(February 17, 2020): Over the last few months, we have seen a significant increase in the number of telemedicine audits and investigations by law enforcement and program integrity contractors. Unfortunately, most of the calls we have received have been from physicians who have inadvertently become associated with a number of improper telemedicine schemes. The purpose of this article is to discuss several of the problematic Durable Medical Equipment (DME) telemedicine business arrangements that we have seen. This article also reviews the possible adverse ramifications that can result if a physician, nurse practitioner or physician assistant becomes involved in one of these improper billing arrangements.
I. Historical Overview of DME Telemedicine Audits and Enforcement Efforts:
Although telehealth services have been around in one form or another for more than a century, it wasn’t until 1997 that legislation was passed that would cover certain Medicare telemedicine consultations to patients living in specific rural areas. These services were later implemented as part of the 2001 Physician Fee Schedule. Since that time, the scope of Medicare telehealth services covered by the government has expanded considerably. Nevertheless, a significant number of restrictions greatly limit the care that can be provided via a telecommunications system, who qualifies to provide telemedicine services, and where a Medicare beneficiary must be located in order for the location to qualify as an “originating site.” A more in-depth discussion of these Medicare telemedicine restrictions can be found at this linked article.
Despite the fact that coding and fee schedule guidance regarding Medicare covered telemedicine services wasn’t even published until November 2001, by March 2003 the Department of Health and Human Services (HHS), Office of Inspector General (OIG) had already found it necessary to issue a Special Fraud Alert entitled “Telemarketing By Durable Medical Equipment Suppliers.” At that time, the OIG had identified a number of DME suppliers that had utilized third-party marketing companies to make unsolicited telephone calls to Medicare beneficiaries in an effort to generate referrals. The Social Security Act, § 1834(a)(17)(A), prohibits DME suppliers from making unsolicited calls to Medicare beneficiaries regarding the furnishing of a covered item (unless one of three narrow exceptions apply). Moreover, § 1834(a)(17)(B) bars payments to a DME supplier that knowingly submits a claim that was generated as a result of a prohibited telephone solicitation. The OIG further noted that DME suppliers cannot use third-party marketing companies as a subterfuge to get around these unsolicited telemarketing restrictions. As the Special Fraud Alert expressly notes:
“. . . a DME supplier is responsible for verifying that marketing activities performed by third parties with whom the supplier contracts or otherwise does business do not involve prohibited activity and that information purchased from such third parties was neither obtained, nor derived, from prohibited activity. If a claim for payment is submitted for items or services generated by a prohibited solicitation, both the DME supplier and the telemarketer are potentially liable for criminal, civil, and administrative penalties for causing the filing of a false claim.” (emphasis added).
Over the next seven years, further instances of improper, and often illegal conduct by third-party marketing companies continued to be identified by the government. In January 2010, the OIG reissued its originally March 2003 Special Fraud Alert, updating the guidance to reflect additional concerns that had been noted by law enforcement. As the OIG’s 2010 Updated Special Fraud Alert states:
“OIG has also been made aware of instances when DME suppliers, notwithstanding the clear statutory prohibition, contact Medicare beneficiaries by telephone based solely on treating physicians’ preliminary written or verbal orders prescribing DME for the beneficiaries. A physician’s preliminary written or verbal order is not a substitute for the requisite written consent of a Medicare beneficiary.”
Once again, the OIG stressed that DME suppliers may only engage in telemarketing activities to Medicare beneficiaries if one of the three exceptions under Social Security Act § 1834(a)(17)(B) have been met. Moreover, the DME suppliers cannot try to go around these restrictions by using third-party marketing companies to make unsolicited telephone contacts.
II. Current DME Telehealth / Telemedicine Fraud Enforcement Efforts:
Telemedicine audits of physician orders for DME supplies and law enforcement investigations of the business arrangements between referring physicians, telemedicine marketing companies and DME suppliers have steadily increased. This is due in large part to the fact that there are often multiple major risk areas at play in the provision of this type of care. Over the last year, the government has announced the investigation and indictment of multiple large DME telemedicine cases, many of which are still ongoing. For example:
February 2020. District of New Jersey. In this case, the government has alleged that the owners of two telemedicine companies agreed to solicit and receive illegal kickbacks and bribes from patient recruiters, pharmacies, brace suppliers and others in exchange for the arranging for doctors to order medically unnecessary braces for Medicare beneficiaries. To accomplish the fraud, the government alleges that the telemedicine company owners recruited and hired health care providers to order braces for Medicare beneficiaries. Federal prosecutors also allege that the telemedicine company owners paid illegal kickbacks to health care providers to order DME supplies for Medicare beneficiaries that were medically unnecessary and / or were ineligible for Medicare reimbursement. Once the physician orders for DME supplies were obtained, the government alleges that the telemedicine company owners transferred the orders to co-conspirator DME suppliers who then submitted in excess of $56 million in false claims to the Medicare program.
September 2019. District of New Jersey. In this case, a New Jersey physician pleaded guilty to his role in a $13 million telemedicine health care fraud scheme. Notably, this was one of the 24 defendants indicted in the national take-down discussed below. In this particular case, the New Jersey physician admitted that while working for two telemedicine companies, he wrote medically unnecessary orders for orthotic braces for Medicare beneficiaries. He further admitted that he wrote the brace orders for the telemedicine companies without speaking to the patients and that he “concealed” the fraud by stating in his documentation that he had “discussions” or “conversations” with the patients.
April 2019. Nationwide DME Telemedicine Take-Down. Last April, the Department of Justice announced that it had brought criminal charges against 24 individuals and 130 DME companies for their alleged participation in fraud schemes involving more than $1.2 billion in losses to insurance payors. The fraud was widespread, and more than 80 search warrants were executed in 17 Federal judicial districts. The 24 individual defendants include CEOs and COOs of telemedicine companies, owners of DME companies and a number of licensed medical professionals. As the Press Release noted:
“The defendants allegedly paid doctors to prescribe DME either without any patient interaction or with only a brief telephonic conversation with patients they had never met or seen. The proceeds of the fraudulent scheme were allegedly laundered through international shell corporations and used to purchase exotic automobiles, yachts and luxury real estate in the United States and abroad.” (emphasis added).
As a review of recent cases will show, every DME telemedicine fraud case is different. Nevertheless, there are a number of common fraud tactics that are repeatedly alleged in the cases prosecuted by the government, many of which are discussed below.
III. The Role of Physicians, Nurse Practitioners and Physician Assistants in the DME Telehealth Fraud Cycle:
Many of the physicians, nurse practitioners and physician assistants currently undergoing a telemedicine audit or a law enforcement investigation of their telehealth evaluations first decided to dabble in the world of telemedicine as a way to supplement their income. In the cases we have handled, these individuals have typically worked full-time as a hospitalist or in another staff capacity and have then taken a side job with a telemedicine marketing company to conduct telemedicine DME evaluations of patients. In most instances, the evaluating physician would work as an Independent Contractor and would be paid anywhere from $30 to $50 for each telemedicine patient evaluation performed.
As a quick review of the internet will confirm, even today there are multiple employment websites listing part-time opportunities for physician telemedicine work. At first glance, it may look like a fast and easy way to make some money. When it comes to telemedicine business arrangements, the old maxim “You are Judged by the Company You Keep,” certainly holds true. We recommend that you exercise caution and conduct an appropriate level of due diligence before you take on this type of work. As the case summaries above reflect, if you are drawn into an improper telemedicine business arrangement, you may face administrative, civil or even criminal sanctions. Questions to be asked include, but are not limited to:
- How is the telemedicine marketing company generating potential beneficiary referrals?
- How is the telemedicine marketing company paid for its services and by whom? Is the company paid by a DME supplier?
- Is the telemedicine marketing company also involved with the promotion of laboratory services?
- How will you be paid for the telemedicine evaluations you will be performing?
- Will you be billing Medicare or another responsible payor directly for your services?
- If you won’t be billing Medicare for the telemedicine evaluation, will you be assigning your rights to bill for evaluations to the telemedicine marketing company?
- Will you be paid by a telemedicine marketing company for each evaluation that you conduct OR only for the evaluations in which you order DME supplies?
- What safeguards are in place to prevent third-parties from using your provider number to submit claims for services that you did not render or for supplies that you did not order?
- Have you asked qualified health care legal counsel to review the proposed Independent Contractor agreement between you and the telemedicine marketing company?
- If you were to decide to work with the telemedicine marketing company, how would you receive patient referrals? Will a patient desiring a telemedicine consultation contact you directly or will you be given a list of patients that need to be evaluated?
- Have you checked with your medical malpractice carrier to verify whether they will cover your telemedicine services?
- Where are the patients you will be evaluating located?
- Will you be personally interacting with each patient by telephone or interactive video conferencing OR is the telemedicine marketing company asking you to conduct your evaluation based on a patient recording and / or an intake sheet completed by the marketing company?
- Has the telemedicine marketing company asked that you complete a prepopulated “script” when issuing an order?
- If you decide to issue an order for DME supplies after conducting a telemedicine evaluation, who decides which DME supplier will be chosen to fill the prescription?
- Are you meeting state requirements with respect to the establishment of physician-patient relationship?
- Where will patient records of your evaluations be stored, and will you have ready access to those records for at least seven (7) years, or if longer, the length of time required by your state’s law?
- Will you maintain a copy of the patient records yourself?
Each of these questions should be carefully considered before deciding whether to work with a telemedicine marketing company. To the extent that potential concerns are identified, we recommend that you work with a qualified health law attorney to determine whether an issue represents a significant professional licensure, statutory or regulatory compliance risk. If a significant risk is identified, we recommend you discuss what steps, if any, can be taken to address the risk and to better ensure that your efforts do not violate the law.
IV. Specific Risks Faced by Referring Physicians in Telemedicine Audits:
- Failure to Comply with Medicare’s Mandatory Claim Filing Requirements.
When representing physicians in telehealth audits and investigations, one of the first areas we discuss with our clients is how they were compensated for their efforts. After conducting a telemedicine evaluation, did the physician bill the Medicare program directly for the Evaluation & Management (E/M) service conducted? Although not necessarily determinative of fraud or improper conduct, this is one of the factors that Unified Program Integrity Contractors (UPICs), such as Qlarent, AdvanceMed, the CoventBridge Group, and SafeGuard Services LLC, will be examining. It is important to keep in mind that you are listed as the referring provider on each of the orders for DME supplies that are issued as a result of the telemedicine evaluations that you have conducted. It is relatively easy for a UPIC to pull a list of the referring providers who are listed on the claim forms submitted by DME suppliers and determine which providers did not bill for the E/M telemedicine service he or she allegedly conducted. Why does this matter?
In the absence of a bona-fide reassignment agreement, it is mandatory that you bill Medicare for the telemedicine evaluations that you are conducting. In fact, under the Social Security Act, § 1848(g)(4), physicians and suppliers are required to submit claims to Medicare carriers for services furnished to Medicare beneficiaries on or after September 1, 1990. Compliance with Medicare’s mandatory claim filing requirements are carefully monitored by Medicare Administrative Contractors (MACs). Violations of this requirement can result in both Civil Monetary Penalties and / or exclusion from participating in the Medicare program.
The bottom line is simple. Your failure to comply with Medicare’s mandatory claims submission requirements may very well lead to the initiation of a UPIC audit.
- Failure to Comply with Federal and State Documentation Maintenance and Access Requirements.
One of the problems sometimes faced by physicians who have entered into an Independent Contractor business arrangement with a telemedicine marketing company is the fact that patient records are typically maintained by the telemedicine marketing company, not by the evaluating / referring physician. When a DME claims audit is conducted by a UPIC, the program integrity contractor will also issue a request to the referring physician for a complete copy of the Medicare beneficiary’s medical records. Sample language that a UPIC may include in its letter to the referring physician may look like the following:
“The UPIC is reviewing claims associated with the beneficiaries referenced in the attached list, submitted by the DME supplier as noted, for supplies billed where you were identified as the referring physician. We are therefore requesting the following medical documentation. . . “
Importantly, as a referring provider, you are required by regulation to maintain a copy of the medical documentation upon which your order and / or referral was based. As required by 42 CFR § 424.516(f)(2)(i)(A):
(f) Maintaining and providing access to documentation.
(2)(i) A physician or, when permitted, an eligible professional who orders, certifies, refers, or prescribes Part A or B services, items or drugs is required to –
(A) Maintain documentation (as described in paragraph (f)(2)(ii) of this section) for 7 years from the date of the service.
As a licensed medical professional, you should also keep in mind that your state’s Medical Practice Act invariably requires that you maintain a copy of the medical records for each of your patient. For example, under Texas Medical Board Rule § 165.1(b)(1):
“(1) A licensed physician shall maintain adequate medical records of a patient for a minimum of seven years from the anniversary date of the date of last treatment by the physician.”
The failure to maintain copies of patients’ records has led to severe administrative sanctions. In several recent cases we have seen, since the referring physician did not have a copy of the telemedicine evaluation notes conducted, the physician failed to submit them in response to a proper request for records from a UPIC. When the physician failed to submit the records requested, CMS revoked the physician’s billing privileges for a period of 10 years. The revocation action taken was based on the following:
“42 CFR § 424.535 – Revocation of enrollment in the Medicare program.
(a) Reasons for revocation. CMS may revoke a currently enrolled provider or supplier’s Medicare enrollment and any corresponding provider agreement or supplier agreement for the following reasons:
. . .
(10) Failure to document or provide CMS access to documentation.
(i) The provider or supplier did not comply with the documentation or CMS access requirements specified in §424.516(f) of this subpart.
(ii) A provider or supplier that meets the revocation criteria specified in paragraph (a)(10)(i) of this section, is subject to revocation for a period of not more than 1 year for each act of noncompliance.”
To be clear, the government’s revocation of a physician’s Medicare billing privileges isn’t necessarily the end of this saga. The failure to maintain adequate documentation and / or provide ready access to patient records when requested can lead to both a referral to a physician’s State Medical Board and, in some cases, a referral to the OIG for possible permissive exclusion action.
V. Responding to a Telemedicine Audit or Investigation:
Every telemedicine audit by a UPIC and investigation by law enforcement is different. If your telemedicine evaluations are being audited, it is essential that you consult with qualified health law counsel to better ensure that your case is properly handled. Liles Parker attorneys have represented physicians, marketing companies and DME suppliers in a wide variety of telemedicine-related matters. Give us a call for a free consultation.
Have you received a request for telemedicine-related records? Our experienced health law attorneys can advise you on how to best respond to a telemedicine audit and represent you throughout the complex appeal process that has been established. For a free initial consultation regarding your situation, call us at: 1 (800) 475-1906.
 A number of writers have argued that telehealth / telemedicine services were likely first provided by telegraph in the mid-1800’s and then in a more traditional format after the invention of the telephone in the latter part of the 19th century.
 CMS. 2001 Physician Fee Schedule List of Telehealth Codes. Available at: https://www.govinfo.gov/content/pkg/FR-2001-11-01/html/01-27275.ht
 As an industry, practically everyone involved in the delivery of health care has long promoted the expansion of telehealth / telemedicine services, often pointing to improved patient access, long-term cost savings and better overall health outcomes as merely a few of the many advantages that will undoubtedly result as the use of telemedicine expands.
 A list of covered telehealth services payable under the Medicare Physician Fee Schedule when furnished via telehealth during Calendar Year 2020 can be found at: https://www.cms.gov/Medicare/Medicare-General-Information/Telehealth/Telehealth-Codes
 42 C.F.R. § 410.78(b)(3).
 While somewhat dated, this December 2018 article entitled “Audits of Telehealth Services are Increasing. Do Your Telehealth Services Meet Applicable Requirements?” provides a concise overview of the Medicare telehealth coverage limitations that were in place at that time. Since Medicare’s coverage requirements in this area are quite dynamic, we recommend that you review the current rules.
 A copy of the March 2003 Special Fraud Alert is available at: https://oig.hhs.gov/fraud/docs/alertsandbulletins/Telemarketingdme.pdf
 Under § 1834(a)(17)(A)(i) – (iii) of the Social Security Act:
(i) The individual has given written permission to the supplier to make contact by telephone regarding the furnishing of a covered item.
(ii) The supplier has furnished a covered item to the individual and the supplier is contacting the individual only regarding the furnishing of such covered item.
(iii) If the contact is regarding the furnishing of a covered item other than a covered item already furnished to the individual, the supplier has furnished at least 1 covered item to the individual during the 15-month period preceding the date on which the supplier makes such contact.
 A copy of the November 2010 Special Fraud Alert is available at: