2022 HME Business Handbook: Legal
How To Work With Physicians and Other Referral Sources
- By Jeffrey S. Baird
- Jun 01, 2022
The lifeblood of the durable
medical equipment supplier
business is a predictable stream
of referrals from physicians and
other referral sources such as
hospitals and long term-care
facilities.
It is acceptable for the supplier
to enter into arrangements
with referral sources that result
in referrals. For example,
the supplier may enter into a
Medical Director Agreement with
a referring physician.
Another example is a joint
venture in which a DME entity is
jointly owned by a hospital and
a DME supplier. In entering
into these types of arrangements,
the supplier cannot run afoul of
the federal and state laws that
prohibit kickbacks, inducements
and self-referrals.
It is important for the DME
supplier to (i) know what the
applicable federal and state laws
are regarding arrangements with
referral sources and (ii) structure
such arrangements to comply
with the laws.
It is equally important for the
DME supplier business to know
which types of arrangements to
avoid.
UNDERSTANDING THE LAW
DME suppliers mostly serve the elderly.
This means that Medicare is the primary
source of payment for DME. If the
supplier takes assignment, Medicare will
pay the supplier directly. If the supplier
provides the product on a non-assigned
basis, (i) the Medicare beneficiary pays
the supplier (ii) the supplier submits
a claim to Medicare on behalf of the
beneficiary, and (iii) Medicare reimburses
the beneficiary for 80 percent of the
Medicare allowable.
ARRANGEMENTS WITH REFERRALS
How do Medicare beneficiaries know to
select one DME supplier over another?
One way is for the supplier to market
directly to the general public, or to a
targeted population, in order to create
brand awareness.
Another way is for the DME supplier
to develop relationships with physicians
and other referral sources that result in
referrals of beneficiaries to the supplier.
In entering into arrangements with
referral sources, the DME supplier needs
to be aware of the federal and state laws
that govern such arrangements.
ANTI-KICKBACK STATUTE
The federal anti-kickback statute (AKS)
is a criminal statute. It prohibits the
DME supplier from offering “anything of
value” to a referral source in exchange
for (i) the referral of (or arranging for the
referral of) a patient covered by a federal
health care program (FHCP) or (ii) the
recommendation of the purchase of a
product covered by an FHCP. The Office
of Inspector General (OIG) has published
a number of “safe harbors.”
If an arrangement complies with a safe
harbor, the compensation (or anything
of value) between the parties does not
constitute illegal remuneration under
the federal AKS. If an arrangement does
not comply with a safe harbor, it does
not mean that the arrangement violates
the federal AKS. Rather, it means that
a careful analysis of the arrangement
needs to be performed in light of the
language of the statute, court decisions,
and other published guidance.
STARK
The federal physician self-referral statute
(“Stark”) is a civil statute. If a physician or
immediate family member has a financial
relationship (ownership or compensation)
with a DME supplier, the physician
cannot refer Medicare/Medicaid patients
to the supplier, unless the arrangement
fits within a Stark exception.
STATE STATUTES
In addition to the federal statutes, it is
important that the supplier’s relationship
with the referral source complies with
applicable state statutes. Each state has
an anti-kickback statute (state AKS) that
is similar to the federal AKS.
Some state AKSs apply only if the
payor is the state Medicaid program.
Other state statutes apply if the payor is
a commercial insurer, or even a cash-pay
patient.
POINTS TO REMEMBER
- It is legally acceptable for a DME
supplier to enter into arrangements
with physicians and other referral
sources that result in referrals to the
supplier.
- In entering into such arrangements,
it is important that the supplier and
the referral source comply with the
federal AKS, Stark, and their state
counterparts.
- In particular, the arrangement
needs to (i) comply with, or substantially
comply with, a safe harbor to
the federal AKS, (ii) comply with a
Stark exception, and (iii) comply
with safe harbors/exceptions to the
applicable state laws.
LEARN MORE
This article originally appeared in the May/Jun 2022 issue of HME Business.
About the Author
Jeffrey S. Baird, Esq., is Chairman of the Health Care Group at Brown & Fortunato, a law firm with a national health care practice based in Texas. He represents HME companies, pharmacies, infusion companies, manufacturers and other health care providers throughout the United States. Baird is Board Certified in Health Law by the Texas Board of Legal Specialization and can be reached at (806) 345-6320 or [email protected].