Point /Counterpoint:: Pushing Your Marketing Efforts Without Falling Into a Legal Pit


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Colette Weil, MBA, and Jeffrey Baird, Esq., square off on how to make home medical equipment marketing programs work through the legal maze.

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Point /Counterpoint:: Pushing Your Marketing Efforts Without Falling Into a Legal Pit

  1. 1. 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 JULY 2010 DEVASTATING Round 1 Bid Rates p.10 Point Counterpoint with Colette Weil and Jeff Baird Pushing Your Marketing Efforts without Falling Into a Legal Pit p.14 Taking SpecialCare of Travelers p. 38 The Official Magazine of Medtrade
  2. 2. Point Counterp “What a sight.” “What a site.” 14 | JULY 2010 | www.homecaremag.com
  3. 3. Pushing Your Marketing point: Efforts without Falling Into a Legal Pit BY COLETTE WEIL, MBA AND JEFFERY S. BAIRD, ESQ. F 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 jbaird@bf-law.com. www.homecaremag.com | JULY 2010 | 15
  4. 4. 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 current base: 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 products. 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 the tech. 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 contact; or 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 clearance wheelchairs 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
  5. 5. 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
  6. 6. 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