OIG & DOJ Announce Special Fraud Alert & Coordinated Efforts to Prosecute Fraudulent Telehealth Arrangements

On July 20, 2022, the Office of Inspector General (OIG) issued a Special Fraud Alert warning practitioners to exercise caution when entering into certain telehealth arrangements. The Alert references the many recent investigations of telemedicine fraud schemes and cautions providers to avoid exposure by proactively identifying suspect arrangements. Common dynamics of problematic telehealth models include the payment of kickbacks to providers to prescribe or order medically unnecessary items and services for patients with whom the providers have limited, or no, interaction. The Special Fraud Alert also acknowledges that many fraudulent models include a telemedicine company selling the order or prescription issued by the prescriber to ancillary providers, such as laboratories, pharmacies, and durable medical equipment companies, who then submit claims for payment to federal healthcare programs.

The Special Fraud Alert focuses on the fact that suspect arrangements typically violate the Federal Anti-Kickback Statute, which prohibits offering, paying, soliciting, or receiving remuneration in return for making or arranging for a referral of an item or service reimbursable by a federal healthcare program. OIG notes that some telehealth models attempt to “carve out” federal beneficiaries by not billing for a practitioner’s encounter conducted on the virtual platform; however, if an ancillary order issued during that unbilled encounter results in a claim for payment to a federal healthcare program, the practitioner may nevertheless be subject to liability. Providers must be aware that the potential for exposure exists irrespective of whether the practitioner has a comprehensive understanding of the entire telehealth model in which they participate; if a provider issues a prescription or order without having sufficient interaction with a patient to assess medical necessity, and that provider is paid for issuing that order—even if the payment is characterized as a payment for each chart review, consult, or assessment—that provider may face criminal, civil, and administrative liability.

The Alert also mentions the possible implication of other federal laws, including OIG’s exclusion authority, the Civil Monetary Penalties Law, the criminal health care fraud statute, and the False Claims Act.

To help practitioners identify suspect arrangements, the OIG offered certain characteristics of fraudulent telehealth models. OIG noted, however, that the list was illustrative, not exhaustive, and the presence or absence of any single factor on its own would not be dispositive. These suspect characteristics provided were as follows:

• The purported patients for whom the practitioner orders or prescribes items or services were identified or recruited by the telemedicine company, telemarketing company, sales agent, recruiter, call center, health fair, and/or through internet, television, or social media advertising for free or low out-of-pocket cost items or services.
• The practitioner does not have sufficient contact with or information from the purported patient to meaningfully assess the medical necessity of the items or services ordered or prescribed.
• The telemedicine company compensates the practitioner based on the volume of items or services ordered or prescribed, which may be characterized to the practitioner as compensation based on the number of purported medical records that the practitioner reviewed.
• The telemedicine company only furnishes items and services to federal health care program beneficiaries and does not accept insurance from any other payor.
• The telemedicine company claims to only furnish items and services to individuals who are not federal health care program beneficiaries but may in fact bill federal health care programs.
• The telemedicine company only furnishes one product or a single class of products (e.g., durable medical equipment, genetic testing, diabetic supplies, or various prescription creams), potentially restricting a practitioner’s treating options to a predetermined course of treatment.
• The telemedicine company does not expect practitioners (or another practitioner) to follow up with purported patients nor does it provide practitioners with the information required to follow up with purported patients (e.g., the telemedicine company does not require practitioners to discuss genetic testing results with each purported patient).

At the same time the Special Fraud Alert was issued, the Department of Justice (DOJ) also announced a nationwide coordinated effort resulting in criminal charges filed against 36 defendants in 13 federal districts across the United States, including against individuals who owned and operated telemedicine companies, durable medical equipment companies, and marketing organizations, as well as medical professionals. These charges, which totaled $1.2 billion, are the result of investigations that targeted alleged schemes involving laboratory owners and operators’ payment of illegal kickbacks in exchange for the referral of patients by medical professionals within fraudulent telemedicine and digital medical technology companies. Allegations pertaining to telemedicine accounted for more than $1 billion of the intended loss.

The DOJ has classified the charges announced yesterday as building upon previous enforcement actions in telemedicine involving over $8 billion, including 2019’s Operation Brace Yourself and Operation Double Helix, 202’s Operation Rubber Stamp, and 2021’s National Health Care Fraud Enforcement Action. Notably, before the announcement of yesterday’s charges, the Health Care Fraud Strike Force has resulted in charges brought against more than 5,000 defendants who are alleged to have billed federal and private insurers more than $24.7 billion.

Also announced yesterday was that the Centers for Medicare & Medicaid Services (CMS), Center for Program Integrity (CPI) took administrative action against 52 providers involved in similar schemes, through which the department seized over $8 million in cash, vehicles, and other fraud proceeds.

Assistant Attorney General Kenneth A. Polite, Jr. of the Justice Department’s Criminal Division stated that these enforcement actions reiterate “[t]he Department of Justice’s commitment to …prosecuting people who abuse our health care system and exploit telemedicine technologies in fraud and bribery schemes.” Likewise, Inspector General Christi A. Grimm of the U.S. Department of Health and Human Services stated that the latest “…enforcement action highlights our dedication to fighting health care fraud and investigating individuals who target Medicare beneficiaries…” noting specifically the department’s work in “…disrupt[ing] fraud schemes that use the guise of telehealth to expand the reach of kickback schemes designed to cheat federally funded health care programs.”

How Frier Levitt Can Help

The above announcements reinforce that the government will continue enforcement in the telemedicine space. Frier Levitt attorneys have advised practitioners, ancillary providers, marketers, and technology companies on developing and restructuring telehealth business models to comply with applicable law while considering obstacles such as licensing, prescribing, and insurance reimbursement concerns that are unique to each arrangement. Our attorneys also represent clients in connection with criminal investigations and prosecutions and civil and administrative actions involving allegations of unlawful prescribing, issuance or receipt of payments, and/or filling of prescriptions and orders associated with virtual health models. If you are seeking to Launch a Telemedicine Practice or Telehealth Startup, want to ensure your compliance in an existing model, or have received a subpoena or other investigative demand – or have otherwise been put on notice you may be under investigation – in connection with your participation in a telehealth arrangement, contact us to speak to an experienced telehealth attorney.