Beneficiary inducements…don’t cross that line

illegal beneficiary inducements...don't cross that line

CJ Wolf, MD provides enforcement action summaries for the YouCompli blog. These summaries provide real-world examples of regulators’ response to practices that don’t fully comply with regulations. This month’s article looks at beneficiary inducement actions. 

Healthcare margins are tighter than ever. Competition for patients can be fierce. And organizations want to do something “outside the box” to bring in more patients or increase their market share. 

In industries outside of healthcare, it is common practice to entice potential customers with a giveaway or freebie. Banks and credit card companies may offer $100 to open a new account with them. In the food and drink industry, a restaurant chain might offer free drinks or food to bring awareness to the opening of a new location. 

But tactics common in other industries might be considered illegal beneficiary inducements in healthcare, especially for beneficiaries of federal programs like Medicare or Medicaid. No one in healthcare advertises them as inducements. However, some key words and phrases should at least pique the interest of a conscientious compliance officer. “Co-pay waivers,” “insurance only billing,” “Medicare accepted as payment in full,” and “free gift for new patients” are just some examples. Digging deeper could uncover unlawful beneficiary inducements. 

The cost of this behavior can be staggering, as these examples illustrate: 

Free insulin: an improper beneficiary inducement 

A hospital in Kentucky agreed to pay over $10 million to resolve allegations that included improper inducements. It was alleged the hospital submitted claims to Medicare that resulted from inducements provided to Medicare beneficiaries. The government contended the inducements were in the form of free blood glucose testing supplies and waiver of co-payments and deductibles for insulin. 

Deflated Medicare copayment and ‘courtesy adjustments’ for injections 

In February of 2021, a Florida pain clinic resolved allegations of illegal inducements by agreeing to a settlement requiring the clinic to pay $1.6 million dollars. The government alleged that the pain clinic participated in an illegal kickback scheme by causing affiliated surgery centers to waive copayments for surgical facility fees in order to induce patients to receive injection procedures. 

The whistleblower who brought this to the attention of the government worked in the business office and was privy to the waiving of copayments. She claims an email she received from the Assistant Business Office Manager advised her “that all Medicare Advantage patients were only to be billed $100 with any remaining co-pay to be written off.” Additionally, her filed complaint states she was to record any waived co-pay in the billing records as a “courtesy adjustment.” 

Free glucometers and waived co-payments  

A mail-order diabetic testing supplier and its parent company agreed to pay $160 million to resolve allegations that they violated the False Claims Act by providing free supplies and routinely waiving co-payments.  

The government alleged the companies paid kickbacks to Medicare beneficiaries by providing them “free” glucometers. Beneficiaries were supposedly told the companies would provide the meters at “no cost” if Medicare denied payment. (Medicare typically did deny payment as the beneficiaries were not yet eligible for a new glucometer.) The company also allegedly offered and provided their current customers with “free” additional meters to induce them to reorder testing supplies from the company. 

The government also said the company routinely waived co-payments. In addition, the company failed to make reasonable collection efforts for co-payments. The government’s allegations included the company’s: 

  • Failure to send invoices to beneficiaries for their co-payment amounts 
  • Failure to send collection letters, or making phone calls, to collect copayments 
  • Systematically waiving “small” dollar copayments without informing beneficiaries of their copayment obligations by sending them an invoice 
  • Automatically waiving other unpaid copayments after sending no more than three invoices seeking payment and making no other collection efforts. 
  • Waiving copayments when customers complained that the company had advertised that their supplies would be free or at no cost 

Meals and waived copayments lead to medically unnecessary procedures 

A cardiologist and his practice paid over $2 million and released claim to another $5.3 million to resolve False Claims Act allegations due to improper inducements to perform unnecessary procedures. The doctor also agreed to be excluded from participation in any federal healthcare program for three years followed by an OIG Integrity Agreement for another three years. The government alleged the cardiologist convinced patients to undergo the medically unnecessary procedures, in part, by paying kickbacks to patients through waiving Medicare copayments irrespective of any individual determination of patient financial hardship. 

The government contended that to help facilitate this false billing scheme, the doctor and his practice routinely waived the 20 percent Medicare copayment, irrespective of the patient’s financial need. 

In reviewing the publicly available court documents, there were also accusations of inducing patients by ordering and providing free meals and food. That activity led the patients to stay in the busy waiting room while waiting for many hours to undergo their procedures rather than foregoing the procedure or rescheduling.  

Clearly, improper beneficiary inducements are still a compliance risk. The ways beneficiaries can be induced may be numerous, but the basic concepts remain the same. In fact, the OIG’s original Special Fraud Alert (SFA) from 2002 is still pertinent today, even as rules have shifted to encourage COVID vaccination and better coordination of care. Taking another look at this SFA might be a good idea for all providers who offer enticements to Medicare beneficiaries. 

Managing regulatory change is a critical way to avoid enforcement actions. YouCompli is the only healthcare compliance solution that combines actionable, regulatory analysis with a simple SaaS workflow to help you mange regulatory change. Read more about our model procedures. 

CJ Wolf, MD, M.Ed is a healthcare compliance professional with over 22 years of experience in healthcare economics, revenue cycle, coding, billing, and healthcare compliance. He has worked for Intermountain Healthcare, the University of Texas MD Anderson Cancer Center, the University of Texas System, an international medical device company and a healthcare compliance software start up. Currently, Dr. Wolf teaches and provides private healthcare compliance and coding consulting services as well as training. He is a graduate of the University of Illinois at Chicago College of Medicine, earned a master’s in education from the University of Texas at Brownsville and was magna cum laude as an undergraduate at Brigham Young University in Provo, UT. In addition to his educational background, Dr. Wolf holds current certifications in medical coding and billing (CPC, COC) and healthcare compliance, ethics, privacy and research (CHC, CCEP, CHPC, CHRC).

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