Illustration of magnifying glass and computer screen with data
by Michael G. Silverman

In most industries, when one person refers business to another, it is often customary to compensate that party for the referral. In the health care space, under certain federal and state laws, providing any form of remuneration in exchange for a referral can be considered a crime.

Durable medical equipment, prosthetics, orthotics and supplies (DMEPOS) providers must abide by a variety of rules and regulations pertaining to their marketing efforts, both with respect to referral sources (such as prescribers and marketers) and direct-to-patient interactions.

Here is a high-level overview of some of the marketing-related laws that DMEPOS providers should be familiar with and always keep in mind.

1. Federal & State Anti-Kickback Statutes
The federal anti-kickback statute states that whoever pays or receives any remuneration in exchange for referring an individual for the furnishing of any item or service for which payment may be made in whole or in part under a federal healthcare program shall be guilty of a felony and fined not more than $100,000 and/or imprisoned not more than 10 years.

While the connotation of a “kickback” invokes imagery of a bag of cash being left at a prescriber’s office, in reality such illegal arrangements take many forms. For example, if a marketing company is advertising a DMEPOS provider’s services and is compensated when a prospective patient connects with that provider, that is considered a kickback.

Even further, the routine waiver of a patient’s financial responsibility for DMEPOS (i.e., a co-pay or deductible) is considered a kickback.

Even DMEPOS providers who don’t bill federally funded health care programs are not out of the woods with respect to the applicability of anti-kickback regulations, because a majority of states have analogues to the federal law that may be more expansive, insofar as also they apply to commercially insured and even cash-
paying patients.

So how does anyone in the health care space engage with referral sources without committing a felony?

Thankfully, federal regulators have delineated certain business practices as exceptions and acknowledged “safe harbors” to the Anti-Kickback Statute, which if adhered to are not considered violations; many states with anti-kickback laws will defer to these exceptions and
safe harbors.

The two most common exceptions and safe harbors applicable to a health care provider’s interactions with marketers are the bona fide employee exception and the personal services and management contract safe harbor.

  • The bona fide employee exception is applicable only to an employee providing marketing services, and allows a DMEPOS provider to compensate such an individual in a manner that takes into account the value or volume of business generated on the provider’s behalf.
  • The personal services and management contracts safe harbor is applicable to independent contractors, and, amongst other requirements, mandates that the parties have a written 12-month long agreement and a compensation structure that does not consider the value or volume of business generated by the marketer (e.g., a fair market value flat weekly fee or hourly rate compensation that will not fluctuate during the term of the agreement).

As such, DMEPOS providers will want to ensure that relationships with any compensated referral sources meet such exception or safe harbor, as applicable, to avoid prosecution.

2. Stark Law & Self-Referrals Regulations
As it pertains to relationships with prescribers, separate and apart from anti-kickback regulations, DMEPOS providers need to be aware of additional prohibitions on financial relationships with prescribers under the federal Stark Law.

This law essentially states that if a prescriber (or an immediate family member) has a financial relationship with any entity that provides certain defined designated health services (DHS), such prescriber cannot refer to that entity for DHS unless an exception applies. Violations of the Stark Law are punishable by civil monetary penalties and exclusion.

Under the Stark Law, because durable medical equipment is considered DHS, a prescriber of DME cannot have a financial relationship with a DMEPOS provider unless an exception applies.

While the Stark Law only applies to state and federally funded healthcare programs, as with the Anti-Kickback Statute, many states also have analogues that can be
more expansive than their federal counterparts and that DMEPOS providers need to be aware of.

3. Telephone Solicitation Statute or Supplier Standard 11
This regulation governs telephonic contact with Medicare Part B beneficiaries and has its own devoted DMEPOS Supplier Standard (11); it essentially prohibits unrequested sales calls to potential DMEPOS customers regarding a Medicare-covered item.

More specifically, Section 1834(a)(17) of the Social Security Act prohibits DMEPOS providers from making unsolicited telephone calls to Medicare beneficiaries regarding the furnishing of a covered item, except in three specific situations:

The beneficiary has given written permission to the supplier to make contact by telephone.

The contact is regarding a covered item the supplier has already provided to
the beneficiary.

The supplier has furnished at least one covered item to the beneficiary during the preceding 15 months.

Medicare regularly audits providers for compliance with this Supplier Standard 11, especially as telephonic sales activity often results in complaints.

As such, before to reaching out to a Medicare via telephone beneficiary about the provision of DMEPOS, suppliers need to ensure at least one of the above exceptions applies.

4. Beneficiary Inducement Law
This regulation provides for the imposition of civil monetary penalties against any person that offers anything of value to a Medicare beneficiary for the purposes of incentivizing that individual to order a Medicare-covered item. Patient inducements can take many forms, such as providing free services or gifts, or the waiver of patient financial responsibility (i.e., co-pays or deductibles).

Where there is a law, there is often an exception (as with the statutes referenced above). In certain circumstances, gifts of nominal value below specified monetary thresholds (e.g., a weekly pill organizer) have been recognized to not constitute an inducement. Additionally, there are certain exceptions to the requirement to collect patient financial responsibility, such as in the event of a documented financial hardship.

In Conclusion
As set forth above, interactions with referral sources and patients are governed by a myriad of regulations, many of which have dire consequences for non-compliance.

Ignorance of the law is no excuse, so business owners must become educated and take a “look before they leap” approach with respect to their DMEPOS marketing endeavors.

Michael G. Silverman is an attorney and co-founder of the law firm Silverman Bain, LLP. As a Certified DME Specialist who represents some of the nation’s largest DMEPOS providers, his experience allows him to provide both legal and practical business insights regarding health care regulatory compliance and transactions. Visit