sum, everyone in the land is interested in the HME Provider-Manufacturer relationship.

The silver lining in this situation is that the Government is not shy about their specific areas of interest. In fact, the OIG’s 2017 Work Plan (the “Work Plan”) specifically identifies the Government’s interest in health care fraud schemes related to “durable medical equipment”.  The Work Plan states that “OIG investigates allegations of fraud, waste and abuse in all of HHS’ programs . . . specific case types include health care fraud schemes related to . . . durable medical equipment;”  In my experience, one of the largest legal issues in the HME Provider-Manufacturer relationship is the Anti-Kickback Statute (“AKS”).

In the HME Provider-Manufacturer context the Government has specifically started to focus on whether manufacturers are providing any form of kickbacks to HME providers in return for the HME provider’s promise to funnel their patients solely to the stated manufacturer. This type of fraudulent healthcare scheme is commonly known as a “switching campaign”.

The Government closely examines advertising underwriting, as well evidence of incentives from manufacturers to their own sales representatives or to the sales representatives of HME providers, and questions whether these stated efforts are proof of an intentional scheme to “switch” or “convert” an HME provider’s patients from one manufacturer’s products to another. To be clear, an appropriate price reduction is not usually problematic, provided that the discount or price reduction is properly disclosed and appropriately reflected in the costs claimed or charges made by the provider under a Federal health care program.

Scrutiny into these “switching campaigns” starts with an examination of any business contracts that the HME entity holds. The Government then digs in further, and asks to review draft agreement, “side letter” agreements, company emails, and any other communication between the HME provider and selected manufacturer. The Government wants to know every detail of the HME provider business relationship so that they can form a theory regarding the intent of the HME Provider-Manufacturer relationship. The Government reviews these documents by asking themselves questions such as “is the manufacturer is merely providing the HME provider a legal discount, or are they underwriting marketing (or tying discounts) to a switching campaigns to convert an HME supplier’s customers to this particular manufacturer’s products?” Or simply stated, does the business agreement and communication between the two parties reflect some form of a kickback arrangement?

HME Providers can prepare themselves for the Government’s in-depth review by taking a hard look at their contracts and business relationships with manufacturers. HME providers should ask themselves, “if the Government reviews my contracts, draft agreements, and communications with XYZ manufacturer, will they find evidence that the manufacturer is seeking to financially induce my company to switch patients solely to the manufacturer’s products (a “switching campaign”)?” The goal for every HME Provider-Manufacturer business arrangement is to be capable of withstanding scrutiny by a Government investigator charged with determining whether the HME supplier-manufacturer business relationship violates any federal or state kickback laws.

 

Jeff Baird and Wayne van Halem will be presenting the following webinar:

AAHOMECARE’S EDUCATIONAL WEBINAR

Compliance Program: Your Most Important “Profit Center

Presented by: Jeffrey S. Baird, Esq., Brown & Fortunato, P.C. & Wayne van Halem, President, The van Halem Group

Wednesday, November 15, 2017

2:30-4:00 p.m. EASTERN TIME

The OIG has stressed the importance of compliance programs for DME suppliers by issuing guidance on how the programs should be structured and implemented. Congress has also weighed in through the Affordable Care Act, which makes compliance programs mandatory for DME suppliers at a date to be set in the future. This program will discuss how an effective compliance program helps create financial success, customer loyalty, community support and employee satisfaction. Topics covered will include primary compliance program objectives, the role of management in overcoming implementation obstacles, and identifying and addressing risk areas. Topics will further include changing behaviors, balancing multiple roles, integration with other parts of the organization, education and training, and finding qualified staff. The program will review the elements of an effective compliance program, and the need to regularly review and update the program. Specific risk areas arising from marketing of DME will be discussed, as well as how to identify and address risk areas particular to DME suppliers.

Register for Compliance Program: Your Most Important “Profit Center” on Wednesday, November 15, 2017, 2:30-4:00 pm ET, with Jeffrey S. Baird, Esq., of Brown & Fortunato, P.C. and Wayne van Halem, of The van Halem Group.

Please contact Ika Sukh at ikas@aahomecare.org if you experience any difficulties registering.

FEES:

Member: $99.00

Non-Member: $129.00

Bradley W. Howard is a Shareholder of Brown & Fortunato, P.C. and one of the senior attorneys in its Health Care Group.  He advises HME suppliers, manufacturers, and other health care companies in their business relationships and routinely represents them in investigative proceedings around the United States.  Howard can be reached at (806) 345-6310 or bhoward@bf-law.com.