DME stands for “durable medical equipment.” Durable medical equipment is equipment that helps patients with completing daily activities. Such equipment includes wheelchairs, walkers, hospital beds, power scooters, and portable oxygen equipment. DME suppliers, to generate new business, use lead generation techniques. Such techniques must comply with federal law, including the Anti-Kickback Statute and HIPAA. DME compliance is discussed below.

How Does an Entity Achieve DME Compliance?

An entity achieves DME compliance by having policies and procedures that effectively monitor the entity’s marketing and advertising efforts to ensure those efforts do not constitute prohibited marketing, referrals, or kickbacks.

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DME Compliance: Prohibited Marketing, Referrals, and Kickbacks

In the recent past, DME suppliers engaged in traditional marketing activities. These activities would include sending sales representatives to doctors’ offices and hospitals. The sales representatives would then demonstrate how to operate a piece of durable medical equipment to the healthcare organization. In the process of doing so, sales representatives would commonly put in a “plug” for their company, by mentioning, for example, that their supplier was a significant or reputable industry player. In case the point did not sink in, so to speak, the sales representatives would leave promotional materials in the healthcare facility before the representatives visited another office. Patients would read these materials (or so it was hoped), and would then, intrigued by what they read, talk to their doctors about their need or want for the product. The doctor would then refer patients to the supplier, who would then sell the equipment to a patient. 

This type of direct marketing is proving to be insufficient to keep a continuous stream of revenue. As a result, suppliers are turning to lead generation companies. Under this arrangement, the supplier pays the lead generation company for a list of patients who might be interested in healthcare products. This arrangement is not illegal, provided the supplier complies with the federal Anti-Kickback Statute (AKS). The Federal Anti-Kickback Statute provides for criminal penalties for whoever knowingly and willfully offers, pays, solicits, or receives remuneration (money or services), to induce or reward the referral of business reimbursable under federal healthcare program. Federal healthcare programs include Medicare and Medicaid, among others.

Federal courts have developed a legal standard for determining whether a lead generation arrangement violates the AKS. This standard is referred to as the “one purpose test.” Under the one purpose test, even if there are legitimate business reasons for a lead generation arrangement, lead generation arrangements may result in patient referrals for DME if the equipment dispensed to the patient is paid for by a federal healthcare program. The “one purpose” test has been adopted by many courts to determine if a payment is in violation of the Anti-Kickback Statute. Under this test, even if there are some legitimate business reasons for the arrangement, if any one purpose is to generate referrals, that purpose renders the entire arrangement illegal. Determining whether a lead generation arrangement violates the Anti-Kickback Statute requires evaluation of each case on its own specific facts.

How Can I Make a Lead Generation Arrangement Compliant?

For a lead generation arrangement to comply with the AKS, the lead generation company should not collect healthcare information from the patient. Instead, the company should ask for name and basic contact information only. Asking for this limited information makes a patient appear to be an unqualified lead. Under the AKS, unqualified leads are unlikely to be regarded as “referrals.” A referral arrangement will generally not be found when the company representative must, working with name and basic contact information only, speak with the patient directly to determine whether the supplier can help that particular patient with his or her medical needs. In contrast, if the lead generation company gathers or mines specific healthcare information on a patient, such as age and overall health status, the patient begins to look more like a “referral,” and the arrangement between the lead generation company and the durable medical equipment provider may violate the Anti-Kickback Statute. Refraining from gathering such information will foster DME compliance.

For a lead generation arrangement to be HIPAA compliant, the arrangement must either:

• Provide for obtaining disclosure of protected health information for marketing purposes; or
• Meet an exception to the written authorization requirement (see 45 CFR 164.508(a)(3), (a)(4)).

In addition, if the arrangement provides that the lead generation company will get appropriate authorizations from leads, the DME supplier should periodically audit the lead generation company’s records to make sure authorization was given.