The Department of Health and Human Services Office of Inspector General (HHS-OIG) recently published a Special Fraud Alert warning health care providers (e.g., prescribers, pharmacies, durable medical equipment providers, clinical laboratories) to steer clear of certain telemedicine arrangements and outlining seven “suspect” characteristics that may present heightened risk of fraud and abuse.

The alert coincides with a third round of criminal “telemedicine takedowns” announced by the Department of Justice (DOJ) in the last several years, reflecting DOJ’s continued focus on identifying and dismantling fraudulent arrangements that exploit telemedicine technologies and related regulatory flexibilities in the wake of the COVID-19 pandemic.

Telemedicine technologies have created a multitude of opportunities for growth and innovation within the health care industry and are well-positioned to become an ongoing cornerstone of our health care delivery system. However, given the increased level of regulatory scrutiny of telemedicine arrangements, providers and telehealth technology companies, including drug and device manufacturers that offer telemedicine technologies (e.g., platforms, mobile applications) for prescribers and patients that facilitate virtual care, should carefully plan and closely evaluate existing arrangements to ensure compliance with applicable state and federal laws and avoid implication amongst the recent uptick in enforcement.

The Expansion of Telemedicine and the Rise of Fraudulent Activity

The COVID-19 pandemic exacerbated existing barriers to health care access and simultaneously created a new and unprecedented opportunity for virtual care with its own set of barriers. In an effort to minimize the public health impact of the pandemic, many state and federal regulatory bodies implemented temporary regulatory flexibilities to expand access to health care services. These flexibilities included, among other things, the relaxation or the complete suspension of restrictions on the provision of health care services via telemedicine (e.g., professional licensure requirements, reimbursement restrictions, patient-provider connectivity standards), which resulted in the rapid proliferation and expansion of telemedicine services, technologies, platforms, and arrangements among providers and tech companies.

While this explosion in telemedicine represented a critical component of the COVID-19 public health response, according to DOJ and HHS-OIG, the limited restrictions on and lack of sufficient regulatory oversight of telemedicine platforms and arrangements also created opportunities for fraudulent and abusive practices.

Increased Regulatory Scrutiny of Telemedicine Arrangements

Despite a relative decrease in health care fraud and abuse enforcement activity during the COVID-19 pandemic, over the last year DOJ and HHS-OIG have shown a renewed focus on investigating alleged fraudulent telehealth service providers and arrangements. In September 2021, the DOJ announced charges against 43 defendants in connection with over $1.1 billion in allegedly false or fraudulent claims involving telemedicine schemes. Under these arrangements, prescribers were allegedly paid to order medically unnecessary durable medical equipment, genetic and other diagnostic testing, and pain medications without having any meaningful interaction with patients.

More recently, in July 2022, the DOJ announced charges against 36 defendants, including physicians and other licensed health care professionals, for participating in fraudulent schemes involving telemedicine, cardiovascular and cancer genetic testing, and durable medical equipment. The DOJ alleged that these schemes resulted in approximately $1.2 billion in losses for federal health care programs. These agencies have also announced new investigations into various other telehealth services companies and arrangements.

HHS-OIG Special Fraud Alert Regarding “Suspect” Telemedicine Arrangements

On the very same day that the DOJ issued those charges, HHS-OIG published the alert detailing key findings from investigations into fraudulent schemes involving companies that provide telehealth, telemedicine, and telemarketing services, collectively referred to as “Telemedicine Companies.” The alert warns physician and nonphysician practitioners to exercise caution when evaluating potential relationships with Telemedicine Companies, noting that both Telemedicine Companies and participating practitioners can be held civilly, administratively, and criminally liable for their involvement in arrangements that violate the federal Anti-Kickback Statute, the False Claims Act, and other applicable laws.

The alert acknowledges that fraudulent telemedicine schemes can vary in design and operation and may involve a wide range of individuals and entities within the health care industry. However, it outlines several particularly “suspect” characteristics commonly associated with fraudulent arrangements, detailed below:

  1. Arrangements where the patients for whom the practitioner prescribes items or services were identified or recruited by the Telemedicine Company or another third party and/or through television/digital advertising campaigns offering free or low-cost services.
    1. This characteristic is often present in so-called “closed loop” referral arrangements in which a Telemedicine Company markets certain items or services directly to patients (e.g., through social media). When patients engage with the advertisements, they are directed to participating practitioners who then make referrals or orders for items and services that are provided by the Telemedicine Company or an affiliate.
  2. Arrangements where the treating practitioner does not have meaningful contact with the patient or information about the patient to be able to make a valid assessment of the medical necessity of the items/services offered through the arrangement.
    1. A lack of meaningful practitioner-patient contact may arise in (i) arrangements where practitioners use audio-only technology or only interact with the patient for a brief telemedicine visit and never see the patient in person; or (ii) arrangements where practitioners order items or services for patient after reviewing only a limited portion of the patient’s medical information (e.g., patient responses to questionnaire established for purposes of the arrangement).
  3. Arrangements in which the practitioner is paid based on the volume of items or services ordered or prescribed or the number of medical records reviewed.
    1. These types of compensation arrangements virtually always raise potential concerns under the federal fraud and abuse laws given their potential to inappropriately influence a practitioner’s professional decision-making, and incentivize a practitioner to maximize their compensation by ordering medically unnecessary items and services that are not in the patient’s best interest.
  4. Arrangements that only offer the provision of items or services to federal health care plan beneficiaries.
    1. Arrangements that specifically target federal health care plan beneficiary patients could present concerns of fraudulent or coercive practices involving more vulnerable patient populations.
  5. Arrangements that only offer the provision of items or services to individuals who are not federal health care plan beneficiaries, but which may ultimately result in inappropriate billing to federal health care plans for related items or services.
    1. Health care providers and other health care industry actors often suspect that carving out federal health care plan beneficiaries from an arrangement will insulate the arrangement from scrutiny under applicable federal fraud and abuse laws. Although such protection may be available in some cases, all aspects of an arrangement deserve consideration when making this assessment, including orders and referrals that may result from the arrangement. For example, an arrangement may involve professional services (e.g., a provider visit) that are not billed to federal health care plans. However, that visit may result in orders/referrals for items or services that are reimbursable under and ultimately billed to the plans (e.g., drug or device prescriptions, diagnostic testing) by another party to the arrangement. If the underlying visit is part of a larger arrangement that violates the AKS or other laws, such resulting orders or referrals may be “tainted” and create FCA risk.
  6. Arrangements involving the provision of only one product or service, thereby restricting a Practitioner’s professional decision-making to a pre-determined course of treatment.
    1. This characteristic may be present in arrangements like the “closed loop” referral example described above and raises concerns regarding the medical necessity of the items or services ordered or provided by the practitioner, as well as the potential for undue influence over a practitioner’s professional judgment.
  7. Arrangements that do not contemplate practitioner follow-up with patients receiving the items or services offered (e.g., no discussion of genetic testing results between patient and practitioner).
    1. Arrangements that are structured with limited practitioner involvement and oversight over a patient’s care raise questions about the validity of that patient-Practitioner relationship and undermine the medical necessity of the items or services provided.

Taken together, the DOJ charges and the OIG alert highlight the government’s escalating interest in telemedicine and underscore for providers and telehealth technology companies alike the importance of scrutinizing these arrangements. Moreover, in addition to federal fraud and abuse laws, these arrangements often present a compliance minefield with other federal and state health care regulatory frameworks, particularly in the realm of provider licensure and scope of practice requirements, state and federal health privacy laws, and FDA-regulated medical devices.