By: Bartt Warner, CVA and Dane Hansen

The Office of Inspector General (OIG) and Department of Health and Human Services (HHS) released a Special Fraud Alert (Alert) on July 20, 2022 related to the inherent fraud and abuse risk associated with physicians or other health care professionals entering into arrangements with telemedicine companies (Telemedicine Companies).1 Specifically, addressing fraud schemes related to telehealth, telemedicine, or telemarketing services based on dozens of civil and criminal investigations. The Alert identified seven characteristics that the OIG believes could suggest a given arrangement has potential risk for fraud and abuse. However, the OIG was cautious not to state that all Telemedicine Companies and arrangements are suspect, but rather to identify key characteristics in potentially problematic arrangements as the prevalence of telehealth services continually increases. In addition, the Alert was designed to provide practical compliance guidance and help establish guardrails with relation to telemedicine arrangements. Simultaneously, the OIG also updated its Telehealth Resource Page2 which aggregates compliance and enforcement resources.

Kickbacks

The Alert provided a specific example of how Telemedicine Companies have utilized kickbacks to aggressively recruit and reward telemedicine practitioners to further their fraud schemes. According to the example:

“…in some of these fraud schemes Telemedicine Companies intentionally paid physicians and nonphysician practitioners (collectively, Practitioners) kickbacks to generate orders or prescriptions for medically unnecessary durable medical equipment, genetic testing, wound care items, or prescription medications, resulting in submissions of fraudulent claims to Medicare, Medicaid, and other Federal health care programs. These fraud schemes vary in design and operation, and they have involved a wide range of different individuals and types of entities, including international and domestic telemarketing call centers, staffing companies, Practitioners, marketers, brokers, and others.”

Based on the OIG’s experience with fraud and abuse in this realm, the Telemedicine Companies often work out an arrangement with the Practitioners to order and prescribe medically unnecessary items and services. Oftentimes, the Telemedicine Companies pay the Practitioners for prescribing items or various services to patients who have had limited interaction with the Practitioner and without regard to the medically necessity for this service or prescription. In addition, these kickbacks are routinely disguised as payment per review, audit, consult, or for the assessment of medical charts and are often tied to the volume of federally reimbursable items or services ordered or prescribed by the Practitioners. As a result, the fees associated with the problematic arrangements are being used as a mechanism to incentivize a Practitioner to order medically unnecessary items or services according to the Alert. Of additional concern, the OIG noted that in many cases the Telemedicine Companies sell the prescriptions that are generated by the Practitioners to other entities who in turn will fraudulently bill for the medically unnecessary items or services.

Compliance Risk

The OIG makes it clear in the Alert that these fraudulent telemedicine schemes pose a significant risk to the health care system and that both Practitioners and health systems should exercise extreme caution when entering into arrangements with Telemedicine Companies. Specifically, the Alert stated,

“These schemes raise fraud concerns because of the potential for considerable harm to Federal health care programs and their beneficiaries, which may include: (1) an inappropriate increase in costs to Federal health care programs for medically unnecessary items and services and, in some instances, items and services a beneficiary never receives; (2) potential to harm beneficiaries by, for example, providing medically unnecessary care, items that could harm a patient, or improperly delaying needed care; and (3) corruption of medical decision-making.”

These telemedicine schemes have the potential for violating multiple Federal Laws, but most specifically, the Federal anti-kickback statute. Violations of the Federal Anti-kickback statute ascribes liability to both sides of the arrangement and can potentially lead to criminal, civil, or administrative liability under other Federal laws as well.

Suspect Characteristics

Based on the OIG’s experience with various problematic telemedicine arrangements, seven “suspect characteristics” were identified that taken together, or separately, could suggest an arrangement presents a heightened risk for fraud and abuse. However, it should but noted that the list is not exhaustive, but rather illustrative and the presence or absence of these characteristics does not determine if a particular telemedicine arrangement would constitute grounds for legal sanctions.

  1. “The purported patients for whom the Practitioner orders or prescribes items or services were identified or recruited by the Telemedicine Company, telemarketing company, sales agent, recruiter, call center, health fair, and/or through internet, television, or social media advertising for free or low out-of-pocket cost items or services.
  2. The Practitioner does not have sufficient contact with or information from the purported patient to meaningfully assess the medical necessity of the items or services ordered or prescribed.
  3. The Telemedicine Company compensates the Practitioner based on the volume of items or services ordered or prescribed, which may be characterized to the Practitioner as compensation based on the number of purported medical records that the Practitioner reviewed.
  4. The Telemedicine Company only furnishes items and services to Federal health care program beneficiaries and does not accept insurance from any other payor.
  5. The Telemedicine Company claims to only furnish items and services to individuals who are not Federal health care program beneficiaries but may in fact bill Federal health care programs.
  6. The Telemedicine Company only furnishes one product or a single class of products (e.g., durable medical equipment, genetic testing, diabetic supplies, or various prescription creams), potentially restricting a Practitioner’s treating options to a predetermined course of treatment.
  7. The Telemedicine Company does not expect Practitioners (or another Practitioner) to follow up with purported patients nor does it provide Practitioners with the information required to follow up with purported patients (e.g., the Telemedicine Company does not require Practitioners to discuss genetic testing results with each purported patient).”

Best Practices

Given the heightened regulatory scrutiny placed on telehealth service arrangements by the OIG and HHS, it is pertinent for health systems, hospitals, and Practitioners to employ certain best practices when considering, implementing, and operating any type of virtual care program. Many of the best practices for traditional face-to-face professional services arrangements are directly applicable to telemedicine arrangements. For example, a telehealth arrangement should be justifiable for all parties involved. From the perspective of a health system or hospital for example, the addition of a virtual care service line could be pursued to fill a highly desired gap in medical care, increase the quality of medical care currently available to its patient base, or alleviate overburdened Practitioners.

Prior to entering any business relationship for telehealth services, it is a best practice to consult with legal counsel. Telemedicine service contracts should be explicit in outlining the expectations of medical care and the structure and magnitude of remuneration. Further, it is particularly important to maintain ongoing dialogue with legal counsel throughout the life of a telemedicine relationship to ensure that a program that was once compliant does not break the bounds into non-compliance over time. Preserving a compliant telehealth business relationship is typically aided by a robust compliance program, created with the help of legal counsel, which outlines specific guidelines for professional examinations, prescribing and billing practices, administrative and record maintenance procedures. Compliance programs should be consistently reviewed and updated as regulatory bodies issue more literature on the subject matter. A static compliance program may quickly become inadequate as the virtual care regulatory landscape continues to evolve. Obtaining third party support of an arrangement is often a pillar of successful compliance programs. The arrangement should be commercially reasonable to all parties involved and any compensation should be directly attributed to services performed and have no consideration of referrals. Obtaining a third-party fair market value (FMV) review is a key best practice in maintaining regulatory compliance within the context of telemedicine arrangements. In addition, seeking a third-party commercial reasonableness assessment should also help mitigate compliance risk by documenting and assessing both qualitative and quantitative factors as to why the telemedicine arrangement is a sensible and prudent business decision without the consideration of referrals.

Conclusion

Although the Special Fraud Alert addresses that it is not intended to discourage legitimate telemedicine arrangements, serious compliance risk may occur if an arrangement has any of the seven “suspect characteristics” as previously discussed. In addition, the OIG made it clear that Practitioners have both legitimately and appropriately utilized telehealth services to provide medically necessary care to their patients during the current public health emergency. Best practices should include a cautious approach to telemedicine arrangements while ensuring there are specific guidelines and guardrails, determining and documenting the justification for the arrangement, ensuring the arrangement is commercially reasonable, and determining if the remuneration paid to the Practitioners is consistent with FMV.

Endnotes

1 Special Fraud Alert: OIG Alerts Practitioners To Exercise Caution When Entering Into Arrangements With Purported Telemedicine Companies available at: https://oig.hhs.gov/documents/root/1045/sfa-telefraud.pdf

2Telehealth Featured Topic from HHS and the OIG available at: https://oig.hhs.gov/reports-and-publications/featured-topics/telehealth/