Vendors, Vultures and Violations: A Case Study

It’s as common as a roadside billboard ad and as old as the Greek agora or the first Mesopotamian marketplaces.  There have always been peddlers who promise you the best product or the finest service or a can’t-miss deal.  But a fool and his money are soon parted, as the saying goes.  Another adage aptly applied is “caveat emptor,” let the buyer beware.   

 And this is certainly sound advice for those in the medical field these days.  Increasingly, vendors of various medical products and health-related services are targeting doctors and other healthcare professionals with offerings sure to increase their bottom line, or so they claim.  But providers should be wary of these wares and obtain optimal optics for the fine print, because there are potential legal landmines lurking therein. 

 The Parameters 

 Ever heard of the False Claim Act (FCA) or the Anti-Kickback Statute (AKS)?  Chances are that at least some of our readers are unfamiliar with these terms.  For others, these titles ring a bell, but they’re not fully informed on their provisions.  Well, for clarification, these are federal laws that directly address the healthcare industry, including individual and group practices.  And they are nothing to sneeze at; they have real teeth.  A conviction under one of these statutes can carry with it substantial penalties.  It may be advantageous, then, to briefly summarize each of these laws before we proceed with how all this relates to medical vendors. 

According to the U.S. Department of Justice (DOJ): 

The FCA provides that any person who knowingly submits, or causes to submit, false claims to the government is liable for three times the government’s damages plus a penalty that is linked to inflation.  FCA liability can arise in other situations, such as when someone knowingly uses a false record material to a false claim or improperly avoids an obligation to pay the government.  Conspiring to commit any of these acts also is a violation of the FCA.  

So, submitting a false medical claim to Medicare, for instance, would constitute a violation of the FCA and trigger its penalty provisions. 

The AKS is even more targeted in its stipulations as it concerns certain aspects of healthcare fraud.  One healthcare law firm summed it up this way: 

Under the federal Anti-Kickback Statute, a company commits fraud when it offers doctors and other healthcare providers financial incentives to use the company’s products or services, for which payment may be made under Medicare, Medicaid, or other federally funded healthcare programs administered by CMS.  

That brings us back to the vendors.   

The Pitch 

According to one prominent healthcare attorney, vendors are approaching chronic pain clinics with offers to provide chronic care management (CCM), remote patient monitoring (RPM) or remote therapeutic monitoring (RTM) services.  In most of the proposals, the compensation is structured so that the outside vendor performs most of the services, and the pain practice bills the services and keeps a percentage of the allowable.  According to the attorney, this arrangement is potentially problematic as it could violate the AKS since the pain practice is arguably referring the patient to a third-party vendor to perform services, and the practice keeps half the revenue “for doing practically nothing.”   

Attorneys for the vendors, of course, typically disagree that this is a kickback scheme.  Now, however, we have a case before a federal judge that may decide the matter. 

The Problem

In a case before the U.S. District Court for the Northern District of Mississippi, The Family Clinic of New Albany and its co-owners brought a qui tam, i.e., whistleblower, action under the FCA and AKS against Chartspan Medical Technologies.  The plaintiffs alleged that Chartspan induced clinics to submit false or fraudulent Medicare claims for CCM services by providing kickbacks and not meeting Medicare requirements for CCM services.  Specifically, the suit contended that Chartspan offered CCM services at about half the Medicare rate, allowing clinics to retain the remainder, in exchange for referring patients to the vendor.  

The vendor filed a Motion to Dismiss arguing that the medical clinics are not “referring” patients to the CCM vendor because the arrangement is just a payment for an outsourced service.  But, quite significantly, the court refused to dismiss the case, stating that a kickback claim had been properly alleged because the AKS is very broad and covers schemes involving payments to induce a person to refer a patient for services which are paid by Medicare.  In this case, the practice is referring patients to the vendor; the vendor is performing the service; and the practice is keeping half the money. 

In other words, a federal judge has found sufficient reason to allow this case to move forward based on a vendor/medical practice arrangement that he deemed to potentially violate the AKS, in particular.  That speaks volumes and could be an indication of which way the court is leaning.   

We have yet to see a final adjudication of this law suit; but, so far, the takeaway for our readers is this: before you enter into an arrangement with a CCM, RPM or RTM vendor, make sure you consult with your own healthcare attorney to ensure you are not in danger of violating these very significant federal laws.  It may not be worth the risk, and the better move may be to just walk away. 

If you have questions about this topic, please contact your account executive.