When you're rethinking or expanding your company's marketing plans, keep the following can- and can't-do's in mind: What Your DME Company CAN Do Market
by Jeffrey S. Baird, ESQ.

When you're rethinking or expanding your company's marketing
plans, keep the following can- and can't-do's in mind:

What Your DME Company CAN Do

  • Market through bona fide part-time and full-time employees. The
    company must comply with as many IRS guidelines as possible so that
    the IRS will classify the marketing rep as an employee (W2), and
    not an independent contractor (1099).

    Among other requirements, the company must exercise supervision
    and control over the employee. The company may pay the employee
    bonuses and commissions.

  • The company can advertise on television, on the radio, in the
    newspaper and in other media outlets.

  • The company may call on physicians, hospital discharge planners,
    home health agencies and other referral sources in order to market
    the company's products and services.

  • On condition that the company secures a list of senior citizens
    in such a way that HIPAA is not violated (e.g., the list comes from
    an entity that is not a health care provider), then the company can
    mail out promotional literature to the people on the list.

    The company can include a stamped, self-addressed postcard. In
    promotional literature, the company can ask the recipient to sign
    and mail the postcard back, which will give the company the right
    to call the recipient.

  • The company can offer an item of nominal value (i.e., retail
    value of $10 or less, not to exceed $50 per 12 months for each
    beneficiary) to a prospective Medicare/Medicaid customer.

  • The company may call a Medicare/Medicaid beneficiary about the
    company's products and services if the company has provided a
    Medicare/Medicaid-covered item to the beneficiary within the
    preceding 15 months.

  • The company can participate in local health fairs. In so doing,
    it can set up a table and give away items with a retail value of
    not more than $10. The company can put on a short program during
    lunch at a senior citizens' center, at which time the company can
    distribute promotional literature. The company can place a kiosk in
    a mall that promotes its products and services.

  • The company may allow an employee to work on the premises of a
    hospital for a certain number of hours each week. This person is
    commonly known as an “employee liaison.”

    The employee may educate the hospital staff regarding medical
    equipment (to be used in the home) and related services. The
    employee may work with a patient after the referral is made to the
    DME company (but before the patient is discharged) in order for
    there to be a smooth transition when the patient goes home. The
    employee liaison may not assume responsibilities that the hospital
    is required to fulfill.

  • The DME company may offer discounts (off of what the company
    submits to Medicare/Medicaid) to cash-paying customers so long as
    the discounts are 20 percent or less, unless the company can show
    “good cause” as to why it is giving a discount greater
    than 20 percent.

  • If a DME company is located in a rural area, then a physician
    can be an owner of the company and also refer to it.

  • If a physician serves as the medical director of a DME company,
    and if the physician refers to the company, then the agreement
    needs to comply with the personal services exception to Stark and
    needs to substantially comply with the Personal Services and
    Management Contracts safe harbor to the anti-kickback statute.

    In particular, the compensation to be paid to the physician must
    be fair market value and must be set one year in advance.

  • If a DME company and a hospital put together a joint venture
    — that is, a jointly owned DME company — then both
    sides must put up risk capital, and the joint venture operation
    must be independently run. The joint venture must comply with the
    OIG's 1989 Special Fraud Alert on joint ventures and the OIG's
    April 2003 Special Advisory Bulletin on contractual joint
    ventures.

  • A cooperative marketing program can be implemented by a DME
    company and a hospital, or by a DME company and a pharmacy, so long
    as both parties pay the expenses on a pro rata basis.

  • A DME company may enter into a loan/consignment closet
    arrangement with a hospital/physician so long as patient choice is
    ensured; the hospital/physician makes no money off the consigned
    equipment; and any rent paid by the DME company complies with the
    Space Rental safe harbor to the anti-kickback statute (e.g., fixed
    one year in advance/fair market value). Preferably, no rent should
    be paid.

  • A DME company may enter into a preferred provider agreement with
    a hospital that ensures patient choice.

  • Under HIPAA, one provider may contact its customers and educate
    them regarding the products and services offered by another
    provider.

What Your DME Company CANNOT Do

  • Market through independent contractors whereby the company pays
    commissions and bonuses to the contractors. The only way that a
    company may market through independent contractors is if the
    company pays the contractor a fixed annual amount that is the fair
    market value equivalent of the contractor's services.

    The arrangement between the company and the contractor needs to
    substantially comply with the Personal Services and Management
    Contracts safe harbor to the Medicare/Medicaid anti-kickback
    statute.

  • In calling on physicians, hospital discharge planners, home
    health agencies and other referral sources, the company may not
    directly or indirectly give something of value for the
    referrals.

  • The company may not obtain a list of senior citizens from
    another health care provider; this would violate HIPAA.

  • The company may not offer anything of value (in excess of
    nominal value, $10 or less retail, not to exceed $50 per 12 months)
    to a prospective Medicare/Medicaid customer.

  • A company cannot call beneficiaries for the purpose of
    soliciting business. There are several exceptions, one of which is
    that the company may call a beneficiary who has acquired a
    Medicare/Medicaid-covered item from the company within the
    preceding 15 months.

  • An employee liaison (see above) may not assume responsibilities
    that the hospital is required to fulfill. Doing so will save the
    hospital money (remember, the hospital is a referral source to the
    DME company), which will violate the Medicare/Medicaid antikickback
    statute.

  • When selling an item to a cash-paying customer, the DME company
    may not give greater than a 20 percent discount (off of what the
    company submits to Medicare/Medicaid) unless the company can show
    “good cause” supporting a discount greater than 20
    percent.

  • If a DME company is located in a non-rural area, a physician
    cannot have an ownership interest in it and also refer to it.

  • If a DME company and a hospital put together a joint venture,
    that is, a jointly owned DME company, then the hospital (a referral
    source) cannot be allowed to have an ownership interest without
    investing risk capital equal to the ownership interest awarded to
    the hospital.

    The DME company (that is an owner of the joint venture) cannot
    manage the joint venture operation on a turnkey basis.

  • If a cooperative marketing program (see above) is implemented by
    a DME company and a hospital, or by a DME company and pharmacy,
    then the referral source cannot be given a free ride — the
    referral source must pay its prorata share of the expenses.

  • A DME company cannot enter into a loan/consignment closet
    arrangement with a hospital/physician that allows the
    hospital/physician to make money off the consigned inventory; does
    not ensure patient choice; and allows for rent in excess of fair
    market value (and that does not comply with the Space Rental safe
    harbor to the anti-kickback statute).

  • A DME company cannot enter into a preferred provider agreement
    with a hospital that does not ensure patient choice.

  • Under HIPAA, one provider may not give customer information to
    another provider in order for the other provider to market to the
    customers.

Jeffrey S. Baird, Esq., is chairman of the Health Care Group at
Brown & Fortunato, P.C., an Amarillo, Texas-based law firm.
Board certified in health law by the Texas Board of Legal
Specialization, he represents home medical equipment companies,
pharmacies and other health care providers throughout the United
States. Baird may be reached at 806/345-6320 or by e-mail at
jbaird@bf-law.com.