Health Law Scan

Legal Insights and Perspectives for the Healthcare Industry

The recent increase in use of telehealth as a care modality has been important to patients and providers alike, with significant benefits for public health. However, with the growing mainstream acceptance of virtual care, the US Department of Health and Human Services Office of Inspector General (OIG), the Department of Justice (DOJ), and other federal regulators have likewise increased fraud enforcement in this area, including through the issuance of OIG’s recent Special Fraud Alert (SFA).

The proliferation of telehealth services during the COVID-19 pandemic intensified the government’s scrutiny in this area, although many enforcement actions also targeted pre-pandemic conduct. Specifically, DOJ has focused its enforcement on purported telemedicine companies engaging physicians to perform minimal encounters and prescribe medically unnecessary durable medical equipment (DME), prescription creams, diabetic supplies, or laboratory and genetic testing services that are ultimately billed to government payers, including Medicare and Medicaid. On July 20, 2022, DOJ announced charges against 36 defendants across the United States, alleging fraudulent schemes totaling more than $1.2 billion. In concert with DOJ, OIG issued the SFA describing the suspect characteristics of purported telemedicine companies engaged in such fraudulent schemes.

The SFA describes a common scheme in which purported “telemedicine companies” devise arrangements with unscrupulous or unwitting clinicians to order or prescribe items and services based on limited interactions and regardless of medical necessity. Some of these arrangements involve these fraudulent actors directing clinicians to prescribe preselected items or services, while other arrangements do not allow clinicians the opportunity to review patients’ legitimate medical records before making a prescribing decision.

In the SFA, OIG identifies a non-exhaustive list of seven “suspect characteristics” that suggest a heightened risk of fraud and abuse, including the following:

  • Patients are identified and recruited through call centers, health fairs, recruiters, telemarketing channels, or social media by advertising free or low out-of-pocket cost items or services.
  • Lack of sufficient contact with patients to assess the medical necessity of prescribed items or services.
  • Compensation based on volumes of items or services ordered or prescribed.
  • Refusal to accept insurance from payors not affiliated with federal healthcare programs.
  • Misrepresentation on whether the company actually bills federal healthcare programs.
  • Predetermining or limiting the types of products or services that clinicians can prescribe, such as restricting prescriptions to only certain DME or topical creams.
  • Not expecting, enabling, or requiring clinicians to follow up with patients.

The SFA is an important tool for distinguishing between legitimate telehealth models and potentially fraudulent telemarketing companies purporting to sell healthcare products. Although not acknowledged by OIG, there are clear distinctions between true telehealth providers and sham operations that are merely engaged in telemarketing. Particularly as more telehealth providers participate in federal healthcare programs and Medicare and Medicaid cover more service modalities, including audio-only encounters and store-and-forward services, telehealth providers will be expected to use a variety of tools to furnish care. While this can create efficiencies, especially in conjunction with value-based care programs, it also increases the risk that telehealth platforms could face scrutiny from OIG and DOJ.

In anticipation of enforcement and whistleblower activity that will attempt to leverage the SFA, telehealth providers should reassess their operations and compliance activities with respect to furnishing services or ordering products, tests, and prescription drugs. In particular, telehealth providers should evaluate the types of items or services included on formularies, “do not prescribe” lists, and other prescription policies, monitor the length of patient encounters, and implement controls, such as peer audits or quality assurance committees, to ensure that prescribed items and services are medically necessary.

For more information on DOJ and OIG’s focus on telehealth and telemedicine or questions about a telehealth arrangement or compliance initiatives, please contact us.