AMARILLO, Texas — "There are very few things in life that I am sure of. For example, I still do not know what the words are to 'Louie, Louie,'" says health care attorney Jeff Baird of Brown & Fortunato. The HHS Office of Inspector General's recent telemarketing fraud alert also "defies logic," Baird points out, and he tackles its meaning in the following Q&A.
A second question Baird takes on this week has to do with whether an HME company can pay commissions to an independent contractor for marketing when the contractor's efforts result in Medicare business to the HME. "This second question has come up on several occasions over the last couple of weeks, so I think it is worthwhile to give a detailed answer," says Baird.
Q: What in the world does the January 2010 Updated Special Fraud Alert on telemarketing mean?
A: Good question. I am trying to figure that one out myself. The telephone solicitation statute is poorly drafted. The term "anti-solicitation" is contained in the title, but is not found anywhere else in the statute.
The statute says that an HME company cannot call a beneficiary unless (1) the beneficiary has given written permission; (2) the HME company has furnished a covered item to the beneficiary and the call pertains to that particular covered item; or (3) the HME company has furnished a covered item to the beneficiary within the preceding 15 months and the call pertains to another covered item.
If you adopt a literal reading of the statute, then if a beneficiary calls the HME and leaves a voicemail asking the company to call him back, the HME company cannot do so because none of the exceptions are met. Likewise, if you adopt a literal reading of the statute, then an HME company can go door-to-door trying to sell covered items to beneficiaries because the statute only prohibits telephone solicitation.
It is clear that the intent of the statute is to prevent "cold-calling" beneficiaries. Such an intent can be ascertained by the insertion of "anti-solicitation" in the statute's title, other statements made by HCFA/CMS over the years and the discussion set out in the updated fraud alert.
Let's look at the alert. It says that the telephone solicitation statute "prohibits suppliers of durable medical equipment (DME) from making unsolicited telephone calls to Medicare beneficiaries regarding the furnishing of a covered item, except in three specific situations" (emphasis added). These three "situations" are the three exceptions listed.
Here is where it gets bizarre. By logical extension, the alert is saying that the telephone calls described in the three exceptions are "unsolicited." However, if the beneficiary gives his written permission to be called (the first exception), then the HME company's phone call cannot be "unsolicited." Make sense? Let's continue.
The alert further says that the OIG "has received credible information that some DME suppliers continue to use independent marketing firms to make unsolicited telephone calls to Medicare beneficiaries to market DME, notwithstanding the clear statutory prohibition." Fair enough. I agree that such telemarketing (cold-calling) must be shut down.
The alert continues to focus on unsolicited telephone calls by saying: "Except in the three specific circumstances described in the statute, [the statute] prohibits unsolicited telemarketing by a DME supplier to Medicare beneficiaries" (emphasis added). OK, I get it. The OIG is concerned about telemarketing, about cold-calling, about unsolicited telephone calls. I agree.
But then the alert includes two sentences that defy logic: "OIG has also been made aware of instances when DME suppliers, notwithstanding the clear statutory prohibition, contact Medicare beneficiaries by telephone based solely on treating physicians' preliminary written or verbal orders prescribing DME for the beneficiaries. A physician's preliminary written or verbal order is not a substitute for the requisite written consent of a Medicare beneficiary."
Where in the world did that come from? Is the OIG really trying to say that when Mrs. Smith (a 78-year-old Medicare beneficiary) is seen by Dr. Jones, and Dr. Jones orders a bed for her and faxes the order to ABC Medical Equipment, that ABC cannot call Mrs. Smith later that morning in order to set up a time for ABC to deliver the bed? Is the OIG trying to say that ABC's phone call to Mrs. Smith, in response to her physician's order, is unsolicited? This makes no sense.
The government might say that the easy solution is for Mrs. Smith to sign something at Dr. Jones's office that consents for ABC to call her. This might work on occasion, but it is not reality. Reality is that Dr. Jones has a position of trust with Mrs. Smith; he is her agent; he speaks on her behalf. If Dr. Jones sends an order to ABC, and if ABC then calls Mrs. Smith to set up a time of delivery, then no credible argument can be made that ABC's phone call is somehow unsolicited.
Q: Isn't there any way for an HME company to pay commissions to a 1099 independent contractor marketing rep who generates both Medicare and commercial business for the company?
A: To quote from an old Patti Loveless country song: "What part of 'no' don't you understand?"
There are very few things in life that I am sure of. For example, I still do not know what the words are to "Louie, Louie." However, what I am absolutely, positively sure about is that an HME company cannot pay commissions to an independent contractor who generates Medicare business to the company.
The Medicare anti-kickback statute states that it is a felony for an individual or entity to knowingly or willfully offer or pay any remuneration to induce a person to refer an individual for the furnishing, or arranging for the furnishing, of any item for which payment may be made under a federal health care program (e.g., Medicare), or the purchase or lease or the recommendation of the purchase or lease of any item for which payment may be made under a federal health care program.
The statute exempts payments made to employees. The statute is very broad and does not provide any exception for independent contractors. In the eyes of the Department of Justice and the OIG, there is a huge difference between a W2 employee and a 1099 independent contractor. Apples and oranges. Venus and Mars. There is no such thing as a "1099 employee" and there is no such thing as a "W2 independent contractor."
The plumber who comes to my house to fix the sink is an independent contractor. If he leaves my house to drive to the plumbing supply store to pick up a pipe, and in the process runs over someone, that is not my problem. A person is not responsible for the acts of an independent contractor. On the other hand, my secretary (whose office is next to mine) is my employee. If she drives to the courthouse to pick up a document for me, and in the process runs over someone, that is my problem.
An employer is liable for the acts of his employee that are conducted in the course and scope of the employee's duties. This is known as the theory of respondeat superior. An HME company can pay commissions and bonuses to its heart's delight to a bona fide (not a sham) full- or part-time employee. The Medicare anti-kickback statute allows this. The reason for this allowance is that the HME company is liable if its employee lies or otherwise takes advantage of 78-year-old Mrs. Smith.
This means that the HME company must control, train and supervise its employee. None of this is true with an independent contractor. If an HME company uses an independent contractor for marketing, and if the contractor lies or otherwise takes advantage of Mrs. Smith, then the HME company is not liable. It is for this reason that the anti-kickback statute allows an HME company to pay commissions to employees, but not to independent contractors.
The OIG has spoken to this issue on a number of occasions. In an advisory opinion, the OIG stated: "Any compensation arrangement between a Seller and an independent sales agent for the purpose of selling health care items or services that are directly or indirectly reimbursable by a Federal health care program potentially implicates the anti-kickback statute, irrespective of the methodology used to compensate the agent. Moreover, because such agents are independent contractors, they are less accountable to the Seller than an employee. For these reasons, this Office has a longstanding concern with independent sales agency arrangements."
In its response to comments submitted when the safe harbor regulations were originally proposed, the OIG stated: "[M]any commenters suggested that we broaden the exemption to apply to independent contractors paid on a commission basis. We have declined to adopt this approach because we are aware of many examples of abusive practices by sales personnel who are paid as independent contractors and who are not under appropriate supervision. We believe that if individuals and entities desire to pay a salesperson on the basis of the amount of business they generate, then to be exempt from civil or criminal prosecution, they should make these salespersons employees where they can and should exert appropriate supervision for the individual's acts."
The bottom line is that if an HME company wants to pay commissions (or other types of production-based compensation) to a person who will generate Medicare business for the company, then that person must be a bona fide full- or part-time employee, and not an independent contractor.
Jeffrey S. Baird, Esq., is chairman of the Health Care Group at Brown & Fortunato, P.C., a law firm based in Amarillo, Texas. He represents pharmacies, infusion companies, home medical equipment companies and other health care providers throughout the United States. Baird is Board Certified in Health Law by the Texas Board of Legal Specialization. He can be reached at 806/345-6320 or jbaird@bf-law.com.
Do you have a legal question about an HME issue? Send your questions to HomeCare Monday for an answer from health law firm Brown & Fortunato. (No names will be used if your question is published.)
