Compliance Issues for Durable Medical Equipment Companies

Durable medical equipment (DME) businesses face many compliance challenges. There are many strict requirements for doing business with the federal government. DMEs are governed by Stark Law, the Anti-Kickback Statute (AKS), HIPAA, and other referral laws. The FTC and other agencies monitor the marketing claims of DMES. A failure to meet those challenges can result in civil and criminal lawsuits.

Skilled healthcare lawyers help durable medical equipment companies understand their compliance issues. We help DMEs take steps to help show DMEs are in compliance with the relevant federal and state laws.

What is durable medical equipment?

Durable medical equipment includes equipment that helps patients perform their daily activities. Examples include wheelchairs, walkers, power scooters, portable oxygen equipment, and hospital beds.

DME companies are subject to unique standards and requirements under Medicare and the other federal healthcare benefit programs. In order to reduce their risk of compliance charges and litigation, DME companies should review their compliance issues before they start any marketing campaign and on a yearly basis. It helps to have a written compliance plan in place to help disclose problems and respond to those problems. Many DME businesses rely on their relationships with medical practices and hospitals to market and sell their products.

Generally, DME businesses need to show the companies meet specific criteria set (such as a “reasonable medical necessity test”) by the Centers for Medicare and Medicaid Services (CMS) and must obtain CMS accreditation in order to bill Medicare, Medicaid, Tricare, any other agencies that compensate patients for these products.

Compliance with referral, kickback, and marketing laws

DME companies pursue different marketing strategies to encourage medical facilities and practices to buy their products. A typical older example includes having the DME sales representative visit the offices of the doctors and the local hospitals. The sales representative would show the physicians how to use the medical equipment. The sales representative would normally leave marketing materials in the hope the doctors and patients would use the company’s durable medical equipment. If a patient needed the products, the doctor would ideally, from the sales rep’s point of view, recommend the company the sales representative works for to the patients.

A lot of marketing is now done through the company’s website, email campaigns, social media, and other platforms. One other type of marketing strategy for DME companies is to hire lead generation companies. Here, the DME company pays the lead company to provide the DME company with a list of medical practices or patients that might be interested in recommending or using the DME company’s products.

The Anti-Kickback Statute and DME marketing

The AKS is a federal law enacted to ensure that medical practices work for the best interests of their patients and not their own financial interests.

According to the HHS OIG, DMEs cannot, “Knowingly and willfully offer, pay, solicit or receive anything of value to induce or reward for referrals of Federal health care program business.” These businesses include Medicare, Medicaid, and Tricare. The AKS statute applies to any DMEs or other businesses that pay for referrals and the medical practices or doctors that receive the referrals.

Kickbacks include bribes, rebates, cash, offers of sham directorships, free vacations, and virtually anything of value.

The HHS OIG states that the penalties for violating the AKS are:

• Criminal penalties. Violating the Anti-Kickback Statute is a felony. DME participants who are convicted can be sentenced up to 5 years in jail, $25,000 in fines for each violation, or both.
• Civil penalties. Any DME that violates the AKS may be civilly charged with violating the False Claims Act. The US Department of Justice (US DOJ) can use the False Claims Act statute to recover the fraudulent or illegal payments (based on the illegal kickbacks). The penalties also include triple damages and $11,000 fines for each claim.

Violators can also be charged with violating the Civil Monetary Penalties Law which provides for expensive additional fines and penalties.

A DME that violates the AKS can also be precluded from participating in Medicare, Medicaid, or Tricare.

The AKS does provide for “safe harbors.” Skilled healthcare lawyers understand what these safe harbors, when a DME can use them, and how to implement them. Common safe harbors include employment arrangements and leases for space and equipment.

Many patients who use durable medical equipment are older which means many of the bills submitted for durable medical equipment are submitted to Medicare.

Generally, the DME cannot pay their employees or contractors by commissions or any type of payment based on the percentage of business the marketer generates.

Stark Law and DME marketing

Stark Law (known as the Physician Self-Referral Law) also governs referrals between companies and medical practices. According to StarkLaw.net, Stark law focuses on referral arrangements between a doctor/medical practice a “designated health service (DHS)” in which the physician has a financial interest in the DHS. For example, a relationship between a physician and a durable medical equipment company may be illegal if the physician (or medical practice) has a financial interest in the DME.

Stark Law does have exceptions that are comparable (but not identical) to the AKS safe harbors. Seasoned healthcare lawyers can explain when and how a DHS and/or a medical practice can benefit from one of these exceptions.

If a DME or physician violates Stark Law, they could be required to return any improper payments and could be excluded from participating in federal healthcare programs. Each improper referral could result in a $15,000 fine.

HIPAA compliance and durable medical equipment companies

A major concern for DMEs that use lead generation arrangements is the Health Insurance Portability and Accountability Act (HIPAA).  According to the Compliance Group, HIPAA requires that the lead arraignment (which, again, provides the DME with patient information):

1. Provide for obtaining disclosure of protected health information for marketing purposes; or
2. Meet an exception to the written authorization requirement (see 45 CFR 164.508(a)(3), (a)(4)).

For the first requirement, the DME should regularly audit the records from the lead generation company to ensure the authorizations are indeed provided. Many lead generation companies do not obtain the proper disclosures.

DMEs and medical necessity

A prerequisite for payment for all medical bills submitted to Medicare, Medicaid, and Tricare is the need for the products to be medically necessary. The DME and physician should be able to explain why the patient does need a wheelchair or other durable medical equipment item.

Generally, the DME should not simply rely on the physician to say the scooter or oxygen equipment is medically necessary. The US DOJ will look to see whether a scheme is involved. If the physicians sign off on too many wheelchairs, the government may begin to look behind the physician’s reports into a scheme to benefit the physician and DME – at the expense of quality patient care – and the government. Billing for medical equipment that is not medically necessary will likely result in criminal charges.

Telemedicine and durable medical equipment

One new challenge for DME business, especially during the pandemic, is understanding the relationship between telemedicine and Medicare. Generally, telemedicine has similarities to the traditional patient-doctor office visit. CMS does have its own rules for when and how to use telemedicine. Numerous questions need to be reviewed by the DME to determine if the use of telemedicine by the physician is proper. The first question is to determine is – if there was a legitimate doctor-patient relationship – where the patient wasn’t examined in the doctor’s office.

Improper documentation of billing procedures

The Office of Inspector General for the US Department of Health and Human Services recommends that DME companies consider the following seven factors when developing a DME compliance plan:

1. Implementing written policies, procedures, and standards of conduct. DME compliance plans should be in writing. The plans should be prepared by a compliance committee or a compliance officer. The plans should be available to the company and also the company’s contractors and suppliers. The plan should address the most problematic areas starting with fraudulent billing and financial relationships with physicians.
2. Designating a compliance officer and compliance committee. The compliance officer should be “a high-ranking official with direct access to the DME supplier’s owner, senior management, counsel, and president or CEO.” If there is a compliance committee, the committed should advise the compliance officer about how the compliance program should be implemented.
3. Conducting effective training and education. All employees including managers and officers should be educated and trained on what the compliance requirements are for the DME company and how to meet those requirements. The OIG recommends more specialized training for the sales and marketing staff and the people responsible for submitting reimbursement claims to Medicare and other payors.
4. Developing effective lines of communication. “The communication should be open and transparent and include a special emphasis on the use of hotlines or other reporting systems that receive anonymous complaints.” The reporting of fraud should be highly encouraged – including written confidentiality and non-retaliation procedures.
5. Enforcing standards through well-publicized disciplinary guidelines. The DME company should have clear disciplinary guidelines that should make clear how existing employees should be disciplined and whether background checks should be conducted.
6. Conducting internal monitoring and auditing. DME companies need to continually look for and monitor DME compliance – through regular reporting and auditing procedures. There should in regular internal and external audits.
7. Responding promptly to detected offenses and developing corrective action.  If the DME company observes or suspects there is non-compliance, the compliance officer or “other relevant party should immediately investigate the conduct to determine if a material violation has occurred – whether that violation is of state law, federal law, or of the DME company’s internal compliance program. Any weaknesses should be corrected “by referring the matter to the appropriate criminal and/or civil authorities, carrying out the DME company’s corrective action plan, reporting the matter to the government, and returning overpayments.”

Other DME compliance program considerations

Implementing a thorough DME compliance program helps ensure compliance. If problems do arise, the use of the compliance program helps show the government that the DME was using its best efforts to comply with the relevant laws – and was working to create an open transparent business environment.

Durable medical equipment companies depend on doctors and medical practices properly determining that a patient needs their product. The DME should speak with a seasoned healthcare lawyer to review the company’s compliance requirements. Once the physician determines that the patient could medically benefit from using the product, there are specific laws and guidelines on what recommendations the physician can make to the patient about where to buy the DME. The need to speak with the attorney is even more critical if the DME seeks to obtain referrals through the physician or works with a lead generation company.

Biotech and digital technology companies should contact Cohen Healthcare Law Group, PC to discuss FDA compliance, referrals, the unauthorized practice of medicine, and many other federal and state laws. Our experienced healthcare attorneys help health providers and health companies understand their compliance requirements.