Marketing Dos & Don'ts

When you're rethinking or expanding your company's marketing plans, keep the following can- and can't-do's in mind:

What Your DME Company CAN Do

• Market through bona fide part-time and full-time employees. The company must comply with as many IRS guidelines as possible so that the IRS will classify the marketing rep as an employee (W2), and not an independent contractor (1099).

  Among other requirements, the company must exercise supervision and control over the employee. The company may pay the employee bonuses and commissions.

• The company can advertise on television, on the radio, in the newspaper and in other media outlets.

• The company may call on physicians, hospital discharge planners, home health agencies and other referral sources in order to market the company's products and services.

• On condition that the company secures a list of senior citizens in such a way that HIPAA is not violated (e.g., the list comes from an entity that is not a health care provider), then the company can mail out promotional literature to the people on the list.

  The company can include a stamped, self-addressed postcard. In promotional literature, the company can ask the recipient to sign and mail the postcard back, which will give the company the right to call the recipient.

• The company can offer an item of nominal value (i.e., retail value of $10 or less, not to exceed $50 per 12 months for each beneficiary) to a prospective Medicare/Medicaid customer.

• The company may call a Medicare/Medicaid beneficiary about the company's products and services if the company has provided a Medicare/Medicaid-covered item to the beneficiary within the preceding 15 months.

• The company can participate in local health fairs. In so doing, it can set up a table and give away items with a retail value of not more than $10. The company can put on a short program during lunch at a senior citizens' center, at which time the company can distribute promotional literature. The company can place a kiosk in a mall that promotes its products and services.

• The company may allow an employee to work on the premises of a hospital for a certain number of hours each week. This person is commonly known as an “employee liaison.”

  The employee may educate the hospital staff regarding medical equipment (to be used in the home) and related services. The employee may work with a patient after the referral is made to the DME company (but before the patient is discharged) in order for there to be a smooth transition when the patient goes home. The employee liaison may not assume responsibilities that the hospital is required to fulfill.

• The DME company may offer discounts (off of what the company submits to Medicare/Medicaid) to cash-paying customers so long as the discounts are 20 percent or less, unless the company can show “good cause” as to why it is giving a discount greater than 20 percent.

• If a DME company is located in a rural area, then a physician can be an owner of the company and also refer to it.

• If a physician serves as the medical director of a DME company, and if the physician refers to the company, then the agreement needs to comply with the personal services exception to Stark and needs to substantially comply with the Personal Services and Management Contracts safe harbor to the anti-kickback statute.

  In particular, the compensation to be paid to the physician must be fair market value and must be set one year in advance.

• If a DME company and a hospital put together a joint venture — that is, a jointly owned DME company — then both sides must put up risk capital, and the joint venture operation must be independently run. The joint venture must comply with the OIG's 1989 Special Fraud Alert on joint ventures and the OIG's April 2003 Special Advisory Bulletin on contractual joint ventures.

• A cooperative marketing program can be implemented by a DME company and a hospital, or by a DME company and a pharmacy, so long as both parties pay the expenses on a pro rata basis.

• A DME company may enter into a loan/consignment closet arrangement with a hospital/physician so long as patient choice is ensured; the hospital/physician makes no money off the consigned equipment; and any rent paid by the DME company complies with the Space Rental safe harbor to the anti-kickback statute (e.g., fixed one year in advance/fair market value). Preferably, no rent should be paid.

• A DME company may enter into a preferred provider agreement with a hospital that ensures patient choice.

• Under HIPAA, one provider may contact its customers and educate them regarding the products and services offered by another provider.

What Your DME Company CANNOT Do

• Market through independent contractors whereby the company pays commissions and bonuses to the contractors. The only way that a company may market through independent contractors is if the company pays the contractor a fixed annual amount that is the fair market value equivalent of the contractor's services.

  The arrangement between the company and the contractor needs to substantially comply with the Personal Services and Management Contracts safe harbor to the Medicare/Medicaid anti-kickback statute.

• In calling on physicians, hospital discharge planners, home health agencies and other referral sources, the company may not directly or indirectly give something of value for the referrals.

• The company may not obtain a list of senior citizens from another health care provider; this would violate HIPAA.

• The company may not offer anything of value (in excess of nominal value, $10 or less retail, not to exceed $50 per 12 months) to a prospective Medicare/Medicaid customer.

• A company cannot call beneficiaries for the purpose of soliciting business. There are several exceptions, one of which is that the company may call a beneficiary who has acquired a Medicare/Medicaid-covered item from the company within the preceding 15 months.

• An employee liaison (see above) may not assume responsibilities that the hospital is required to fulfill. Doing so will save the hospital money (remember, the hospital is a referral source to the DME company), which will violate the Medicare/Medicaid antikickback statute.

• When selling an item to a cash-paying customer, the DME company may not give greater than a 20 percent discount (off of what the company submits to Medicare/Medicaid) unless the company can show “good cause” supporting a discount greater than 20 percent.

• If a DME company is located in a non-rural area, a physician cannot have an ownership interest in it and also refer to it.

• If a DME company and a hospital put together a joint venture, that is, a jointly owned DME company, then the hospital (a referral source) cannot be allowed to have an ownership interest without investing risk capital equal to the ownership interest awarded to the hospital.

  The DME company (that is an owner of the joint venture) cannot manage the joint venture operation on a turnkey basis.

• If a cooperative marketing program (see above) is implemented by a DME company and a hospital, or by a DME company and pharmacy, then the referral source cannot be given a free ride — the referral source must pay its prorata share of the expenses.

• A DME company cannot enter into a loan/consignment closet arrangement with a hospital/physician that allows the hospital/physician to make money off the consigned inventory; does not ensure patient choice; and allows for rent in excess of fair market value (and that does not comply with the Space Rental safe harbor to the anti-kickback statute).

• A DME company cannot enter into a preferred provider agreement with a hospital that does not ensure patient choice.

• Under HIPAA, one provider may not give customer information to another provider in order for the other provider to market to the customers.

Jeffrey S. Baird, Esq., is chairman of the Health Care Group at Brown & Fortunato, P.C., an Amarillo, Texas-based law firm. Board certified in health law by the Texas Board of Legal Specialization, he represents home medical equipment companies, pharmacies and other health care providers throughout the United States. Baird may be reached at 806/345-6320 or by e-mail at jbaird@bf-law.com.