Q&A with Jeff Baird: What the Federal E-Sign Act Means for You

AMARILLO, Texas — “The signature of the Medicare beneficiary is important. The HME provider needs the beneficiary’s signature on an AOB. Before an HME provider calls a prospective customer, the provider needs the beneficiary’s written permission. And the list goes on,” notes health care attorney Jeff Baird of Brown & Fortunato. “Fortunately, technology and a federal statute have intervened to make it easier for the provider to obtain the beneficiary’s signature. In a number of instances, a ‘blue ink’ signature is not required.”

Here’s Baird’s explanation.

Question: I keep hearing about the “Federal E-Sign Act.” What is it?

Answer: The Electronic Signatures in Global and National Commerce Act (E-Sign Act) provides: “Notwithstanding any statute, regulation, or other rule of law … with respect to any transaction in or affecting interstate or foreign commerce … a signature, contract, or other recording relating to such transaction may not be denied legal effect, validity, or enforceability solely because it is in electronic form.”

Question: So does the E-Sign Act define “electronic?”

Answer: Yes, it does. The Act states: “The term ‘electronic’ means relating to technology having electrical, digital, magnetic, wireless, optical, electromagnetic, or similar capabilities.”

Question: What other key definitions are there under the Act?

Answer: The Act defines “electronic record” as “a contract or other record created, generated, sent, communicated, received, or stored by electronic means.” The Act defines “electronic signature” as “an electronic sound, symbol, or process, attached to or logically associated with a contract or other record and executed or adopted by a person with the intent to sign the record.” The Act defines “record” as “information that is inscribed on a tangible medium or that is stored in an electronic or other medium and is retrievable in perceivable form.”

Question: Does the provision of DME fall within the E-Sign Act?

Answer: Yes. The threshold question is whether there is a “transaction” subject to the Act. The Act defines “transaction” as “an action or set of actions related to the conduct of business, consumer, or commercial affairs between two or more persons, including any of the following types of conduct — (a) the sale, lease, exchange, licensing, or other disposition of personal property, including goods and intangibles; services; and any combination thereof; and (B) the sale, lease, exchange, or other disposition of any interest in real property, or any combination thereof.”

In a somewhat circular manner, the Act defines “consumer” to mean “an individual who obtains, through a transaction, products or services which are used primarily for personal, family, or household purposes.” It is clear that the provision of DME falls within the definition of “transaction.”

Question: OK, can you give me a real-world example of how I can utilize the E-Sign Act?

Answer: Sure. The federal telephone solicitation statutes say that an HME provider cannot call a Medicare beneficiary (who is a potential customer) unless the beneficiary has given “written permission” to be called. The question is: Does “written permission” need to be a blue-ink signature?

Under the E-Sign Act, the answer is no. “Written permission” fits under the definition of “record” insofar as the beneficiary’s permission must be documented in “written” form. Therefore, the E-Sign Act is applicable to the telephone solicitation statute’s requirement that the beneficiary give written permission for telephone contact.

This also means that a beneficiary’s permission “may not be denied legal effect, validity, or enforceability solely because it is in electronic form.” Therefore, it is logical to conclude — and in my opinion, it is correct to conclude — that the following constitutes “written permission” in satisfaction of the telephone solicitation statute:

The beneficiary pulls up a web page for diabetic supplies and inputs his name, address, phone number and other information onto the web page; the beneficiary checks a box that says “I consent to be called by the manager of the web page and by any diabetic supply companies affiliated or associated with the manager of the web page;” and the beneficiary hits “submit.” A more conservative approach will be for the box to say “I consent to be called by [the manager of the web page] and by any diabetic supply companies described in the link set out below.”

Question: Does CMS agree with your conclusion?

Answer: Information from CMS indicates that it is CMS’ position that an electronic signature is not sufficient — that the beneficiary must give a blue-ink signature. I disagree with CMS and hope that CMS will recognize the applicability of the E-Sign Act.

Question: Does the E-Sign Act discuss the potential of a federal agency not recognizing the applicability of the Act?

Answer: Yes. The Act maintains a federal agency’s ability to specify the standard and format of records filed with the agency. The Act provides: “Subject subsection (c)(2) of this section, nothing in this subchapter limits or supersedes any requirement by a Federal regulatory agency, self-regulatory organization, or State regulatory agency that records be filed with such agency or organization in accordance with specified standards or formats.”

While a federal agency may require a record be in a paper form, it must have a compelling reason to do so. The E-Sign Act provides: “Nothing in subsection (b) of this section (other than paragraph (3)(B) thereof) shall be construed to grant any Federal regulatory agency or State regulatory agency authority to impose or reimpose any requirement that a record be in a tangible printed or paper form.”

Paragraph (3)(B) states: “Notwithstanding subsection (c)(1) of this section, a Federal regulatory agency or State regulatory agency may interpret section 7001(d) of this title to require retention of a record in a tangible printed or paper form if — (i) there is a compelling governmental interest relating to law enforcement or national security for imposing such requirements; and (ii) imposing such requirement is essential to attaining such interest.”

CMS has not published any guidance, let alone a regulation interpreting the E-Sign Act, for the written permission required by the telephone solicitation statute. Therefore, it is my opinion that under the E-Sign Act, CMS does not have legal grounds to deny written permission that is in electronic form from a Medicare beneficiary.

Question: So let’s revisit a beneficiary electronically giving his permission (on a web page) to be called by an HME provider.

Answer: The telephone solicitation statute requires written permission for contact by telephone regarding the furnishing of DMEPOS. Focus on the term “written.”

The term “written” implies some affirmative action on the part of the beneficiary. If the written permission were on a tangible medium such as paper, it is clear that CMS would accept a statement that was authored by the provider, but signed by the beneficiary. Therefore, if the written permission were in electronic form, CMS should also accept a statement that was authored by the provider as long as the statement was signed by the beneficiary.

As stated, the E-Sign Act defines “electronic signature” to mean “an electronic sound, symbol, or process, attached to or logically associated with a contract or other record and executed or adopted by a person with the intent to sign the record.” If a Medicare beneficiary checks a box on an online form that is directly adjacent to a statement or text (giving an HME provider permission to call the beneficiary), then it is reasonable to conclude that the beneficiary has electronically signed the statement and, therefore, gave his or her written permission to be called.

Question: Can you give us another example of how an HME provider can utilize the E-Sign Act?

Answer: Sure. An HME provider can utilize the Act by obtaining a telephonically recorded AOB. The provider can call the beneficiary and start out by saying, “Mrs. Smith, I am going to read you a short contract. Please listen carefully. At the end, I will ask whether you agree with what I have read.”

The HME provider will then read the AOB to Mrs. Smith, after which the provider will say, “Mrs. Smith, do you agree with what I have just read? If Mrs. Smith’s reply is “Yes,” then the provider will say, “If you had a paper document, you would confirm that you agree by signing your name. In this conversation, you can confirm that you agree by saying your first and last name. If you say your name, it is the same as if you were signing a piece of paper. If you intend to sign this release of medical information and assignment of benefits, please say your first and last name.”

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. Baird is Board Certified in Health Law by the Texas Board of Legal Specialization. He can be reached at 806/345-6320 or [email protected].