DOJ Announces Charges in Wide-Ranging Fraud Scheme Involving Use of Telemedicine

The investigation, conducted by the FBI and the US Department of Health and Human Services’ Office of the Inspector General, resulted in charges against more than 20 defendants, including the CEOs and COOs of five telemedicine companies, as well as the owners of multiple DME companies and several licensed medical professionals, including physicians. The DOJ’s announcement comes after the department announced charges in October 2018 in another billion-dollar telemedicine fraud scheme involving the use of telemedicine to prescribe unnecessary prescription pain creams to patients.  

Alleged Kickbacks to Telemedicine Providers for Prescriptions

Under the alleged arrangement, DME companies worked with call centers and telemarketers to identify Medicare beneficiaries interested in receiving “free” back, shoulder, wrist, and knee braces that were advertised through television and radio advertisements. The beneficiaries were referred to one of the telemedicine companies for a consultation by a physician, who then wrote prescriptions for one or more braces for the patients after, at most, only a brief telephone call with the patients. The prescriptions were then sent to the DME companies, which filled the prescriptions and billed Medicare for the braces. The DME companies allegedly paid kickbacks and bribes of nearly $300 per brace to the telemedicine companies in violation of, primarily, the federal Anti-Kickback Statute. The scheme allegedly resulted in a loss of more than $1.2 billion dollars to the federal health care program.

In addition to the charges announced by the DOJ, the Centers for Medicare and Medicaid Services (CMS) simultaneously announced it had taken adverse administrative action against 130 DME companies that had submitted over $1.7 billion in improper claims, of which CMS then paid over $900 million.

Future Expansion of Medicare Reimbursement May Increase Enforcement

Historically, Medicare reimbursement for telemedicine services has been limited, primarily due to Medicare’s conditions for coverage of telemedicine services, which include requiring patients to be located in qualifying rural areas and qualifying “originating sites” (for example, a hospital or physician’s office, but not the patient’s home), and requirements regarding use of real-time audio visual communications to facilitate the services. As a result of the limited reimbursement (in 2015, for example, Medicare paid a total of $17.6 million for telemedicine services out of a total of approximately $540 billion in payments), government enforcement actions in the past have not focused on telemedicine providers. However, as the announcements regarding the DME and pain cream fraud schemes illustrate, telemedicine is a high-risk area for abuse in high-dollar arrangements. Moreover, Medicare spending on telemedicine services likely will continue increasing as recent legislation has approved Medicare reimbursement for a wider range of telemedicine services. Thus, we expect telemedicine services to be an increasing area of government enforcement over the next several years. 

Companies and practitioners providing telemedicine services must remain vigilant against “too good to be true” business opportunities that may ultimately constitute fraudulent activities. Even if providers do not directly bill Medicare for telemedicine encounters or prescribed items or services, they nevertheless could be implicated in a fraudulent kickback arrangement. Providers should carefully assess business opportunities to confirm they are in compliance with federal and state fraud and abuse laws. Additionally, telemedicine providers should implement robust compliance policies designed to ensure compliance with all relevant billing and coding procedures, including Medicare and Medicaid requirements. Such policies should address compliance with applicable technology, location, and personnel requirements. Telemedicine offers many opportunities for growth and expansion of service offerings for companies and practitioners; however, such growth should only be undertaken pursuant to a careful and considered process.