You are outside counsel to the Marcus Welby Healthcare Corporation, which among its other operations owns a durable medical equipment (DME) subsidiary, which sells equipment for home use such as crutches, wheelchairs, and oxygen concentrators. You learn that the subsidiary has had certain business practices about which you have some question under the Medicare and Medicaid Anti-Fraud and Abuse provisions:

• Salesmen regularly offer home health agency employees a “premium” whenever their clients order DME from the subsidiary.

• The subsidiary offers “rebates” to patients who use its equipment.

• The subsidiary pays hospital and home health agency personnel for assisting its patients in learning how to use its products.

• Some arterial blood gas test results may have been “massaged a bit” by the DME in order to facilitate Medicare payment for oxygen concentrators. What advice would you give?

Answer:

Marcus Welby Healthcare Corporation owns a Durable Medical Equipment subsidiary. Durable medical equipment is equipment that provide therapeutic benefits to needy patients due to certain medical conditions. They include wheelchairs, crutches, oxygen concentrators; stretcher chairs etc. The subsidiary distributes and promotes its durable medical equipment products by use sales promotions through sales representatives.

However, the company subsidiary is involved in some medical malpractices which violate the Medicare and Medicaid anti-fraud and abuse provisions. For instance, the subsidiary pays hospital and home health personnel for assisting its patients in learning how to use its products. Furthermore, the company subsidiary offers rebates to patients for using their products. The subsidiary salesmen behave unethically by offering home agency staff premiums on a regular basis every time a client from the agency orders durable medical equipment. To make matters worse, the subsidiary tampered with the results of the arterial blood gas tests in order to receive Medicare payments for their oxygen concentrators. These are serious breach and violation of federal healthcare laws. The company has requested the services of my law firm, Nixon Peabody LLP as an outside general counsel.

Healthcare industry in America is undergoing numerous restructuring especially following the signing of the Affordable Care Act into law. The law aims to improve the delivery, accessibility, and affordability of health services by expanding the Medicare and Medicaid program and encouraging healthcare providers and private insurance companies to reduce their expenditures. This has led to increased funding and more entities applying to be included in the program. However, this has seen cases of fraud emerge. Healthcare frauds are increasing significantly in America. Majority of these frauds are committed against the Medicare and Medicaid anti-fraud and abuse laws.

Under the Medicare and Medicaid anti-fraud and abuse provisions, the Durable Medical Equipment subsidiary has violated the following federal healthcare laws;

1. Civil Monetary Penalties Law
2. Anti-Kickback Statute

                             Civil Monetary Penalties law

The Affordable Care Act through the Social Security Act, section 112A, authorize civil monetary penalties for individuals or entities who knowingly;

• Make or use a false record or material statement to a false or fraudulent claim for payments for items or services furnished under the federal health program
• Fail to report or return an overpayment within specified time limits
• Order or prescribe a medical or other item or service during which a person was excluded from a federal health program
• Fail to grant the office of the inspector general upon request for access on time for investigations, audits, statutory functions or evaluations

The subsidiary violates this statute when it tempered with the results of the arterial blood gas tests to be able to claim payments o the Medicare program for their oxygen concentrators. I advise the company to disclose this information to the Office of the inspector general about the malpractice and offer to pay the fine rather than wait for the audits by the same office

                             Anti-kickback statute

According to the Social security Act, section 1128B, it prohibits the “knowingly and willingly offering, payment. soliciting, or receipt of any remuneration, in cash or in kind, to induce or in return for referring an individual for the furnishing or arranging of any item or service for which payment may be made under the federal health program”

The practice of the company subsidiary to pay hospital and home agency personnel for assisting its patients in learning how to use its products is against anti-kickback statute. Moreover, the company salesmen practice of offering home agency employees premiums on a regular basis for clients who order Durable Medical Equipment from the subsidiary violates this statute too.

Fortunately,” remuneration” in reference to the anti-kickback statute does not include premiums provided those reductions in prices are properly disclosed. I would advise the company salesmen to continue offering premiums but the subsidiary should ensure that they disclose those prices and ensure they are reflected in their costs when claiming payments from the Medicare program.

However, I recommend the company to stop offering payments to hospitals and home agency employees for assisting patients to learn how to use their products. If this continues, the company risks being discontinued from participating in the program or a fine of up to $25,000 or the executives' risk imprisonment of up to 5 years in jail

                            References

1. US Department of Health and Human Services,Office of the Inspector General(2015)”A Road Map for New Physicians: Avoiding Medicare and Medicaid Fraud and Abuse case”
2. Robert A. Berenson and John Holahan, Preserving Medicare: A Practical Approach to Controlling Spending (Washington, DC: Urban Institute, Sept. 2011)
3. US Department of Health NAD Human service &Department of Justice(2011)”Healthcare Fraud and Abuse control Program annual report for fiscal year 2010”