Business Practices That Will Get You Investigated

The best way to protect your profit margin as a DME company is through strong defensive policies and procedures based on good business practices. If your regulatory compliance and good business practices take a backseat to profit margin-driven business practices, then you are likely to join the ranks of more than 20,000 providers who have been excluded from participation in federal government health care programs since 2011. Learn to protect your business’s profit margin by establishing good business practices that prevent violations of state and federal law.

The DME industry is facing many new challenges, among them is an increase in DME-related U.S. Department of Justice (DOJ) and Office of Inspector General (OIG) investigations and prosecutions. The government’s scrutiny of the DME industry places your business practices squarely in the purview of the federal government.

Identifying Health Care Fraud and Abuse

The government prosecutes most DME companies for health care fraud under the False Claims Act (FCA), or Lincoln’s Law. Essentially, the FCA prohibits any person from knowingly submitting a false claim to the government or causing another to submit false claims or knowingly making a false record or statement to get a false claim paid by the government. The FCA was drafted broadly to give the DOJ latitude in its discretion to prosecute an entity or individual under the Act. Under the FCA, a DME provider and its owners can be fined between $5,000 and $10,000 plus three times the amount of damages sustained for each false claim filed. In 2013, the DOJ recovered $3.8 billion from FCA cases. More importantly, the government has levied fines against health care providers that have exceeded $1 billion.

Either the federal government or a relator can bring FCA cases against a DME provider. A relator is an individual who brings a claim against another on behalf of the federal government. Relators, on average, file about 70 percent of all federal government FCA actions and they typically are disgruntled former employees of DME companies. (Read: It pays to keep your employees happy.) The remainder of cases are brought by the government typically as a result of investigations launched by the joint DOJ-Health and Human Services Medicare Fraud Strike Force.

Medicare Fraud Strike Force investigations typically begin with a government information technology agent analyzing Medicare claims data for unusual billing patterns. The Strike Force also utilizes a predictive-analysis program to scan claims for suspect behavior. Once an agent or the software identifies suspect behavior, the Strike Force opens up an investigation to determine if the suspect behavior amounts to abuse of the Medicare system. The Strike Force often focuses on high-risk providers in high-risk locations (e.g. Miami, Detroit, Chicago). DME companies committing health care fraud in conjunction with another health care provider are more likely to be caught by the Strike Force because the Force is focused on DME entities and can easily track the billing relationships with Medicare.

Common Practices Receiving OIG Attention

Unfortunately, the DME industry is frequently accused of engaging in fraudulent business practices. The DME Medicare industry is a $10 billion per year industry, but Medicare estimates more than 50 cents of every dollar spent was spent improperly—either through incorrect billing or unnecessary equipment. Below are common DME-related FCA violations in order of prevalence and guidance on how to better comply with regulations.

• Medical Necessity: DME companies are most often prosecuted for providing Medicare beneficiaries with unnecessary equipment or providing equipment without the correct documentation demonstrating medical necessity. What constitutes medical necessity is complex and not as black-and-white as the government often suggests. Compliance with medical necessity requirements can be difficult, but it is essential. DME providers who were prosecuted by the government for dispensing unnecessary equipment received fines as high as $1.5 million and jail sentences exceeding seven years. We encourage DME companies to obtain documentation evidencing medical necessity prior to dispensation. DME companies must review all documentation provided by physicians and determine that the documentation meets the local coverage determination (LCD) requirements for medical necessity. Providers who have switched to this model have increased their Medicare collections by as much as 300 percent. This model also provides advantages during government audits or investigations because it ensures you have all of the necessary documentation.
   
• No Equipment Provided: DME companies are often investigated for billing for services but failing to provide the equipment to a Medicare beneficiary. Typically, the equipment is provided but the provider failed to document proof of delivery (POD). The government sometimes reads this lack of documentation as failure to deliver equipment. Documenting POD is essential.
   
• Improper Billing: Several DME providers have been investigated for billing for a more expensive item but dispensing an inferior or less expensive product. To ensure you are billing for the correct item, make sure staff and your billing department are familiar with the products and their corresponding HCPCS code.
   
• Improper Records: Sometimes, a DME company deliberately forges documentation for the purpose of being reimbursed by Medicare. But often, a stray mark on a form is just an error. For example, a DME company receives a physician’s order with an improper quantity, so the DME company calls the physician informing him or her of the error. If the doctor provides a new quantity for the order, how should this be reflected in your documentation? Many providers would simply scratch out the quantity on the order and write in the quantity the physician provided over the phone. However, this is incorrect procedure. Any documentation originally signed by a physician may only be modified by the physician. These seemingly harmless errors may amount to documentation fraud and are punishable by fines and jail time under the FCA.
   
• Physician Referrals: Some DME companies think it wise to provide compensation (benefits, gifts, cash, rental space, etc.) to physicians who refer business to their company. This is illegal under the Federal Anti-Kickback Statute (AKS) and is a de facto violation of the FCA. Violation of this statute may result in criminal penalties, civil monetary penalties of $50,000 per violation plus triple the damages incurred and automatic exclusion from federal health care programs. We highly encourage you to have your compliance team review all agreements and relationships your business has with physicians to ensure compliance with the AKS.
   
• Prior Billing: Several DME companies have been prosecuted for billing for DME prior to delivery. This typically occurs when a DME company is not familiar with Medicare’s date of service rules.
   
• Unsolicited Calls: DME companies may not make unsolicited calls to Medicare beneficiaries, and several DME companies have been prosecuted for doing so. The Social Security Act prohibits DME companies from making unsolicited calls to Medicare beneficiaries, except in three scenarios: (1) The beneficiary provides written permission for the supplier to contact them via telephone; (2) The contact is related to a Medicare-covered item already furnished to the beneficiary; or (3) The supplier has furnished at least one Medicare-covered item in the preceding 15 months.
   
• Employee Exclusion: A few DME companies have been excluded from participation in federal government health care programs because they employed an individual they knew or should have known was excluded from participation in federal government health care programs. The OIG has put together a list of excluded individuals and entities on its website at exclusions.oig.hhs.gov. Every DME provider should verify that all current and potential employees are not excluded from participation in federal government health care programs.
   
• Complying with federal statutes, regulations and guidance is fiscally burdensome, slows growth and decreases profit margins. But, compliance with federal regulations protects you from OIG/DOJ investigations and prosecutions, which can result in multimillion dollar fines and jail time. As a for-profit corporation, growth is always important to you, but you must protect and defend your profit margins by working diligently to comply with federal and state laws. Establishing policies and procedures to defend against the potential of a government investigation is critical, because sometimes, the best offense is a good defense.