Inducements in the Wound Care Clinic Setting

  A wise man once told me that no good deed goes unpunished. This ironic observation that a life of service is not without hardship, is a real, legal conundrum for physicians and hospital-based wound care departments (facilities) when it comes to providing patients seemingly innocuous benefits like free dressings or transportation to and from wound care clinic (WCC) visits. While it may seem like the right thing to do, such gestures are more often than not a compliance mistake. This article outlines the legal issues surrounding the provision of free items and services to patients, discusses the particular problems of dressings and transportation, and identifies potential alternatives to physician/facility practices, which may violate the law.

  The starting point in an analysis of benefits provided to patients is the Civil Monetary Penalty Statute, 42 U.S.C. § 1320a-7a. As the Office of Inspector General (OIG) for Health and Human Services has observed, healthcare providers that offer free goods or services to federal healthcare beneficiaries may be subject to civil monetary penalties. The Civil Monetary Penalty Statute specifically addresses the issue of providers offering remuneration to Medicare and Medicaid beneficiaries when the person offering the remuneration knows or should know that the remuneration is likely to influence the beneficiary to order or receive items or services from a particular provider.

That Statute Provides That Any Person Who:

  … Offers to or transfers remuneration to any individual eligible for benefits under [Medicare], or under a state healthcare program (as defined in section 1320a-7(h) of this title) that such person knows or should know is likely to influence such individual to order or receive from a particular provider, practitioner, or supplier any item or service for which payment may be made, in whole or in part, under Medicare or a state healthcare program (as so defined);

  … Shall be subject, in addition to any other penalties that may be prescribed by law, to a civil money penalty of not more than $10,000 for each item or service … In addition, such a person shall be subject to an assessment of not more than 3 times the amount claimed for each such item or service in lieu of damages sustained by the United States or a state agency because of such claim … In addition the Secretary may make a determination in the same proceeding to exclude the person from participation in the federal healthcare programs (as defined in section 1320a-7b(f)(1) of this title) and to direct the appropriate state agency to exclude the person from participation in any state healthcare program.

  Remuneration is generally defined as “anything of value” and implicitly recognizes that almost every good or service has a monetary value. Of particular importance for compliance with the Monetary Penalty Statute is that the ‘should know’ standard, while requiring deliberate ignorance or reckless disregard of the truth, does not require fraudulent intent. The prohibition applies to both existing patients and to the solicitation of new patients, even if such solicitation does not take the form of a formal advertising campaign.

  The OIG has provided guidance on the scope of allowable ‘inducements.’ Medicare or Medicaid providers may offer patients inexpensive gifts (other than cash or cash equivalents) or services without violating the statute. For enforcement purposes, inexpensive gifts or services are those that have a retail value of no more than $10 individually, and no more than $50 in the aggregate annually per patient. These limits may be increased in accordance with inflation and other factors. In addition, physicians/facilities may offer patients more expensive items or services that fit within one of the five statutory exceptions: waivers of cost-sharing amounts based on financial need; properly disclosed co-payment differentials in health plans; incentives to promote the delivery of certain preventive care services; any practice permitted under the federal anti-kickback statute; or waivers of hospital outpatient copayments in excess of the minimum co-payment amounts. (See Special Advisory Bulletin: Gifts and Inducements 2002). https://oig.hhs.gov/fraud/docs/alertsandbulletins/SABGiftsandInducements.pdf.

  In addition, inducements that may fall outside of the price limitations and exceptions can be provided by an independent entity, such as a patient advocacy group, based on financial need when the entity makes an independent determination of such need. In these instances, the patient’s receipt of the remuneration must not depend, directly or indirectly, on the beneficiary’s use of any particular provider. (See Special Advisory Bulletin: Gifts and Inducements 2002).

  For free items and services that do not fall within any of these categories, the practice may still be within the law if the provider did not know or should not have known that the gift would induce the patient to use his or her services, or the services of the facility. The OIG has identified factors such as not conditioning the gift on the recipient using any other goods and services from the provider and the not steering the recipient toward a particular provider following receipt of the gift as supporting a determination that the free item or service is not an inducement. (Advisory Opinion 09-11, August 2009). https://oig.hhs.gov/fraud/docs/advisoryopinions/2009/AdvOpn09-11.pdf.

  These factors cannot be viewed in a vacuum, and each situation must be scrutinized to determine whether inducement is present.

  For non-Medicare patients, state law is the guide. Virtually every state has its own local version of the federal fraud and abuse laws. Depending on the state, those laws can also implicate physicians/facilities relating to private insurance patients as well as those receiving government-funded healthcare. Texas, for example, has an Anti-Solicitation Statute, which prohibits any person from providing remuneration in order to secure a patient or patronage. (Texas Occupations Code, § 102.001). The Anti-Solicitation statute carries criminal penalties and can affect licensure. The dearth of interpretation of Texas and other state statutes in this regard suggests caution as these statutes rarely provide less enforcement authority than the federal law, and often provide more.

  The second part of the equation in this context is that physicians providing goods and services out of hospital-based wound care departments must realize that they are not operating out of their own offices. Instead, the ‘place of service’ for the physician’s treatment of the patient is the hospital and the department must meet the Medicare Conditions of Participation for the hospital, as it is in fact a functioning part of the hospital.

Free Dressings

  In the case of dressings, a physician/facility may often be faced with the patient who is not covered for dressings other than the one provided on the day of service and cannot afford additional dressings that may be necessary in between visits. Physicians/facilities in this situation may realize that they cannot sell the patient a dressing directly if the facility does not have a DME license, and see giving the patient a free dressing as an innocent gesture. Such gestures more often than not create problems under the Civil Monetary Penalty Statute, however, and should generally be avoided.

  The dilemma for the physician/facility is that the patient goes without an item from which he or she could benefit and which is relatively easy to provide. The OIG has explained, however, that while “complimentary goods or services have therapeutic, as well as financial, benefits for patients … there is no meaningful basis under the statute for exempting valuable gifts based on a beneficiary’s medical condition or the condition’s severity. Moreover, providers have a greater incentive to offer gifts to chronically ill beneficiaries who are likely to generate substantially more business than other beneficiaries.” (Special Advisory Bulletin: Gifts and Inducements 2002).

  The analysis does not change if the dressing is provided to the physician/facility for free. The focus of the analysis for purposes of inducement is the exchange between the physician/facility and patient. While there may be an argument that the dressing does not have ‘value’ to the patient because the physician/facility would not have sold it anyway, such argument ignores the fact that had the free sample not been available, the patient would have had to incur the cost of the standard dressing. In this context the item does have value to the patient, thus bringing it within the category of inducement.

  Physicians in hospital-based wound departments should consider the alternative of referring the patient to the hospital’s Social Services Department who can offer resources to the patient including independent agencies that may be able to provide the free or discount dressings based upon a determination of need. Other physicians/facilities may take it upon themselves to educate the patient about these resources.

Free Transportation

  Free transportation can also trigger the Civil Monetary Penalty Statute and may implicate the criminal anti-kickback statute, which prohibits offering anything of value to any “person” (including a federal healthcare beneficiary) to reward or induce referrals (including self-referrals) for items or services reimbursable under any federal healthcare program. 42 U.S.C. §1320a-7b. In this context, the relationship between the physician/facility and the transportation service would also be scrutinized to determine whether the transportation company’s role includes recruiting or recommending patients to the facility. Earlier this year, the OIG identified several factors (Advisory Opinion 09-01, March 2009) https://oig.hhs.gov/fraud/docs/advisoryopinions/2009/AdvOpn09-01.pdf, that it takes into account in evaluating such arrangements including:

    • Transportation offered in a manner related to referrals. Selective criteria for transportation eligibility related to the volume or value of federal healthcare program business are suspect. Examples of suspect criteria include the selection of passengers based upon a diagnosis, condition, or treatment that might result in lucrative revenues to the offeror or selection based on a patient’s insurance coverage.

    • Luxury or specialized transportation. Luxury or specialized transportation, such as limousines, airline tickets, or ambulance transports, raise greater concerns because such transports are more valuable to the recipient and therefore more likely to be an improper inducement.

    • Geographic area for transportation. Local transportation services are typically less valuable to the recipient than longer-distance transports. Free transportation services offered to beneficiaries residing outside an offeror’s primary service area are subject to abuse, particularly if the free transportation is used to expand the provider’s historical service area. For example, ‘leap-frog’ arrangements that provide free or subsidized transportation to beneficiaries traveling from outside the provider’s local area, potentially bypassing other providers that could provide services for the beneficiary, are problematic.

    • Availability of other means of transportation. When examining free transportation services, the OIG will consider whether services are offered in areas lacking public transportation or areas without affordable alternatives. Free local transportation arrangements in areas lacking affordable alternative transportation are less likely to be vehicles for inducement.

    • Marketing or advertising. When a free transportation arrangement is marketed or advertised, there is greater risk that the arrangement is being offered as an inducement for referrals.

    • Transportation destination. Free transportation provided to or from the offeror’s premises may be appropriate based on the totality of the facts and circumstances. However, free transportation of beneficiaries to a different provider raises concerns. The transportation could be an inducement for referrals from the provider to the offeror of the transportation.

    • Treatment of the costs of the free transportation. Costs of free transportation should be borne by the provider of the transportation. Arrangements that shift costs to Federal healthcare programs are suspect.

    • Other characteristics that raise concerns. Where the offeror of the free transportation is also a provider that will provide Federally payable items and services to passengers, there is increased risk that the provider could be using free transportation services to gain access to beneficiaries, potentially to provide services that are unnecessary or inappropriate. For example, we have a long-standing concern about Medicare and Medicaid mills that provide free transportation to attract patients.

  These factors are not exclusive. No one factor is necessarily determinative or probative of whether an arrangement violates the applicable statutes. Any arrangement including free transportation should be scrutinized based on all of the above, as well as unlisted similar factors in determining whether there is a compliance risk.

  As with the free dressings, physicians/facilities should consider the alternative of comparable resources within the community and send the patients to the hospital Social Services Department or inform them directly of those opportunities.

  In today’s healthcare environment, the list of problems can be long, and solutions are often in short supply. Physicians and WCCs should resist the urge to bridge the gaps in Medicare and other coverage by providing free dressings and transportation. In this context, carrying over practices and routines from the physician’s office to the WCC can cause more problems than it solves. In cases of true financial need, Social Services can be very adept at connecting patients with community resources who can provide assistance. In addition, programs that follow the guidelines set out by the government may be useful, but such programs must be well planned and developed in conjunction with the hospital.

  Chris DeMeo is a member of McGlinchey Stafford’s healthcare section and practices in Houston, Texas. Chris has extensive experience representing healthcare companies and healthcare professionals in complex, multi-party litigation and regulatory compliance matters regarding licensure, healthcare transactions, compensation, medical staff relations, contract disputes, and employee relations as they impact federal and state anti-kickback, self-referral (Stark), information privacy and security (HIPAA), and false claim laws in Texas and other states. Chris can be reached at cdemeo@mcglinchey.com.