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
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
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
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
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
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
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
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 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
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