OIG Alert and DOJ Enforcement Action Summary: Telemedicine Arrangements

OIG Special Fraud Alert: OIG Alerts Practitioners to Exercise Caution When Entering Into Arrangements With Purported Telemedicine Companies 

The July 20, 2022 Special Fraud Alert describes findings from what OIG describes as “dozens of investigations of fraud schemes involving companies that purported to provide telehealth, telemedicine, or telemarketing services” (collectively called “Telemedicine Companies”) that “exploited the growing acceptance and use of telehealth.” While the practices that OIG criticizes vary in their design and operation, one common component OIG cites is the use of kickbacks to recruit and reward practitioners—both physicians and non-physicians—into the purportedly fraudulent schemes. Specifically, in many of the arrangements it investigated, OIG found that companies paid practitioners in exchange for ordering or prescribing items or services (1) for “purported patients” with whom the practitioners had little or no interaction, and (2) without regard to medical necessity. OIG further observed that in many instances, the Telemedicine Companies would in turn sell the orders or prescriptions to others who then fraudulently billed for the unnecessary items or services.

OIG describes several “fraud concerns” it believes are implicated by these arrangements, including: (1) an inappropriate increase in costs to federal health care programs through the ordering of medically unnecessary items and services; (2) potential harm to beneficiaries through medically unnecessary care, harmful items, or improperly delayed care; and (3) corruption of providers’ independent medical decision-making. 

According to OIG, these purportedly fraudulent schemes implicate a number of federal laws, including the Federal Anti-Kickback Statute, a criminal law that prohibits knowingly and willfully soliciting, receiving, offering, or paying any remuneration to induce or reward referrals for, or orders of, items or services billable to a Federal health care program. Under the Federal Anti-Kickback Statute, parties on both sides of an impermissible kickback transaction can be liable. Practitioners involved in these inappropriate arrangements may also be subject to criminal, civil, or administrative liability under other federal laws, including OIG’s exclusion authority related to kickbacks, the Civil Monetary Penalties Law provision for kickbacks, the criminal health care fraud statute, and the False Claims Act. 

In OIG’s recent enforcement experience in criminal, civil, and administrative fraud cases focused on these kinds of kickbacks, Telemedicine Companies, practitioners, and other participants have been held liable for paying or receiving a payment in violation of the Federal Anti-Kickback Statute, causing a submission of claims in violation of the False Claims Act, and/or other federal criminal laws. While the specific facts and circumstances in these cases varied, OIG identified certain common practices including (1) practitioners ordering items or services for purported patients they never examined or meaningfully assessed, and (2) Telemedicine Companies paying practitioners a fee based on the number of federally reimbursable items or services they ordered. 

In the Special Fraud Alert, OIG also provides a list of attributes of telehealth and telemedicine arrangements that may indicate a heightened risk of fraud and abuse. OIG notes this list of so-called “suspect characteristics” is solely illustrative—the absence or presence of these characteristics is not determinative of whether a specific arrangement is actually improper. OIG identifies the following suspect characteristics of inappropriate telemedicine arrangements: 

• The purported patients for whom the practitioner orders or prescribes items or services were identified or recruited by the Telemedicine Company, telemarketing company, sales agent, recruiter, call center, health fair, and/or through internet, television, or social media advertising for free or low out-of-pocket cost items or services.
• The practitioner does not have sufficient contact with or information from the purported patient to meaningfully assess the medical necessity of the items or services ordered or prescribed.
• The Telemedicine Company compensates the practitioner based on the volume of items or services ordered or prescribed, which may be characterized to the practitioner as compensation based on the number of purported medical records that the practitioner reviewed.
• The Telemedicine Company only furnishes items and services to federal-health care program beneficiaries and does not accept insurance from any other payor.
• The Telemedicine Company claims to only furnish items and services to individuals who are not Federal health care program beneficiaries but may in fact bill Federal health care programs.
• The Telemedicine Company only furnishes one product or a single class of products (e.g., durable medical equipment, genetic testing, diabetic supplies, or various prescription creams), potentially restricting a practitioner's treating options to a predetermined course of treatment.

The OIG’s Alert concludes by noting that telehealth services have been appropriately used by many practitioners to provide medically necessary care during the COVID-19 public health emergency, and that OIG does not intend to discourage legitimate telehealth arrangements.  However, OIG emphasizes that practitioners should exercise caution before entering into arrangements with telemedicine companies to avoid fraud and any related liability. 

Justice Department Charges Dozens for $1.2 Billion in Health Care Fraud

Also on July 20, 2022, DOJ announced federal criminal charges against 36 defendants for more than $1.2 billion in alleged fraudulent telemedicine, genetic testing, and durable medical equipment (DME) schemes. The defendants include a range of healthcare stakeholders, including a telemedicine company executive, clinical laboratories, DME companies, marketing organizations, and medical professionals. Additionally, the Centers for Medicare & Medicaid Services (CMS), Center for Program Integrity (CPI) announced administrative actions against 52 providers involved in similar schemes. 

Most of these investigations center on arrangements that the DOJ alleged to involve illegal kickbacks and bribes for laboratory owners and operators in exchange for patient referrals by medical providers coordinating with fraudulent telemedicine and digital medical technology companies. DOJ alleged that medical providers referred patients for expensive and medically unnecessary genetic tests and DME without any patient interaction or after only a brief telephone conversation. Providers were also to have placed these orders regardless of whether the patients actually needed them, and in many cases the results or equipment were not actually provided to the patients. 

Telemedicine arrangements account for over $1 billion of the total alleged intended losses associated with this enforcement action. In one case, an operator of clinical laboratories allegedly paid over $16 million in kickbacks to marketers who subsequently paid kickbacks to telemedicine companies in exchange for physician orders. These orders were allegedly used to submit over $174 million in false and fraudulent Medicare claims for genetic testing.

This enforcement action comes after several prior telemedicine enforcement actions involving over $8 billion in fraud, including Operation Brace Yourself and Operation Double Helix in 2019, Operation Rubber Stamp in 2020, and the telemedicine component of the National Health Care Fraud Enforcement Action in 2021.