Sham Transactions in Digital Health Industry

Posted by Aselle Kurmanova on September 23, 2022

In its recently published Special Fraud Alert, the Office of Inspector General (“OIG”) presented a list of suspect characteristics related to arrangements with telehealth and telemedicine companies, which may help determine the potential for fraud.

The OIG developed this list based on dozens of fraud investigations involving companies in the digital health space. The schemes investigated by the OIG varied in design and operations, as well as the types of entities and individuals involved. They implicated a whole slew of Federal laws, including, among others, violations of the Federal anti-kickback statute and the False Claims Act. These schemes raised significant fraud concerns because “of the potential for considerable harm to Federal health care programs and their beneficiaries.”

The list of suspect characteristics related to arrangements with telemedicine companies is as follows:

  • The purported patients for whom the practitioner orders or prescribes items or services were identified or recruited by the telehealth company (or a telemarketing company, sales agent, recruiter, and/or through the internet, etc.) advertising free or low out-of-pocket cost items or services.
  • The practitioner does not have sufficient contact with or information from the patient involved to meaningfully assess the medical necessity of the items or services ordered or prescribed.
  • The telehealth company with which the providers work compensates the practitioners based on the volume of items or services ordered or prescribed. Sometimes the compensation arrangement is characterized to the practitioners as compensation based on the number of medical records that the practitioners review under the arrangement.
  • The telehealth company only furnishes items and services to Federal health care program beneficiaries. It does not accept insurance from any other payor.
  • The telehealth 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 telehealth company only furnishes one product or a single class of products, possibly establishing a predetermined course of treatment from which the practitioner cannot deviate.
  • The telehealth company does not expect that anyone will follow up with the patients. Additionally, it does not provide practitioners with the information required to follow up with the patients.

The OIG noted that any one of the suspect characteristics above, taken separately or together with other characteristics on the list, may suggest that an arrangement is fraudulent. However, this list is not exclusive and was developed for illustrative purposes.

These suspect characteristics potentially have broad implications since any one of them taken alone may indicate a risk of fraud from the OIG’s perspective while not being inherently problematic. The OIG did note that the Special Fraud Alert was not intended to discourage legitimate arrangements in telehealth. However, the OIG encourages the exercise of heightened scrutiny and caution, especially when the characteristics described above are present in any arrangement involving companies in the digital healthcare space.

The Special Fraud Alert provides the most information regarding the OIG’s view of the relatively new business models that have developed due to the rapid development in technology enabling the delivery and proliferation of remote health care and services. Telehealth companies are well advised to structure their arrangements with the Special Fraud Alert in mind and assess and address any related risks with legal counsel. The Special Fraud Alert provides substantial guidance on how telehealth arrangements can be structured to avoid potential legal and/or regulatory violations. For example, practitioners are advised to maintain sufficient information for follow-up with patients. As a result and to the extent applicable, care delivery protocols should include the required follow-up. Thorough consideration of the Special Fraud Alert when designing digital care delivery, operational or financial models is critical, along with creating and implementing an effective compliance program, for any company that desires to operate effectively in this highly regulated arena.

Please see here for additional details regarding the Special Fraud Alerts. You can also get more information regarding telehealth issues on the OIG’s website here.

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