Q&A on Purchasing Leads: On the Government’s Radar

By Jeffrey S. Baird, Esq.

Lead generation companies are coming out of the woodwork. While they have been around for years in the non-healthcare industries, they have recently been entering the health care sector, including HME. While there are relatively few legal restrictions pertaining to lead generation in non-healthcare industries, the same is not true with health care. In particular, in purchasing leads, HME providers must be careful not to violate the Medicare anti-kickback statute, the telephone solicitation statute, and Supplier Standard No. 11.

A lead generation company compiles leads in different ways. It may manage a number of websites, and have Medicare beneficiaries who are customers input their names, addresses and phone numbers. Or a lead generation company may advertise by newspaper, radio or TV and have beneficiaries call a toll-free number. The lead generation company will then mail them promotional literature, along with a stamped, self-addressed post card that beneficiaries can fill out and mail back. A lead generation company can also purchase leads from a “lead broker.”  For reasons discussed later, I do not like the concept of purchasing leads from brokers. This Q & A focuses on how leads can be generated and purchased.
 

QUESTION: Your title says that purchasing leads has made its way on the government’s radar. What do you mean by that?

ANSWER: In the old days, the only governmental agencies that conducted investigations were the Department of Justice and the Office of the Inspector General. These investigations would normally take years to resolve. Things have changed dramatically. Essentially, the DOJ and OIG have outsourced investigations to the three entities that can immediately impact HME providers:  the provider’s accrediting organization, the National Supplier Clearinghouse (NSC), and zone program integrity contractors (ZPICs). If CMS receives evidence that an HME provider is purchasing leads in violation of the anti-kickback statute and/or is calling leads in violation of the telephone solicitation statute, then CMS will likely ask the accrediting organization, the NSC and/or a ZPIC to investigate.  IF the accrediting organization concludes that the provider is violating the law then it will terminate its accreditation which will, in turn, cause a domino effect — revocation by the NSC of the provider’s supplier number and cessation of payments by the DME MACs. If the NSC revokes the supplier number, then a similar domino effect will occur.  If the DME MACs cease making payments to a HME provider, then the provider stops making money. In short, while the investigations by the DOJ and OIG may take years to resolve, actions by the accrediting organizations, NSC and ZPICs can have an immediate effect on a provider.

QUESTION: If I am approached by a lead generation company, what questions I should I ask?

ANSWER: First find out the number of years the lead generation company has been in business and operating in the health care sector. Ask if the company uses a health care regulatory attorney, if the attorney has reviewed the lead generation company’s operations, and if the attorney has issued an opinion letter addressing its business model. Find out how the lead generation company obtains its leads. Does it generate leads in-house (“organically-grown leads”) or does it purchase “buckets of leads” from brokers?  If it is the latter, then the lead generation company may not know, with any degree of assurance, where the leads initially came from.

QUESTION: Can the lead generation company be a health care provider?

ANSWER: Generally speaking, no. Most health care providers are “covered entities” under HIPAA. HIPAA allows a covered entity to disclose protected health information under limited circumstances, such as for treatment, payment and health care operations. A covered entity may not disclose protected health information for marketing purposes.

QUESTION: What does the law say about how leads – Medicare beneficiaries — can be compiled?

ANSWER: The federal telephone solicitation statute is specific to HME providers.  The statute says that a provider may not call a Medicare beneficiary unless one of three exceptions is met. The relevant exception to a prospective customer is the “written permission” exception. This says that the HME provider cannot call a beneficiary unless the beneficiary gives prior written permission. Supplier Standard No. 11 essentially says the same thing.  It is important to keep in mind that a provider “cannot indirectly do what the provider cannot directly do.” Let’s say that a lead generation company obtains leads by cold-calling Medicare beneficiaries, and then sells the leads to the HME provider. The provider may want to take the position that it is not its problem that the lead generation company cold-called the beneficiaries. But it the arrangement is ever scrutinized by the government, that argument will likely fall on deaf ears. The government will likely take the position that the leads, resulting from the cold calls, are “tainted” and that the HME provider may not submit claims to Medicare for products sold to these “tainted” leads. More ominously, because the HME provider will end up calling these leads, then the government would likely assert that the provider is violating the telephone solicitation statute and Supplier Standard #11.

QUESTION: What does the answer mean from a practical standpoint?

ANSWER: Here are some nuances you need to understand: If a beneficiary is not an existing customer of an HME provider, then the provider may not call that beneficiary to sell Medicare-covered items. The lead generation company also may not call that beneficiary about the provider’s product. Neither the provider nor any other entity can call the beneficiary under the guise of a “survey” in which the caller asks about pet food or a refrigerator or anything else and then at the end of the call asks if anyone in the home has diabetes and if so, whether they would like to talk to a provider about Medicare covered items.

If the lead generation company runs an ad on television or in the newspaper about a non-Medicare covered product, and no mention is made about a Medicare-covered product, then when a beneficiary responds, the lead generation company may not at the end of the conversation ask the beneficiary about talking to an HME provider about Medicare-covered products.

But if a lead generation company runs an ad about a non-Medicare covered item, and also says “When you call, we will visit with you about medical supplies offered by our partner companies” or words to that effect, then when a beneficiary calls, the lead generation company can ask if a beneficiary would be interested in talking to an HME provider about Medicare-covered items. So, if a beneficiary calls a lead generation company in response to an ad and the ad contains the “other medical supplies offered by our partner companies” language, and the lead generation company can document that the beneficiary made the call, it is unlikely that the government would bring an enforcement action. “Written permission” can be “blue ink” in print or in an electronic format. In a webpage, a beneficiary can check a box that sets out consent to be called by an HME provider. (Note: CMS has informally stated that the website “consent-to-be-called” box must specifically give the name of the HME provider that will call. I disagree with CMS, but this is nevertheless what CMS has said.)

QUESTION: Assuming that an HME provider pays a lead generation company on a “per lead” basis, how much information can the company obtain on the lead and transmit to the provider?

ANSWER: The only guidance by the OIG on this issue is contained in OIG Advisory Opinion 08-19 which discusses Internet leads in the context of the Medicare anti-kickback statute. The arrangement described in the opinion involved one or more websites to which prospective customers interested in chiropractic services would enter their zip codes. The websites displayed phone numbers and e-mail addresses of chiropractors within the prospective customer’s zip code. When the prospective customer called the phone number or sent an e-mail, the call or e-mail was routed to the chiropractor selected by the prospective customer. The lead generation company was paid on a “per lead” basis. The OIG indicated that it would not seek an enforcement action under the Medicare anti-kickback statute for a number of reasons, including the following: the lead generation company is not a health care provider; the lead generation company did not collect health care information such as medical history, diagnosis, and the like; the lead generation efforts did not target federal health care program beneficiaries; the website did not request insurer or other payer information about prospective patients; all prospective customers used the website received the same automated service; the lead generation company’s compensation did not depend on whether the prospective customers were federal health care program beneficiaries; fees paid by the chiropractor did would not depend on whether the prospective patient decided to become a patient of the chiropractor; all chiropractors subscribing to the arrangement were charged the same; the chiropractor was charged for the lead generation services when the prospective customer used the contact information from the website to contact the chiropractor; the arrangement did not actively steer prospective customers to a particular chiropractor; and the website contained a disclaimer noting that it was a directory where chiropractors paid a fee to be listed.

An arrangement between an HME provider and a lead generation company does not have to be structured exactly like that. However, the opinion provides guidelines to consider, and as many of these guidelines as possible should be incorporated into arrangements.

The bottom line is this: It is acceptable for an HME provider to purchase a lead.  However, it is a violation of the Medicare anti-kickback statute for the provider to pay for a referral. “Buying a lead” is on the left end of the continuum; “paying for a referral” is on the right end of the continuum. As the arrangement starts moving from the left to the right, then the kickback risk increases. A “raw” or unqualified lead is one where the only information that the lead generation company obtains about the lead and transmits to the HME provider is the lead’s name, address, phone number and the fact that the lead is interested in certain products.  It is proper for an HME provider to pay for the lead on a “per lead” basis.  A qualified lead is one where the lead generation company obtains health and insurance information on the lead. The HME provider may not pay for a qualified lead on a “per lead’ basis. The government would likely view this as not “purchasing a lead,” but rather, as “paying for a referral” in violation of the anti-kickback statute. In short, the odds of converting a “raw” lead into a paying customer are low, while the odds of converting a qualified lead to a paying customer are much higher. The only way that an HME provider can purchase qualified leads on a “per lead” basis is if the arrangement substantially fits within the Personal Services and Management Contracts safe harbor to the anti-kickback statute. Among other requirements, the compensation must be fixed one year in advance, such as  $120,000 over the next 12 months, and be the fair market value of the lead generation company’s services.

Jeffrey S. Baird, Esq. is chairman of the Health Care Group at Brown & Fortunato, P.C., a law firm based in Amarillo, Texas. He represents pharmacies, infusion companies, home medical equipment companies and other health care providers throughout the United States. He can be reached at (806) 345-6320 or [email protected]