Point /Counterpoint:: Pushing Your Marketing Efforts Without Falling Into a Legal Pit
Market Analysis: Orthopedic Softgoods p. 20
Product Focus: Pediatric Products p. 32
A Penton Media Publication
FOR BUSINESS LEADERS IN HOME MEDICAL EQUIPMENT www.homecaremag.com
Round 1 Bid Rates
with Colette Weil and Jeff Baird
Pushing Your Marketing
Efforts without Falling
Into a Legal Pit
The Ofﬁcial Magazine of Medtrade
“What a sight.”
“What a site.”
14 | JULY 2010 | www.homecaremag.com
Pushing Your Marketing
point: Efforts without Falling
Into a Legal Pit
BY COLETTE WEIL, MBA AND JEFFERY S. BAIRD, ESQ.
or an HME company that provides
products and services to patients
covered by Medicare and Medicaid,
marketing is guided by federal stat-
utes and regulations that protect and
guard the integrity of the programs.
This does not mean that you must
restrict your creativity in marketing;
however, you must abide by the law.
A Note about Colette and Jeff
The story goes like this: An environmen- lifeblood of every business. You might have According to Jeff, in the real world
talist and an oil driller are standing on the best product mix, the best service, the businesses can do just about anything
the top of a hill looking over a pristine best prices and the greatest website. But if they want when it comes to marketing.
valley with elk, streams and trees. The no one knows about you, it doesn’t really However, he says, “HME suppliers are
environmentalist sighs and says, “What a matter, she says. “Marketing is what keeps not in the real world—they are in Alice
sight.” The oil driller sighs and says, “What pumping new life into the veins of the in Wonderland. HME suppliers have to
a site.” In other words, beauty is in the eye business. I know of no attorneys who have adhere to rules that do not apply in the
of the beholder. built HME businesses. Entrepreneurs and real world.”
The same is true when it comes to look- creative people build businesses.” As Jeff says: “What a site.”
ing at marketing programs. As Colette says: “What a sight.” In this special presentation for Home-
Colette Weil is an expert in marketing. Jeff Baird is a health care attorney. For Care, Colette the marketing expert poses
For years, she has advised HME providers years, he has advised HME providers on real-world marketing scenarios, and Jeff
on how to grow their businesses by imple- how to implement marketing programs the health care attorney responds with
menting innovative marketing programs. legally and, in doing so, how to avoid his thoughts. As you will see, they’re both
According to Colette, marketing is the legal pitfalls. right on.
Colette Weil, MBA, is managing director Jeffrey S. Baird, Esq., is chairman of the Health Care Group at Brown
of Summit Marketing, Mill Valley, Calif., & Fortunato, P.C., a law ﬁrm based in Amarillo, Texas. He represents
a consulting ﬁrm specializing in strategic pharmacies, infusion companies, home medical equipment companies
marketing and program development. and other health care providers throughout the United States. Baird is
You can reach her at cweil@summitm- board-certiﬁed in health law by the Texas Board of Legal Specialization.
ktg.com or 415/388-5303. He can be reached at 806/345-6320 or firstname.lastname@example.org.
www.homecaremag.com | JULY 2010 | 15
Scenario 1 Marketing Direct to
Your Own Beneﬁciaries
“What a sight.”
Colette: Commonly accepted marketing wisdom is that
your current customers are your “best value” customers and
offer the fastest way to increase revenue. They are cheapest
to market to because they are already using you; you don’t
have to spend money ﬁnding them. They will buy more from
you in the average sale or obtain other Medicare items from
you if they have the choice. They stay with you longer, have
a higher average customer lifetime value, and they will refer
others to you.
Here are some programs that can directly leverage your
N You make customer service calls using a script to inform
existing customers of other items that are commonly used
with their primary equipment.
N You send direct mail describing companion items to cus-
tomers’ primary equipment.
N You email questions and answers about common
N Your delivery technician leaves information on common
items used with primary DME that is delivered. The tech
sells from the truck, and FAQs are also provided.
N A catalog is mailed by customer service or delivered by
Jeff: I am comfortable with this scenario. This scenario
is partially governed by the federal telephone solicitation
statute, which states that an HME supplier may not contact a
Medicare beneﬁciary by phone regarding the furnishing of a
covered item unless:
1) The beneficiary has given written permission for the
2) The supplier has previously provided the covered item to
the beneﬁciary and the supplier is contacting the beneﬁciary
regarding the covered item; or An HME supplier that bills Medicare/Medicaid is restricted
3) If the telephone contact is regarding the furnishing of the in how deep a discount (off the Medicare allowable) it can
covered item other than an item already furnished to the ben- sell a covered item to a cash customer. The standard rule is
eﬁciary, the supplier has furnished at least one covered item that you cannot bill Medicare more that your usual charge,
to the beneﬁciary during the preceding 15 months. which translates to median, or average. There’s no clear line.
N Colette’s ﬁrst bullet falls within an exception to the tele- But common thinking is that you cannot discount more than
phone solicitation statute. Looking at the second and third 17 percent below the Medicare allowable on a covered item.
bullets, there is no prohibition against mailing literature Special sales, discounts and promotions are just that: special,
(“snail mail”) to a beneﬁciary. It is also permissible to email not usual and customary.
information to beneﬁciaries so long as the requirements of the Here are some examples:
federal Can-Spam Act are met (e.g., giving the beneﬁciary the Example 1: 20% off all bath safety, commodes and related
right to opt out). items for the month of June. This program is run three times
There are no prohibitions against the examples in the fourth a year.
and ﬁfth bullets. Example 2: A holiday special 20% coupon (email, print) off
of all power lift chairs
Scenario 2 Discounts and Example 3: 15-20% off transport wheelchairs and special
Cash Sales Example 4: 20% off of a speciﬁc model of a product
Colette: Nearly everyone uses the Internet to research Example 5: A clearance corner where all items are 40% off
products and pricing. Medical equipment and supplies are Example 6: An “item of the week” at 30% off
popular Internet items. Internet companies, which do not bill Example 7: A free pillow with an over-the-bed table
Medicare/Medicaid, sell at deep discounts. Internet compa-
nies invest in search engine marketing and some print and Jeff: In considering these scenarios, we need to look at CMS/
mail catalogs. Ofﬁce of Inspector General guidance on giving cash discounts
16 | JULY 2010 | www.homecaremag.com
increased costs of serving Medicare and Medicaid beneﬁcia-
ries. The proposed rules would include charges of afﬁliated
companies into the calculation of a supplier’s usual charges.
CMS declined to promulgate the proposed rules into a ﬁ-
nal rule (72 FR 33430, 33432, June 18, 2007). Therefore, while
there is no ﬁnal rule to give the industry absolute guidance,
the proposed rules give the clearest indication of the govern-
ment’s thoughts toward this issue.
The federal beneﬁciary inducement statute imposes civil
monetary penalties upon a person or entity that offers or gives
remuneration to any Medicare beneficiary (or beneficiary
under a state health care program) that the offeror knows, or
should know, is likely to inﬂuence the recipient to order an item
for which payment may be made under a federal or state health
care program. In the preamble to the regulations implementing
this provision, the OIG stated that the statute does not prohibit
the giving of incentives that are of “nominal value.”
The OIG deﬁnes “nominal value” as no more than $10 per
item or $50 in the aggregate to any one beneﬁciary on an an-
nual basis. “Nominal value” is based on the retail purchase
price of the item.
Under the Medicare anti-kickback statute, it is a felony for
a person or entity to knowingly or willfully solicit or receive
any remuneration in return for referring an individual for the
furnishing or arranging for the furnishing of any item for which
payment may be made under a federal health care program,
or in return for purchasing, leasing, or arranging for or recom-
mending the purchasing or leasing of any item for which pay-
ment may be made under federal health care programs.
Likewise, it is a felony for a person or entity to knowingly
or willfully offer or pay any remuneration to induce a person
to refer a person for the furnishing or arranging for the fur-
nishing of any item for which payment may be made under a
federal health care program, or the purchase or lease or the
recommendation of the purchase or lease of any item for which
payment may be made under a federal health care program.
on covered items, the beneﬁciary inducement statute and the These prohibitions do not apply to any amount paid by an
Medicare anti-kickback statute. employer to an employee.
An HME supplier is prohibited from charging Medicare With these guidelines in mind, let’s look at the scenarios
substantially in excess of the company’s usual charges un- Colette has posed.
less there is good cause. (See 42 U.S.C. 1320a-7(b)(6)(A) and Example 1: This is low risk. Twenty percent is close to 17 per-
42 CFR 1001.701(a)(1).) The current regulations do not give cent. If the supplier is ever questioned, it will need to be able to
any guidance on what constitutes “substantially in excess” or produce evidence that selling an item at a 20 percent discount
“usual charges.” An HME supplier that violates this prohibi- off the Medicare allowable is justiﬁed by the cost savings result-
tion is subject to exclusion from federal health care programs ing from not having to deal with Medicare. In addition, some
(42 CFR 1001.701(a)). of the items may not be covered by Medicare.
While there have been some efforts by the OIG to deﬁne Examples 2, 3 and 4: The same goes here as in the response
“substantially in excess” and “usual charges,” no ﬁnal rule for Example 1.
has been issued. The most recently proposed rules contem- Example 5: I am OK with this so long as once the product
plate the “usual charge” to be either the average or median is gone (“cleared out”), then the supplier does not start selling
of the supplier’s charges to payers other than Medicare and the product again.
some others. (See generally 68 FR 53939, Sept. 15, 2003.) Under Example 6: This is aggressive. So long as the supplier follows
these proposed rules, an HME supplier’s usual charge should the guidelines for Example 1, then the chances of an enforce-
not be less than 83 percent of the Medicare fee schedule ment action brought against the company are not high. But
amount (i.e., up to a 17 percent discount from the Medicare I would like to see an item be an “item of the week” only one
fee schedule). time during the year.
There would be an exception for good cause, which would Example 7: The supplier can advertise that it will give a free
allow a supplier’s usual charges to be less than 83 percent of pillow so long as the pillow has a retail value of $10 or less. If the
the Medicare fee schedule, if the supplier can prove unusual pillow has a retail value greater than $10, then the supplier can
circumstances requiring additional time, effort or expense, or give the pillow to the customer after the fact, that is, after the
www.homecaremag.com | JULY 2010 | 17
customer has made the decision to purchase the over-the-bed Example 2: A vacation getaway drawing features ADLs and
table. By giving the pillow “after the fact,” then the free pillow mobility with a free trip for two to a local casino (one night and
is not used as an inducement. (This answer presumes that the three meals, plus a beauty salon visit) valued at $300.
over-the-bed table is a Medicare-covered item. If it is not, then Example 3: A “Watch ’n Relax” Father’s Day or Mother’s Day
the beneﬁciary inducement statute does not apply.) giveaway includes a drawing for an HDTV valued at $2,000.
Your HME company uses a sticky note drawing entry on the
Scenario 3 Events, Promotions, local newspaper (which is expensive, but it works).
Example 4: The HME company hosts seniors or caregiver
Contests, Giveaways meetings, and provides food, pens and pads, with the net cost
Colette: The purpose of marketing tools is to engage the at $7 per person.
consumer, get them into your store, get their email or snail
mail address and sell to them. They involve advertising and Jeff: I am comfortable with Example 1. The card that the
promotion. Once again, restrictions apply to the Medicare au- customer ﬁlls out should say that the customer gives the HME
dience in that you cannot spend more than $10 retail or $50 supplier permission to call the customer. It is important that
total per year per beneﬁciary on incentives. the supplier not go overboard in conducting the grand opening.
Seniors like coupons, contests, giveaways, free food, vaca- For example, a one-week grand opening would be proper, while
tions and other promotional angles. Keep in mind that all a one-month grand opening would be too aggressive.
prizes and contest values are divided by the total number Example 2: I am also comfortable with this as long as the
of participants. supplier offers a vacation getaway drawing no more than once
So, if a drawing for a vacation getaway costs you $300 and a year. It is important that the drawing be open to all those
200 people participate in the drawing, that comes out to $1.50 who walk through the company’s front door.
per person. But you may also be spending $2,000 or more to Example 3: This giveaway is aggressive, and it makes me
promote the giveaway. feel uncomfortable. Giving away an HDTV for a special event
Example 1: An HME company has a grand opening (or re- such as a grand opening is justiﬁed. However, “Mother’s Day”
opening or celebration jubilee), where manufacturers donate and “Father’s Day” are not that special (each happens once a
giveaway prizes (such as a lift chair, TV or iPad). People must year). I am not saying that giving away an HDTV for Mother’s/
enter the drawing (no restrictions) and give their name and Father’s Day would trigger an enforcement action, but the risk
email with permission given to the provider to contact them. is there.
There is complimentary transportation for senior communi- Example 4: I am comfortable with HME companies host-
ties, a wine/appetizer social for referral sources and door prizes ing such meetings. However, let’s not do this every month—
and free food daily. perhaps once every three months.
“What a site.”
18 | JULY 2010 | www.homecaremag.com