New OIG Advisory Opinion on Provision of Items and Services Below Cost or Free of Charge to Referral Sources in Exchange for Referrals

Elizabeth E. Hogue, Esq. Office: 877-871-4062   Fax: 877-871-9739   E-mail: ElizabethHogue@ElizabethHogue.net

In an Advisory Opinion posted on August 4, 2011, the Office of Inspector General (OIG) of the U.S. Department of Health and Human Services concluded that the provision of items and services below cost or free of charge to referral sources likely violates the federal anti-kickback statute.  A home medical equipment (HME) company requested the Advisory Opinion.

The HME supplier provides medical supplies and equipment to skilled nursing facilities (SNF’s).  When the medical supplies and equipment that the HME company furnishes to SNF’s are covered by Medicare Part B, the HME company bills the Medicare Program for them.  When they are not covered under Medicare Part B, the HME supplier bills the SNF for the supplies.  The HME supplier usually charges SNF’s amounts in excess of the cost of the non-covered supplies in order to cover the cost of related services; such as inventory control, visits by customer service representatives, customized patient-specific packaging, etc.; plus overhead and profit.

In this case, SNF’s requested proposals for exclusive suppliers of items covered by the Medicare Program.  Bidders were also required to submit pricing for items not covered by the Medicare Program that SNF’s may purchase at their option.  The HME supplier wanted to submit bids offering pricing for the non-covered items and related services that were below the HME supplier’s costs.  The HME company acknowledged that the payments it would receive from Medicare Part B as SNF’s exclusive suppliers for covered items would more than offset any losses it would incur to furnish the non-covered items and related services below its costs.

In response to the suppliers’ request, the OIG first stated that the anti-kickback statute is implicated if any direct or indirect link exists between a price offered by a supplier or provider to referral sources for items or services that referral sources pay for and referrals of Federal business for which the supplier or providers can bill a Federal health care program.  According to the OIG, both referral sources and providers that receive referrals have obvious motives to trade below-cost payment rates for or free items and services for referrals of patients whose care will be paid for by the Medicare Program.

The OIG then pointed out that providers may be “swapping” the below-cost rates on certain types of business in exchange for other profitable Federal business from which providers can recoup losses incurred on the below-cost business.  The OIG stated that providers likely engage in such practices with the intent of inducing referrals of more lucrative business paid for by the Medicare Program.

It is worth considering this Advisory Opinion in light of the practices of some hospital discharge planners/case managers.  They may require post-acute providers to give services and/or supplies to patients for whom there is no payor source or payor sources that do not reimburse at rates that cover providers’ costs in order to receive referrals of patients whose care will be paid by the Medicare Program.  If post-acute providers are unwilling to render services free of charge, hospitals may bear the risk of continued care of such patients.  This type of “swapping” may also be prohibited by the OIG based upon the Advisory Opinion described above.

© 2011 Elizabeth E. Hogue, Esq.  All rights reserved.

HMESales Community has received permission to reprint this article.  No portion of this material may be reproduced in any form without the advance written permission of the author.

Marketing Representatives of Post-Acute Providers Must Receive Training Regarding Appropriate Activities

Elizabeth E. Hogue, Esq.

Office:  877-871-4062 Fax:  877-871-9739

E-mail: ElizabethHogue@ElizabethHogue.net

The Office of the Inspector General (OIG) of the U.S. Department of Health and Human Services, the primary enforcer of fraud and abuse prohibitions, recently announced that “patient recruiters,” or marketing representatives, had been convicted of fraud and were on their way to jail.  On July 12, 2011, for example, the OIG announced that a marketing representative in the Detroit area was sentenced to twenty-seven months of jail time and required to pay restitution in the whopping amount of $10,765,325.  In another case announced on July 21, 2011, a marketing representative pleaded guilty to Medicare fraud and is awaiting sentencing.

These two recent cases bring home once again the importance of making sure that marketing representatives of home health agencies, hospices, HME companies, and private duty companies understand what is legal and what is not with regard to getting referrals.

The stakes are extremely high.  Court decisions and a federal statute make it clear that billing for referrals that were obtained in impermissible ways are false claims.  That is, if marketing representatives use inappropriate means to get referrals and post-acute providers bill for services provided to such patients, then the claims submitted are false claims.  The penalties for submissions of false claims may include:

-          Fines or civil money penalties that are three times the amount of the claims involved;

-          Jail time; and

-          Suspension or exclusion from participation in the Medicare, Medicaid, and other state and federal health care Programs.

What if owners did not know what the marketing representatives were doing?  Providers need to know that court decisions say that enforcers may conclude that providers had intent if they can prove that providers knew or should have known of a pattern of fraudulent conduct.  This means that managers of post-acute providers must remain vigilant and constantly monitor the activities of marketing representatives to be sure that they don’t cross the line.

From a practical point of view, providers should take the following actions:

-          Develop and implement a policy and procedure that says that marketing representatives may not engage in new types of marketing activities without the advance written permission of appropriate managers.

-          Provide initial and periodic training to marketing representatives regarding regulation of marketing practices, including, at a minimum:

-          The Federal anti-kickback statutes;

-          The Federal False Claims Act;

-          The so-called “Stark laws” and regulations; and

-          Any applicable state statutes.

There are few checks on marketing representatives’ activities, especially when, as a result of their efforts, they receive incentives based on the number of admitted patients referred.  Management is responsible for the oversight of these activities.  The possible consequences described above make the necessity of vigilance quite clear.

(To obtain an 80-minute video that can be used to train marketing representatives, please send a check made out to Elizabeth E. Hogue in the amount of $105.00 that includes shipping and handling to: Fulfillment, 107 Guilford, Summerville, SC 29483.)

© 2011 Elizabeth E. Hogue, Esq.  All rights reserved.

No portion of this material may be reproduced in any form without the advance written permission of the author. The HME Sales Community has received permission to reprint this material.