US Department of Justice and HHS-OIG target telemedicine companies, issuing companion enforcement action and Special Fraud Alert

Telemedicine companies, beware: on July 20, 2022, the United States Department of Health and Human Services, Office of Inspector General (OIG) issued a new Special Fraud Alert targeting arrangements between practitioners and purported telemedicine companies, signaling a heightened focus by the government on fraud in the telemedicine industry.

While OIG drafted the alert broadly to apply to telehealth, telemedicine, and telemarketing services (collectively referred to in the Alert as Telemedicine Companies), the agency highlighted arrangements whereby practitioners order or prescribe a federally reimbursable item and/or service for patients they never examine or meaningfully assesses to determine whether such item is or service is medically necessary. OIG remarked that these arrangements commonly involve Telemedicine Companies paying practitioners on a per-click basis (ie, reimbursement per prescription, order, or other assessment/review), which incentivizes physicians to order or prescribe a higher volume of federally reimbursable items and/or services.

The type of enforcement displayed in the Special Fraud Alert and the corresponding $1.2 billion takedown announcement by the US Department of Justice (the DOJ), also issued on July 20, 2022,[1] are not new.[2] In fact, the suspicious characteristics noted by OIG in the Alert are common fraud schemes, irrespective of the particular healthcare industry segment where the schemes occur. While the potential for fraud may be slightly higher in virtual care models, OIG and DOJ continue to focus on instances where there is no medical necessity or where companies improperly incentivize practitioners by compensating them based on the volume or value of items or services that are reimbursable by federal healthcare programs.  Companies should carefully structure their telemedicine offerings to avoid OIG and DOJ scrutiny.

Background

Telemedicine is highly regulated at both the state and federal levels.

Federally, the Anti-Kickback Statute (the AKS) aims to protect patients from improper medical referrals or recommendations by practitioners who may be improperly influenced by financial incentives. Absent safe harbor protection, a person or entity violates the AKS if the person or entity knowingly and willfully pays or receives remuneration, which encompasses money and any other item of value, in exchange for inducing or rewarding referrals of items and/or services payable under a federal healthcare program. DOJ uses the AKS to investigate and prosecute fraud cases involving kickback schemes.

At the state level, Telemedicine Companies and their providers must comply with various legal and regulatory requirements, including licensure, supervision, appropriate examination and prescribing, as well as state law equivalents to the AKS, which states similarly designed to prevent improper financial incentives from undermining quality medical care.

The July 20, 2022 takedown announcement referenced actions taken against 36 defendants in 13 federal districts, resulting in more than $1.2 billion in allegedly fraudulent telemedicine schemes involving cardiovascular, oncology, genetic testing, and DME items and services.  In the same DOJ press release, the Centers for Medicare and Medicaid Services (the CMS) also announced that it had taken administrative actions against 52 providers involved in similar telemedicine schemes.

While Telemedicine Companies may engage practitioners to provide telemedicine services to patients in a compliant way, practitioners can only order or prescribe items and/or services for patients whom they have examined and must ensure that such items and services are medically necessary and clinically appropriate. Telemedicine Companies must pay careful attention to how they compensate their practitioners for providing virtual healthcare services and ensure that the compensation model complies with the law and does not induce a practitioner to prescribe or order an item or service.

The HHS-OIG Special Fraud Alert

The COVID-19 pandemic caused CMS to use its regulatory flexibilities and public health emergency waivers to open up new telehealth reimbursement pathways. This vastly increased the number of companies offering telemedicine and telehealth services in a short timeframe.

In turn and as expected, the government followed the money and turned its attention to the newly reimbursed telehealth service codes and related arrangements. While OIG acknowledges that there are plenty of appropriate uses of telehealth services, it recommends that practitioners exercise additional caution before entering into a new arrangement with a Telemedicine Company.

As with other Special Fraud Alerts, OIG points out several “suspect characteristics” that present a heightened risk of fraud and abuse; however, the list is illustrative, not exhaustive. If a Telemedicine Company enters into an arrangement with one or more of these characteristics, they should exercise care, and may face criminal, civil, or administrative liability depending on the facts and circumstances.

These characteristics include the following:

• Patients were identified or recruited by the Telemedicine Company, telemarketing company, a sales agent, recruiter, call center, health fair, and/or through the Internet, TV, or social media ads for free or low out-of-pocket cost items/services.
• The practitioner does not have sufficient contact with or information from the patient to meaningfully access medical necessity (ie, the Telemedicine Company requires practitioners to use audio-only technology, does not provide practitioners with other telehealth modalities, and provides only cursory patient demographic information or medical history).
• The practitioner is compensated based upon volume of items and/or services furnished or ordered (ie, compensation based upon the number of medical records reviewed).
• The Telemedicine Company only furnishes items and services to federal healthcare program beneficiaries (and does not accept any other insurance).
• The Telemedicine Company claims only to furnish items and/or services to non-federal healthcare program beneficiaries, but still bills items and/or services to federal healthcare programs.
• The Telemedicine Company furnishes only one product or a single class of products (such as durable medical equipment, genetic testing, diabetic supplies).
• The Telemedicine Company does not expect or require practitioners to conduct follow-up visits with patients or provide practitioners with any information required to initiate a follow-up visit (ie, the Telemedicine Company does not require practitioners to follow-up with patients to discuss genetic testing results).

Takeaways

There is no question that Telemedicine Companies and practitioners alike should be on notice that the government will continue to prioritize oversight of the arrangements between these parties. While OIG notes that it does not intend to “discourage legitimate telehealth arrangements,” the Special Fraud Alert emphasizes that it will exercise heightened enforcement scrutiny of such arrangements.

Moving forward, the suspect characteristics identified by OIG are helpful guideposts to evaluate each arrangement. However, given the varying facts and circumstances applicable to each arrangement, practitioners and telemedicine companies should examine their relationships with care to ensure that they structure their telemedicine offering appropriately and in compliance with the AKS, other federal fraud and abuse laws, and any state law equivalents.  In particular, Telemedicine Companies should be proactive in reviewing their compliance policies and procedures, provider contracts, and any prescribing or ordering of items through telemedicine platforms to ensure that safeguards are in place to prevent the ordering of any medically unnecessary services or items.

Notably, some of the flexibilities offered to encourage virtual care delivery during COVID-19 will end following expiration of the federal public health emergency declaration, and states have already begun to scale back or terminate state-level waivers. Telemedicine Companies should not wait until the end of the public health emergency declaration to engage in compliance review activities. The government’s latest coordinated agency responses with respect to telemedicine emphasize that telehealth is  ̶  and will remain  ̶  an enforcement priority.

In conjunction with the Special Fraud Alert, OIG also updated its telehealth resource page.  OIG continues to conduct significant oversight projects to assess telehealth services, including the impact of the public health emergency waivers. We expect that this work will continue to produce informative guidance both during and after the public health emergency.

DLA Piper continues to closely monitor federal and state measures and other governmental actions regarding telemedicine matters. For more information or if you have any questions regarding this development, please contact your DLA Piper relationship attorney or any member of the DLA Piper Healthcare group.