Federal Enforcement Keeps Pace with the Expansion of Telemedicine Services

In Short 

The Situation: Even before the COVID-19 pandemic, federal enforcement in the telemedicine area was on the rise and focused largely on "telefraud," which purportedly leverages telehealth platforms improperly to sell expensive items like durable medical equipment ("DME") and genetic testing. As a result of pandemic-related policies, telemedicine services have expanded dramatically, as have the federal dollars associated with these services and related prescriptions.  

The Result: Federal enforcement agencies have taken note of the expansion in telemedicine services and, particularly in recent months, have noticeably increased their enforcement, both in the criminal arena and with civil False Claims Act settlements. Newer enforcement efforts focus not only on prescriptions arising from telemedicine consultations but also on the consultations themselves. On the administrative side, the Office of Inspector General for the Department of Health and Human Services ("HHS-OIG") is focused on telemedicine and is currently performing audits and evaluations slated to be completed in 2021 and 2022, bringing further attention to this area.  

Looking Ahead: Criminal, civil, and administrative enforcement in connection with the expansion of telemedicine services is expected to continue to evolve and likely increase. Given the upswing in scrutiny, telemedicine companies should take the opportunity to assess the robustness of their compliance programs, the accuracy and completeness of provider documentation and billing practices, and, given the government's focus on kickback issues, the structure and purpose of their relationships with third parties.

Federal government enforcement in the telemedicine space continues to escalate, with three separate announcements in just the last three weeks regarding criminal and civil telemedicine-related actions. These enforcement actions show continuing prosecution themes, as well as emerging areas of Department of Justice ("DOJ") scrutiny and exposure for telemedicine providers. Below is an overview of DOJ's September 17, 2021, announcement of criminal telemedicine enforcement, followed by two other recent announcements detailing criminal and civil False Claims Act telemedicine resolutions. Collectively, these announcements encompass just under 50 defendants and involve highly similar allegations regarding kickback-type conduct intended to induce orders of high-priced items and services through telehealth platforms, as well as allegations of purported "exploitation" of expanded federal telemedicine policies. 

Announcement of September 17, 2021 

On September 17, 2021, DOJ's Criminal Fraud Section announced extensive criminal health care fraud charges against numerous defendants in a wide range of health care settings. Telemedicine comprised the overwhelming share of these prosecutions, with DOJ charging more than 43 criminal defendants across 11 judicial districts with the submission of more than $1.1 billion in false and fraudulent claims relating to telemedicine. Sept. 17 2021 DOJ Press Release. These new prosecutions make what are now familiar allegations: Telemedicine executives allegedly paid providers "to order unnecessary durable medical equipment, genetic and other diagnostic testing, and pain medications, either without any patient interaction or with only a brief telephonic conversation with patients they had never met or seen." The government alleges that DME companies, laboratories, and pharmacies paid kickbacks to obtain those orders and submitted more than $1.1 billion in false and fraudulent claims to Medicare and other government insurers. These cases track allegations seen in DOJ's Operation Rubber Stamp and Operation Brace Yourself—nationwide, pre-COVID takedowns for conduct described by HHS-OIG as "telefraud," i.e., "scams that leverage aggressive marketing and so-called telehealth services" to sell expensive items like DME and genetic testing.   

However, the September 17 prosecutions also confirm that DOJ is looking beyond alleged "telefraud" to the telemedicine consults themselves. According to DOJ, nine defendants, who submitted unnecessary claims for expensive laboratory testing, are also alleged to have billed for "sham telehealth consultations that did not occur as represented," exploiting "policies that were put in place by [the Centers for Medicare and Medicaid Services ("CMS")] to enable increased access to care during the COVID-19 pandemic, such as expanded telehealth regulations and rules." Note that while the current prosecutions may be related to CMS's expansion of telemedicine rules, U.S. Health Resources and Services Administration ("HRSA"), U.S. Drug Enforcement Administration ("DEA"), and other federal agencies utilized waivers or enforcement discretion specific to telehealth during the public health emergency ("PHE"), which also may become the subject of enforcement attention. 

September 1, 2021, Announcement of Guilty Plea Relating to Exploitation of Expanded Telemedicine Policies 

DOJ's emphasis on the "exploitation" of CMS's expansion of telehealth rules and regulations highlights an emerging prosecution theme and ties into a May 2021 telemedicine-related indictment and subsequent guilty plea announced by DOJ on September 1, 2021.  

On May 26, 2021, DOJ announced a telemedicine prosecution representing "first in the nation charges" for allegedly exploiting CMS policies expanding access to telemedicine services during the PHE "by submitting false and fraudulent claims to Medicare for sham telemedicine encounters that did not occur." See Jones Day's June 2021 Alert. On September 1, 2021, DOJ announced that one of the defendants in that case, the co-owner of Panda Conservation Group LLC ("Panda"), a holding company for laboratories, pled guilty for his role in a $73 million conspiracy to defraud Medicare by paying kickbacks to a telemedicine company (1523 Holdings LLC) to make referrals for medically unnecessary genetic testing. DOJ Sept. 1, 2021, Announcement.  

In the agreed statement of facts, the Panda owner pled guilty to violations of the Anti-Kickback Statute, 31 U.S.C. § 1320a-7b(b)(2)(B), for paying a $50,000 monthly kickback to the owner of 1523 Holdings for arranging for telemedicine providers to authorize genetic testing orders for Panda's laboratories. The defendant admitted that he, along with his co-conspirators, entered into a "sham" contract for IT and consultation services to disguise the true purpose of the payments. As alleged in the indictment, 1523 Holdings was provided with Medicare beneficiary information by Panda and then "exploited" temporary amendments to telehealth restrictions enacted during the PHE by offering telemedicine providers "access" to these beneficiaries for whom they could bill consultations. In exchange, these providers allegedly agreed to refer beneficiaries to Panda's laboratories for expensive and medically unnecessary genetic testing. 

The agreed statement of facts also states the Panda owner knew that "these telemedicine providers had no pre-existing relationship with these Panda-recruited patients, typically did not actually speak to the patients prior to authorizing the testing, and would not have been able to access these patients and bill Medicare for visits with them if they did not agree to refer authorized genetic testing orders to Panda's laboratories." The defendant also admitted that, as a result of this scheme, Panda's laboratories billed Medicare approximately $90 million and were paid approximately $61 million for "genetic testing orders procured by illicit kickbacks between April l, 2020 and December 31, 2020." 

While very much in the vein of the earlier "telefraud" prosecutions, the Panda matter also illustrates that in the COVID era, with the tremendous expansion of federal reimbursement for telemedicine services, DOJ is now squarely focused on the consultation services themselves, as well as any orders or prescriptions that arise out of those consultations. DOJ's highlighting of similar charges in its September 17 announcement further indicates that we can expect to see similar allegations in future cases.  

False Claims Act Telemedicine Resolutions and Agency Audits 

Despite DOJ's criminal focus, there is also potential civil exposure under the False Claims Act. Operation Brace Yourself involved not only criminal indictments and guilty pleas but also an underlying False Claims Act qui tam action, which resulted in a $20.3 million False Claims Act settlement announced earlier this year. See Feb. 21 2021, DOJ Press Release. More recently, on August 24, 2021, the U.S. Attorney's Office in the Western District of Michigan announced developments in "Operation Happy Clickers," designed to target schemes involving physicians who prescribe expensive Medicare-covered items with little to no review. Similarly, this DOJ operation encompassed both criminal and civil outcomes, including civil False Claims Act settlements with multiple telemedicine providers for allegedly approving orders for medically unnecessary braces and cancer genetic testing "despite many red flags that these items and services were illegitimate."  

HHS-OIG has likewise been actively scrutinizing the telemedicine space. The OIG work plan for 2021 includes multiple audits and evaluations of telemedicine services. And as the HHS Inspector General emphasized in February of 2021: "OIG is conducting significant oversight work assessing telehealth services during the public health emergency…. We anticipate the first work products to be published later this year." Feb. 2021 OIG Letter.  


Given the substantial upswing in government scrutiny from criminal, civil, and administrative angles, telemedicine companies and all involved in delivering telehealth (including all aspects of the revenue cycle) should take the opportunity to assess the robustness of their compliance programs and remind providers of the need to ensure that physician-patient relationships and encounters are appropriately documented. Similarly, providers should seek to ensure that their billing practices comply with applicable laws and regulations and that their orders of other items and services comply with medical necessity requirements. In addition, given the government's recurring focus on kickback concerns, telemedicine companies should conduct a review their relationships with third parties to ensure that the arrangements serve a legitimate business purpose and are otherwise consistent with any applicable safe harbors and fair market value.

Three Key Takeaways 

  1. DOJ continues to focus on criminal "telefraud" cases, particularly those involving alleged violations of the Anti-Kickback Statute, and the provision of high-priced items and services, such as DME, genetic testing, and pain medications.
  2. DOJ is expanding its focus beyond "telefraud" and is examining and charging conduct that involves the alleged "exploitation" of CMS's COVID-related expansion of telemedicine access and related rules and regulations. This focus could further shift to encompass other types of telehealth-related rule expansion, such as HRSA and DEA waivers and federal exercise of enforcement discretion. 
  3. This is the time for telemedicine companies to take stock of their compliance programs; remind providers of the need to ensure that physician-patient relationships, encounters, and orders are appropriately documented; re-examine billing practices; and evaluate relationships with third parties to ensure that any arrangement serves legitimate business purposes.
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