New DOJ and OIG Actions Warn the Telemedicine Industry About Suspect Arrangements

Health Highlights

On July 20, the U.S. Department of Health and Human Services (HHS) Office of the Inspector General (OIG) issued a new Special Fraud Alert (SFA) on practitioner arrangements with telehealth, telemedicine or telemarketing companies to warn the industry—particularly providers—about key characteristics of “telehealth fraud.” The SFA comes on the heels of a near-simultaneous DOJ $1.2 billion nationwide health care fraud takedown that targeted telemedicine companies in addition to clinical laboratories and durable medical equipment suppliers, and almost one year after a comparable DOJ takedown. These recent actions are the strongest indications yet of enforcement agencies’ increased focus on fraud and abuse in telemedicine arrangements given the rapid expansion of telehealth services over the past three years; however, the SFA notes that the alert’s intent is not to discourage “legitimate” telehealth arrangements.

Overview: Seven ‘Suspect Characteristics’ of Telehealth Fraud

The SFA highlights schemes where telemedicine companies recruit, engage and reward physician and nonphysician providers with kickbacks in exchange for such providers prescribing or ordering medically unnecessary durable medical equipment, genetic testing, wound care items or medications. The OIG calls particular attention to schemes in which providers take such actions with either no or limited patient interaction or review of medical records, as well as those involving volume-based fees, which the OIG states “may corrupt medical decision making, drive inappropriate utilization, and result in patient harm.” The OIG notes that such schemes vary in design and operation but often involve “international and domestic telemarketing call centers, staffing companies, practitioners, marketers, brokers, and others.”

Regardless of the parties involved, the result common to such schemes is the submission of fraudulent claims to Medicare, Medicaid and other federal health care programs. Such improper claims may give rise to criminal, civil or administrative liability under the federal Anti-Kickback Statute (AKS) (42 U.S.C. § 1320a-7b(b)), the False Claims Act (31 U.S.C. §§ 3729-3733) and the Civil Monetary Penalties Law (42 U.S.C. § 1320a-7a), in addition to any applicable state law counterparts. At the heart of the SFA is the OIG’s non-exhaustive list of seven “suspect characteristics” that are indicative of arrangements presenting a heightened risk of fraud and abuse. The characteristics of such arrangements include:

  1. Patients for whom providers prescribe or order unnecessary items or services are recruited by advertising free or low out-of-pocket cost items or services through the telemedicine company or its sales agent, recruiter, or call center, or through a health fair, the internet, television or social media.
  2. Providers have insufficient contact with or medical information from the patient to meaningfully assess the medical necessity of items or services ordered or prescribed, including when providers are forced to inappropriately use audio-only technology with patients.
  3. Providers are compensated by the telemedicine company based on the volume of items or services ordered or prescribed, which may be characterized to the provider as compensation based on the number of purported medical records reviewed (i.e., a “per click” basis).
  4. The telemedicine company only furnishes items and services to federal health care program beneficiaries.
  5. The telemedicine company claims to carve out federal health care program beneficiaries but still bills such programs (the OIG notes that carve-out arrangements can still result in criminal, civil and administrative liability for fraudulent activity involving federal health care program beneficiaries).
  6. The telemedicine company furnishes only one product or a single class of products (e.g., durable medical equipment, genetic testing, diabetic supplies or various prescription creams), restricting a provider’s options to a predetermined course of treatment.
  7. Providers are not given necessary information (e.g., test results) to follow up with patients and are not expected to do so.

As is customary in the context of conduct that may implicate the AKS in particular, the OIG caveats its list by noting that the presence or absence of any one factor is not dispositive of whether an arrangement with a telemedicine company provides grounds for enforcement or sanctions. The SFA also recognizes the importance of innovative telehealth arrangements, recalling prior OIG guidance that stated: “For most, telehealth expansion is viewed positively, offering opportunities to increase access to services, decrease burdens for both patients and providers, and enable better care, including enhanced mental health care.”

Between the Lines: What the Special Fraud Alert Means for Industry

The SFA should be viewed as underscoring already well-established telehealth enforcement trends.

As mentioned above, the SFA comes in the wake of multiple enforcement actions, including massive DOJ takedowns, over the past two years targeting telehealth fraud schemes. This wave of enforcement is not surprising given the exponential growth of telehealth as an accepted care modality, particularly since the beginning of the COVID-19 public health emergency, and the recent expansion of federal health care program and commercial insurance reimbursement for certain telehealth visits. In fact, just last week the U.S. House of Representatives passed legislation to extend Medicare telehealth flexibilities through 2024 (for more on the House-passed legislation, see the Manatt Health newsletter here). Such coverage and reimbursement expansion, in addition to the proliferation of new care delivery arrangements and telehealth modalities, make telehealth ripe for fraudulent exploitation.

The SFA should not be construed as a shot across the bow at legitimate telehealth companies seeking to address bona fide patient care needs that may happen to display one of the suspect characteristics listed in the SFA.

In general, SFAs are designed to put the industry on notice of concerning or problematic trends that the government has identified through its criminal, civil and administrative enforcement activities. As the OIG expressly notes in the SFA, the fact that an arrangement displays one or more of the suspect characteristics is not determinative of whether that particular arrangement violates the law. Rather, the factors are designed to serve as illustrative examples of features that may give a regulator pause and should be carefully evaluated when structuring care delivery models.

As is common in SFAs, the list of suspect characteristics identified by the OIG contains some features that are inherently more concerning than others.

Some of the potentially problematic factors noted in the SFA are unsurprising based on the OIG’s prior pronouncements and guidance. For example, the active recruitment of patients through the offering of “free” or “no out-of-pocket cost” items or services has been a perennial focus of the government, including under the beneficiary inducement provision of the Civil Monetary Penalties Law (CMPL). Similarly, it is not difficult to imagine why the government would take issue with claims submitted to the federal health care programs through arrangements that involve physicians or other clinicians paid to order or prescribe reimbursable items and services with no evaluation, examination or other service that would suffice to establish a valid physician-patient relationship.

At the same time, the SFA includes some factors that might appear relatively benign or even commonplace, all things being equal. That is, as health care offerings—particularly those launched by private equity or venture capital-backed companies—become increasingly specialized, it is not atypical for telehealth companies to focus on (1) servicing a particular patient population (whether that be federal health care program beneficiaries or commercial/cash pay patients) or (2) concentrating on a particular type of ancillary service offering. Reading between the lines, the OIG’s focus appears to be not on the simple fact of subspecialization but rather on arrangements that have the practical effect of boxing physicians and other providers into ordering treatments that are not supported by medical necessity or appropriate for the patient.

Additionally, there is an important distinction to be drawn between the types of sham arrangements that the SFA is focused on (e.g., arrangements involving medically unnecessary services that inherently do not involve patient interaction) and the furnishing of legitimate telehealth services through recognized modalities that inherently do not involve real-time interaction with the patient (e.g., store-and-forward technology). The OIG’s pronouncements in this regard simply underscore the importance of ensuring that physicians and other providers treating patients through telehealth have the freedom to use whatever technology they deem necessary to obtain relevant information and properly evaluate the patient’s needs.

Action Items for Providers and Telemedicine Companies

Given the heightened regulatory scrutiny that has been and will continue to be placed on telehealth arrangements, telemedicine companies and providers should exercise caution when designing, implementing and operationalizing arrangements that display one or more of the suspect features in the SFA. Industry participants in the telehealth space also should conduct a review of their current operations and arrangements, identify relevant risk areas, and take any necessary steps to mitigate potential risk. Such a review may include an assessment of current marketing practices, clinical decision-making autonomy, compensation arrangements with referral sources, and any remuneration offered or provided to potential and current patients.

Many of the best practices for traditional face-to-face professional services arrangements are directly applicable to telemedicine arrangements as well. For example:

  • Practitioners engaged in a telehealth encounter should ensure there is adequate documentary support of medical necessity for any items or services ordered or prescribed;
  • Telehealth service contracts should explicitly outline the expectations surrounding the delivery of medical care and the compensation structure; and
  • Companies should develop and maintain robust compliance programs that outline specific guidelines for professional services, prescribing and billing practices, and administrative and record maintenance procedures as they pertain to telehealth.

For further guidance, the OIG also maintains an updated telehealth resource page to provide a single point through which to access its telehealth-related guidance.

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