By Joseph E. Houchin, Health Care, Litigation

On July 20, 2022, the Department of Justice announced charges against 36 criminal defendants across 13 different federal districts for healthcare fraud violations resulting in Government losses in excess of $1.2 billion. The bulk of the charges allege bribery and illegal kickbacks by laboratory owners in exchange for patient referrals by telemedicine companies. Additionally, DOJ revealed that over $8 million in cash, vehicles, and other proceeds have been seized in relation to the nationwide, multi-agency investigation which also resulted in first-time prosecutions for fraudulent cardiovascular genetic testing. Separately, the Centers for Medicare and Medicaid Services (CMS) announced administrative actions against 52 providers allegedly engaged in similar conduct.

The same day, the Office of Inspector General for the Department of Health and Human Services (OIG) released a Special Fraud Alert detailing the growing number of fraudulent schemes associated with telemedicine services. OIG has released only five Special Fraud Alerts since 2003, highlighting the importance of the agency’s statements and focus of investigative efforts, especially given OIG’s announced collaboration with the Justice Department to combat the problem of telemedicine fraud.   

OIG identified that while fraudulent operations can take various forms, commonly telemedicine companies will arrange with unwitting or unscrupulous medical providers to order or prescribe unnecessary medical items or services for individuals recruited by the company. Under these arrangements, the practitioner is paid by the company for placing the unnecessary order or prescription with limited, if any, interaction with the patient or adequate review of their medical records. Under this impermissible arrangement, both the practitioner and telemedicine company may face exposure for fraud under criminal, civil, or administrative penalties including the Federal Anti-Kickback Statute or the False Claims Act. Violation of these statutes can result in civil suspension or exclusion from participation in any federally funded healthcare program such as Medicare, Medicaid, and Tricare, which is often a fatal consequence to the provider’s business operations.

While the facts and circumstances of each case can differ greatly, OIG provided a list of seven red flags that, taken together or separately, could suggest a heightened risk of fraud:

1. The practitioner is ordering items or prescribing services for patients that were identified or recruited by telemarking companies, call centers, health fairs, television, or social media companies advertising free or low out-of-pocket cost items or services.
2. The practitioner does not have sufficient contact with or information from the patient.
3. The practitioner is paid by the telemedicine company based on volume of items ordered, services provided, or number of medical records reviewed.
4. The telemedicine company only works with federal health care program beneficiaries and does not accept private insurance.
5. The telemedicine company claims to work only with private health insurance, but may in fact bill federal health care programs.
6. The telemedicine company produces only one product or single class of products, restricting a practitioner’s options to a predetermined course of treatment.
7. The telemedicine company does not expect the practitioner to follow up with purported patients or other providers.

The Special Fraud Alert recognized that most practitioners appropriately utilize telehealth services, which have become more important than ever due to the COVID epidemic. OIG specifically stated that it is not discouraging legitimate telehealth services or practices. However, due to increased risk, legitimate providers are encouraged to exercise caution and operate with increased scrutiny especially if they identify any of the above suspect characteristics.  

Key Takeaways:

• Practitioners should review the OIG’s list of red flags in assessing their relationship with telemedicine companies and work only with reputable providers.
• Telemedicine companies should carefully compare their business practices against the OIG’s list of suspect characteristics and, if necessary, make appropriate changes as part of broader compliance efforts.
• Telehealth providers should review and bolster compliance programs with respect to the provision of services or product ordering in anticipation of enforcement activity.
• Telehealth companies should implement appropriate controls to ensure that prescribed services or products are medically necessary.

Telehealth providers with questions or those that have been contacted by enforcement agencies are encouraged to immediately contact an experienced attorney.

The contents of this publication are intended for general information only and should not be construed as legal advice or a legal opinion on specific facts and circumstances. Copyright 2024.