Feds List 7 Characteristics of a Fraudulent Telehealth Arrangement

The characteristics are part of a Special Fraud Alert issued by the Health and Human Services Department's Office of the Inspector General, and give healthcare organizations an idea of what to look out for in dealing with telehealth companies.

Federal officials have issued a Special Fraud Alert targeting contracts with telehealth companies and offered seven characteristics of an arrangement that could be illegal.

The notice, issued by the Health and Human Services Department's Office of the Inspector General, follows several recent investigations into companies claiming to offer what they define as telehealth services, but which often constitute illegal marketing schemes.

"While the facts and circumstances of each case differed, often they involved at least one practitioner ordering or prescribing items or services for purported patients they never examined or meaningfully assessed to determine the medical necessity of items or services ordered or prescribed," the OIG notice reads. "In addition, telemedicine companies commonly paid practitioners a fee that correlated with the volume of federally reimbursable items or services ordered or prescribed by the practitioners, which was intended to and did incentivize a practitioner to order medically unnecessary items or services. These types of volume-based fees not only implicate and potentially violate the federal anti-kickback statute, but they also may corrupt medical decision-making, drive inappropriate utilization, and result in patient harm."

Telehealth advocates like the American Telemedicine Association have long argued that many of these cases don’t involve telehealth, and they've worried that the industry will be tarnished by a few bad actors. In a blog post analyzing the OIG notice, Nathanial Lacktman, a partner with the Foley & Lardner law firm, chair of its telemedicine and digital health industry team and a national expert on digital health law, also noted that difference.

"[The] OIG was careful to state that not all telemedicine companies are suspect, and this alert is not intended to discourage legitimate telemedicine arrangements," he wrote. "Indeed, in 2021, [the] OIG previously noted, '[f]or most, telehealth expansion is viewed positively, offering opportunities to increase access to services, decrease burdens for both patients and providers, and enable better care, including enhanced mental healthcare.' [The] OIG is aware that many practitioners have appropriately used telehealth services during the current Public Health Emergency (PHE) to provide medically necessary care to their patients."

To help healthcare organizations identify potential problems in their telehealth arrangements, the OIG highlighted these characteristics:

1. The purported patients for whom the practitioner (clinician) 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.
2. 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.
3. 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.
4. The telemedicine company only furnishes items and services to federal healthcare program beneficiaries and does not accept insurance from any other payer. (Lacktman pointed out that [the] OIG noted instances in which a telemedicine company requires the practitioner to use audio-only technology to facilitate engagement with purported patients, regardless of their preference, and does not provide the practitioner with other telehealth modalities. Additionally, a telemedicine company may provide a practitioner with purported 'medical records' that reflect only cursory patient demographic information or a medical history that appears to be a template but does not provide sufficient clinical information to inform the practitioner’s medical decision-making.)
5. The telemedicine company claims to only furnish items and services to individuals who are not federal healthcare program beneficiaries but may in fact bill federal healthcare programs. (As noted by Lacktman, an attempt to carve out federal healthcare program beneficiaries from arrangements with telemedicine companies may still result in criminal, civil, or administrative liability for a practitioner’s role in any resulting fraudulent activity that involves federal healthcare program beneficiaries.)
6. 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.
7. 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).

The alert comes as healthcare organizations are trying to navigate the murky waters of the Public Health Emergency brought on by the pandemic, which prompted federal and state regulators to issue waivers allowing for expanded use and coverage of telehealth services. It also led to an increase in criminal activity, and to confusion around what could and couldn't be done with virtual care.

That confusion will likely escalate when the PHE ends.

"As the pandemic’s intensity diminishes, many telemedicine companies that were previously cash-only retail medicine are now billing health insurance and the federal healthcare programs (including Medicare, Medicaid, and TriCare) in order to diversify their sources of revenue and addressable market," Lacktman pointed out. "This is a good thing for patient access to care and continued growth of digital health services.  At the same time, this diversification in patient-payer mix, the expiration of PHE waivers, and the abatement of the pandemic will encourage {Department of Justice] and HHS-OIG to increase investigations of telemedicine companies and target arrangements and practices the government agencies believe are illegal."

"The alert emphasizes the risk of illegal kickbacks posed by suspect arrangements between telemedicine companies and practitioners," Lacktman continued. "If one purpose of the payment arrangement is to induce referrals of Medicare patients, that arrangement – particularly if notorious and not protected by a statutory/regulatory Safe Harbor – can place all participants at real risk of civil and criminal enforcement. Even subtle suspect arrangements can cause an employee or other knowledgeable person to file a qui tam / False Claims Act action under seal in court. If that occurs, DOJ is required to investigate the allegations in order to decide whether or not to intervene and take over the prosecution.  Even non-criminal civil actions are a serious enforcement tool DOJ regularly relies upon to stop health care companies from entering into such arrangements."