Amanda S. Marshall Former U.S. Attorney (Local Counsel)
Lynette Byrd Former Assistant U.S. Attorney
Roger Bach Former Special Agent (OIG & DEA)
Joe Brown Former U.S. Attorney
DME Fraud Defense Lawyers
The 5 Pitfalls of DME – Durable Medical Equipment
A Real-Life Example of a DME Fraud Investigation
It is Thursday morning at 8:00am. A DME company owner (“John”) arrives at his office to find approximately 20 police cars in the parking lot. Special agents from the Federal Bureau of Investigation (FBI), the Office of Inspector General (OIG), and the Department of Justice (DOJ) approach John to inform him that they have a federal search and seizure warrant to raid his office and his house, and that they have probable cause to believe that John’s DME business is engaged in healthcare fraud, Medicare fraud, mail fraud, wire fraud, and the receipt of illegal kickbacks. John is in shock. How could this happen? What in the world did he do wrong? He is a good man. He has never been accused of anything illegal—he has never even received a traffic ticket. He would never risk his freedom by doing something illegal, no matter how lucrative it may be.
Put our highly experienced team on your side
Dr. Nick Oberheiden
John W. Sellers
Former Senior Trial Attorney U.S. Department of Justice
Joanne Fine DeLena
Former Assistant U.S. Attorney
Lynette S. Byrd
Former Assistant U.S. Attorney
Former U.S. Attorney
Aaron L. Wiley
Former Federal Prosecutor
Former Special Agent (OIG)
Former Supervisory Special Agent (FBI)
Former Special Agent (FBI & IRS-CI)
Kevin M. Sheridan
Former Special Agent (FBI)
Former Supervisory Special Agent (FBI)
Dennis A. Wichern
Former Special Agent-in-Charge (DEA)
Why are DME Companies Being Targeted So Aggressively by the DOJ, FBI, and OIG?
DME companies are currently being heavily targeted by the DOJ, FBI, OIG and other federal authorities. The reason for this is that DME companies fall at the intersection of many of the enforcement issues that are currently top federal law enforcement priorities. From medical marketing to telemedicine practice, DME companies can face prosecution from many different angles, and company owners who fail to effectively defend themselves can face substantial monetary penalties and years behind bars.
The key legal issues facing DME companies include:
1. Medical Marketing
Many DME companies utilize marketing arrangements that violate federal law. Everyone understands that business development is an integral part of any company’s ability to survive. However, unlike the rules that apply to most other industries, the restrictions governing the healthcare industry are complex and unforgiving. For example, simply choosing whether to designate a marketer as a W2 employee or a 1099 contractor can determine whether a DME company is in violation of the federal Anti-Kickback Statute. The Anti-Kickback Statute prohibits certain compensation structures for referring or directing federally-funded patients. Commissions, percentage-based compensation, and individual rewards are generally prohibited.
Another common issue is that many DME companies do not have written contracts with their marketers – a practice which federal authorities consider to be non-transparent. To avoid scrutiny in this area, structuring Medicare-compliant marketing compensation arrangements should be a centerpiece of compliance.
2. Buying Medicare Leads
In addition to their traditional marketing efforts, some DME businesses have turned to buying leads from online companies. These lead-generation businesses have built large databases of patients that may qualify for DME based on records showing past surgeries, pain management visits, and other indications. Buyers typically receive a patient’s name, phone number, and other information to contact the patient and verify the lead. As the DME market is skyrocketing, a single DME lead can cost up to $500 in some areas.
Buying leads is dangerous business. The DOJ has an extensive track record when it comes to criminally prosecuting lead agencies, DME companies, and others for making available and using the personal information of individuals in need of medical services. These prosecutions typically focus on two main issues:
HIPAA Violations – The first (and smaller) issue is HIPAA. HIPAA protects sensitive patient information from unwanted disclosure. “Trading” such information would require, at an absolute minimum, the patient’s informed consent and a written agreement, and online lead companies almost never have this documentation.
Anti-Kickback Statute Violations – The bigger issue with buying or selling leads is that the CMS and the DOJ consider these transactions to constitute violations of the federal Anti-Kickback Statute. If your DME business is purchasing Medicare leads, or if you are considering doing so, you should contactus to make sure that your arrangement does not violate the Anti-Kickback Statute and is appropriately documented in a legally-compliant contract.
3. Medical Necessity
Success in healthcare starts and ends with improving the patient’s condition. Marketing may be an important element of running a DME business, but at what point does marketing cross the line to patient brokering, patient solicitation, or talking a patient into buying a device he or she does not need? Does the patient really need the wheelchair? What should the patient do if he or she already has a back brace?
Almost all DME businesses focus too little on the most important aspect of operating in the healthcare industry: medical necessity. Typically, DME company owners will say that they leave the medical necessity decision to a doctor. Their company just ships the order. This view, in our opinion, is too short-sighted.
The DOJ looks at the entire process of delivering a medical device to a patient, not just the doctor’s treatment recommendation. In this regard, the DOJ’s current focus on DME is similar to its recent targeting of compound pharmacies: While compound pharmacy owners took the position that they just filled doctors’ prescriptions, the DOJ repeatedly charged the doctor, the pharmacy owner, and the pharmacist. Why? Because the DOJ viewed the entire process of delivering medically-unnecessary prescriptions to patients as a healthcare fraud conspiracy. Under federal conspiracy laws, all parties participating in a “scheme” to defraud the government (i.e. by billing for medically-unnecessary prescriptions or DME) can be held criminally liable.
Oberheiden P.C. has developed effective defense strategies for protecting DME companies from these types of allegations. Federal healthcare fraud investigations are very different from other types of legal matters. Hiring experienced legal counsel counts. If you do not want a doctor’s mistake to cost you your business, your reputation, and your freedom, callus to make sure you are not at risk for federal prosecution.
Telemedicine presents unique compliance challenges for DME businesses as well. While, in principle, few would deny the benefits of telemedicine in 21st century medical practice, the law has not fully caught up to the omnipresence of telemedicine, particularly in the context of consultations for Medicare patients. Under current law, telemedicine consultations are compared to traditional doctor-patient office visits: the patient walks in, signs forms, sees medical staff, and eventually meets with a physician. However, almost by definition, unlike a patient seeing a primary care doctor regularly, telemedicine is a sporadic business where the patient typically has a one-time interaction with the physician, the physician does not touch or examine the patient, and the physician can only offer limited face-to-face time.
Recent DOJ press releases have publicized dozens of cases in which physicians, marketing companies, and DME business owners have been indicted for their roles in alleged telemedicine fraud schemes. In today’s world, telemedicine is a legal minefield. From triage to consultation, and from physician compensation structures to establishing an appropriate doctor-patient relationship, there are numerous issues that can present liability risks for DME companies that supply products based on physicians’ treatment recommendations during telemedicine consultations. If telemedicine is an integral part of your DME business, be aware, it can be done, but it should be done with caution and based upon sound legal advice. Call today and find out what traps to avoid in telemedicine arrangements, how to ensure the establishment of a real doctor-patient relationship, and how to protect your DME business against being investigated for the mistakes of telemedicine operators.
5. No Compliance Program
Given that compliance mistakes in running a DME business are not just possible but very likely and very common, each business owner must make a fundamental decision: Do I risk being caught with errors? Or, do I get good sleep at night knowing that I have the documentation and agreements in place that will shield me from criminal allegations in the event of a federal investigation?
What does not help is simply assuming that, if your DME business is targeted in a federal investigation, the government will believe that you had good intent and did not knowingly overbill Medicare. No one will take an x-ray of your brain to determine if you are a good person. In fact, in healthcare, the second most regulated industry in the United States, the burden of proof is on you. While it is true that the government has the burden of proof in court, this step only comes after you have been arrested and indicted.
In order to avoid these risks, your best bet is prevention. Have the federal healthcare lawyers and DME consultants at Oberheiden, P.C. establish structures, procedures, policies, protocols, and guidelines for your business. Prepare the right contracts and documentation so that you don’t need to wonder anymore whether the contract you just signed can get you into trouble. Make sure your staff is trained and your marketers are educated. Make sure you cover all of your exposure areas, and remember: You may have good intent, but what matters is your ability to affirmatively demonstrate that you have taken appropriate steps to comply with the law. Think of John in the example above: It wasn’t him, it was someone working for him that got him in the middle of a life-changing federal criminal investigation.
Contact a Federal DME Fraud Defense Lawyer Today
The trusted DME fraud defense lawyers and former federal prosecutors at Oberheiden, P.C. can help you and your company avoid federal prosecution. To build your business safely and with confidence, call 888-680-1745 or contact us online to schedule a free initial consultation today.
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