On September 6, 2019, the U.S. Department of Justice (DOJ) announced that the owner and chief executive officer (CEO) of a telemedicine company pleaded guilty for his role in one of the largest healthcare fraud schemes ever investigated by the Federal Bureau of Investigation (FBI) and the U.S. Department of Health and Human Services Office of the Inspector General (HHS-OIG), and prosecuted by the DOJ, stemming from April 2019 charges against 24 defendants.1 Lester Stockett (Stockett), owner of Video Doctor USA (Video Doctor), and owner and CEO of Telemed Health Group LLC (AffordADoc), pleaded guilty to one count of conspiracy to defraud the U.S. and pay and receive healthcare kickbacks, and one count of conspiracy to commit money laundering.2 Stockett agreed to pay $200 million in restitution, as well as forfeit assets and property traceable to conspiracy to defraud the U.S.3 Assistant Attorney General Brian A. Benczkowski of the Justice Department’s Criminal Division described the conspiracy, which occurred from March 2016 until April 2019, as “exploiting telemedicine technology meant to help elderly and disabled patients in need of health care.”4 In connection with his guilty plea, Stockett admitted that he and others agreed to solicit and receive illegal kickbacks and bribes from patient recruiters, pharmacies, brace suppliers, and others in exchange for arranging physicians to order medically unnecessary orthotic braces for beneficiaries of Medicare and other insurance carriers.5 Stockett admitted to paying illegal kickbacks and bribes to healthcare providers to order the medically unnecessary braces.6
This is not the first time that telemedicine companies have been found in violation of federal fraud and abuse laws. In July 2019, the DOJ announced an indictment of an anesthesiologist for her role in a $7 million conspiracy to commit healthcare fraud in a telemedicine scheme to submit fraudulent claims to federal healthcare programs and private health insurance plans.7 Additionally, in August 2019, the DOJ announced that a telemarketer and his companies agreed to pay $2.5 million to settle Anti-Kickback Statute and False Claims Act allegations that the companies illegally obtained customers’ insurance information and arranged for them to receive (medically unnecessary) pain creams and other types of products (without a valid physician-patient relationship) for the sake of selling the prescriptions to pharmacies as part of their “marketing services.”8
Telemedicine, generally, is the remote delivery of healthcare services and clinical information using telecommunications technology.9 However, the specific definition of telemedicine varies.10 Telemedicine is frequently, but mistakenly, used interchangeably with telehealth, which refers broadly to electronic and telecommunications technologies and services used to provide care and services at a distance.11 Telemedicine refers specifically to remote clinical services, while telehealth can refer to remote non-clinical services.12 The ideologically diverse views on U.S. healthcare reform results in most telemedicine reforms occurring at the state, rather than federal, level.13 Despite the current patchwork regulation, telemedicine is expected to remain (and expand) as a mainstay of the U.S. healthcare delivery system. This is evidenced in part by the preamble to the 2011 final accountable care organization (ACO) rule, which encourages ACOs to employ telemedicine as one of their key tools.14 Further, the Centers for Medicare and Medicaid Services (CMS) finalized rule language in April 2019 to bring telehealth benefits to Medicare Advantage plans, Medicare private health insurance plans, which will expand access for patients, and improve coordination for dual-eligible, beneficiaries covered under Medicare and Medicaid.15
The Anti-Kickback Statute (AKS) “provides criminal penalties for individuals or entities that knowingly and willfully offer, pay, solicit, or receive remuneration [directly or indirectly] to induce or reward the referral of business reimbursable under Federal health care programs.”16 [Emphasis added.] AKS violations are punishable by up to five years in prison, criminal fines up to $25,000, or both.17 Of note, healthcare providers violate the AKS if even one purpose of the arrangement in question is to offer remuneration deemed illegal under the AKS.18 In order to prove a violation of the AKS, the government must show that the defendant was aware that the conduct in question was “generally unlawful,” but not that the conduct specifically violated the AKS.19
Remuneration, for purposes of the AKS, can be anything of value (inclusive of more than money) that is knowingly and willfully obtained.20 The wide net that is cast by the AKS can put many proposed and current actions of telemedicine companies in precarious situations. Courts are split as to whether the AKS qualifies as a highly technical area of law which would make the willful and knowledge standard of AKS a higher standard of intent to meet, and seem to apply a sliding scale to that standard, based on the circumstances of the case.21
Due to the broad nature of the AKS, legitimate business arrangements may appear to be prohibited.22 In response to these concerns, Congress created a number of statutory exceptions and delegated authority to the HHS to protect certain business arrangements by means of promulgating several safe harbors.23 These safe harbors set out regulatory criteria that, if met, shield an arrangement from regulatory liability, and are meant to protect transactional arrangements unlikely to result in fraud or abuse.24 Failure to meet all of the requirements of a safe harbor does not necessarily render an arrangement illegal.25
As noted above, telemedicine arrangements may be subject to AKS, including arrangements among telemedicine providers, as well as arrangements with the technology partners with which healthcare organizations interact.26 OIG advisory opinions (guidance from the federal government on specific healthcare arrangements) have highlighted the various attributes that may render telemedicine arrangements legally permissible, such as ensuring that:
There is no volume or value difference because of the arrangement;
The primary beneficiaries of the arrangement would be the patients, not the providers;
The arrangement increases the timeliness of care, in order to decrease the rate of mortality in rural areas;
The arrangement has safeguards in place to prevent inappropriate patient steering;
The arrangement does not inappropriately increase costs to federal healthcare programs;
The business benefits to the organizations from the arrangement are minimal and incidental; and,
Patients are given free choice to choose providers after consultation.27
There are two AKS safe harbors particularly relevant to telemedicine: (1) when a provider receives free electronic prescribing technology or training; and, (2) when a provider receives free electronic health records software, information technology, or training.28 Thus, adherence to one of these safe harbors could, in theory, potentially reduce or eliminate associated kickback risks.29 As noted above, failure to comply with a safe harbor provision does not mean an arrangement is per se illegal.30 Further, limited reimbursement from Medicare does not necessarily reduce kickback risks; a telemedicine arrangement could violate the AKS by inducing other referrals.31 In addition to regulatory considerations, the American Medical Association (AMA) emphasizes certain ethical considerations, including that:
All physicians who participate in telemedicine have an ethical responsibility to disclose to the patient any financial or other interests in connection to the application or service;
All physicians inform patients about the limitations of the service;
Physicians advise about follow-up care if needed; and,
Physicians encourage patients to inform their primary care provider about the online consultation.32
As mentioned in the September 2018 Health Capital Topics article titled, “CMS Seeks Comments on Anti-Kickback Statute Reform,” both healthcare industry stakeholders and politicians have a significant interest in prospective reforms to federal fraud and abuse laws (including for the AKS), but no modification of the implementation of the regulations have materialized thus far.33 Organizations with active involvement in the telemedicine space such as Connected Health Initiative have pushed for certain AKS reforms specific to telemedicine, such as giving patients a device with which they can communicate with a care team to better meet patient needs.34 Despite the Trump Administration’s actions to deregulate the healthcare industry over the past couple years, the number of new cases enforcing healthcare fraud and abuse laws (especially those as relate to the fast-evolving telemedicine sector) suggest that regulatory enforcement is likely to remain vigilant going forward, and that all parties to a telemedicine arrangement (and not just physicians) are potentially liable.
“Owner and Chief Executive Officer of Telemedicine Company Pleads Guilty to $424 Million Conspiracy to Defraud Medicare and Receive Illegal Kickbacks in Exchange for Orders of Durable Medical Equipment” The United States Department of Justice, September 6, 2019, https://www.justice.gov/opa/pr/owner-and-chief-executive-officer-telemedicine-company-pleads-guilty-424-million-conspiracy (Accessed 9/11/19).
“Anesthesiologist Indicted for Alleged Role in $7 Million Telemedicine Health Care Fraud Conspiracy” The United States Department of Justice, July 9, 2019, https://www.justice.gov/usao-edny/pr/anesthesiologist-indicted-alleged-role-7-million-telemedicine-health-care-fraud (Accessed 9/18/19).
“Telemarketer And His Companies Agree To Pay $2.5 Million To Settle Allegations That They Operated Telemedicine Schemes Involving Illegal Kickbacks And Unnecessary Prescriptions” The United States Department of Justice, August 1, 2019, https://www.justice.gov/usao-mdfl/pr/telemarketer-and-his-companies-agree-pay-25-million-settle-allegations-they-operated (Accessed 9/20/19).
“Telemedicine Frequently Asked Questions (FAQs)” American Telemedicine Association, 2019, http://www.americantelemed.org/main/about/about-telemedicine/telemedicine-faqs (Accessed 9/13/19).
“Telemedicine definition” American Health Lawyers Association, Health Law Practice Guide, Vol. 3, No. 46.2, September 2019.
“What’s the difference between telemedicine and telehealth?” American Academy of Family Physicians, 2019, https://www.aafp.org/media-center/kits/telemedicine-and-telehealth.html (Accessed 9/13/19).
“The patchwork: Health reform, American style” By Theodore Marmor and Jonathan Oberlander, Social Science & Medicine, Vol. 72 (2011), http://healthsciences.utah.edu/hcr/2012/resources/marmor.oberlander.pdf (Accessed 9/13/19), p. 126.
“Medicare Program; Medicare Shared Savings Program: Accountable Care Organizations” Federal Register, Vol. 76, No. 212 (November 2, 2011), p. 67826.
“CMS finalizes policies to bring innovative telehealth benefit to Medicare Advantage” U.S. Centers for Medicare & Medicaid Services, April 5, 2019, https://www.cms.gov/newsroom/press-releases/cms-finalizes-policies-bring-innovative-telehealth-benefit-medicare-advantage (Accessed 9/18/19).
“Medicare and State Health Care Programs: Fraud and Abuse; Request for Information Regarding the Anti-Kickback Statute and Beneficiary Inducements CMP” Federal Register, Vol. 83, No. 166 (August 27, 2018), p. 43607.
“Criminal Penalties for Acts Involving Federal Health Care Programs” 42 U.S.C. § 1320a-7b(b)(1) (2013).
“Re: OIG Advisory Opinion No. 15-10” By Gregory E. Demske, Chief Counsel to the Inspector General, Letter to [Name Redacted], July 28, 2015, http://oig.hhs.gov/fraud/docs/advisoryopinions/15/AdvOpn15-10.pdf (Accessed 12/9/15), p. 4-5; “U.S. v. Greber” 760 F.2d 68, 69 (3d Cir. 1985).
“Health Care Fraud and Abuse Laws Affecting Medicare and Medicaid: An Overview” By Jennifer A. Staman, Congressional Research Service, September 8, 2014, https://www.fas.org/sgp/crs/misc/RS22743.pdf (Accessed 9/23/19), p. 5.
42 USC § 1320a-7b(b)(2)(B).
“DEFINING “WILLFUL” REMUNERATION: HOW BRYAN V. UNITED STATES AFFECTS THE SCIENTER REQUIREMENT OF THE MEDICARE/MEDICAID ANTI-KICKBACK STATUTE” Rob DeGraw, Journal of Health and Law, Vol. 14, No. 271 (1999-2000).
Chief counsel to the Inspector General, Letter to [Name Redacted], July 28, 2015, p. 5.
Federal Register, Vol. 64, No. 223 (November 19, 1999), p. 63518-63520.
“Re: Malpractice Insurance Assistance” By Lewis Morris, Chief Counsel to the Inspector General, United States Department of Health and Human Services, Letter to [Name redacted], January 15, 2003, http://oig.hhs.gov/fraud/docs/alertsandbulletins/MalpracticeProgram.pdf (Accessed 9/23/19), p. 1.
“Anti-Kickback Statute” Health Law Practice Guide, Vol. 3, No. 46.21, September 2019.
“Advisory opinions” Health Law Practice Guide, Vol. 3, No. 46.23, September 2019.
“Exceptions” 42 CFR 1001.952(x), (y), May 13, 20190
“Safe harbor” Health Law Practice Guide, Vol. 3, No. 46.22, September 2019.
“FEDERAL ANTI-KICKBACK LAW AND REGULATORY SAFE HARBORS” By Office of Inspector General, Department of Health and Human Services, November 1999,https://oig.hhs.gov/fraud/docs/safeharborregulations/safefs.htm (Accessed 9/18/19)
“Ethical Practice in Telemedicine” American Medical Association, 2019, https://www.ama-assn.org/delivering-care/ethics/ethical-practice-telemedicine (Accessed 9/13/19).
“CMS Seeks Comments on Anti-Kickback Statute Reform” Health Capital Topics, Vol. 11 Issue 9 (September 2018), available at: https://www.healthcapital.com/hcc/newsletter/09_18/HTML/AKS/convert_aks_rfi_hc_topics_final_9.17.18.php#_edn7 (Accessed 9/13/19).
“Medicare Program; Request for Information Regarding the Physician Self-Referral Law (CMS-1720-NC)” Brian Scarpelli, Connected Health Initiative, Regulations.gov, August 24, 2018, https://www.regulations.gov/document?D=CMS-2018-0082-0375 (Accessed 9/13/19).