Fraud Alert Issued: Prohibited Telemarketing by Health Care Suppliers

By Kathryn L. Holloman and Corrine Parver, Esq

On March 3, 2003, the Department of Health and Human Services’ Office of the Inspector General issued a Special Fraud Alert regarding unsolicited telephone contacts with Medicare beneficiaries. Despite a ban on such contacts by the Social Security Act, the Department found widespread violations of the Act. Therefore, the Special Fraud Alert was issued. Because teleservices and marketing firms may be affected by the Act, it is important to familiarize yourself with this important law that is receiving so much attention.

Despite the statutory prohibition against unsolicited telephone contacts set forth in Section 1834(a)(17) of the Social Security Act, the Office of the Inspector General (OIG) Alert noted that some Durable Medical Equipment (DME) suppliers were using independent marketing firms to make unsolicited telephone calls to Medicare beneficiaries. In response to this lack of compliance to the statutory provisions, on March 3, 2003, the OIG issued its Alert regarding telemarketing by DME suppliers.

Three provisions of the Alert follow: First, the Alert reaffirms that DME suppliers are prohibited from making unsolicited telephone contact with Medicare beneficiaries. Then, it expressly prohibits both unsolicited telemarketing conducted directly by a DME supplier and unsolicited telemarketing conducted by another party on behalf of the DME supplier, except in the three circumstances set forth in Section 1824(a)(17)(A) of the Social Security Act. The OIG based its decision to apply the prohibition to marketing agencies on the theory that DME suppliers cannot do indirectly that which they cannot do directly. The Alert, therefore, expands the statutory language of Section 1834(a)(17) to apply to unsolicited telephone contacts by independent marketing agencies as well as by DME suppliers.

Second, the Alert also holds DME suppliers responsible for verifying that both the marketing activities conducted by, and information purchased from third parties do not involve impermissible activities. Specifically, DME suppliers are required to verify that information purchased from third parties was neither obtained nor derived from a prohibited activity. DME suppliers must also confirm that prohibited activities are not involved in marketing activities conducted by third parties with whom the DME supplier contracts or otherwise does business. The Alert expands the scope of Section 1834(a)(17) in that no language in the statute addresses these issues.

Finally, the Alert states that both DME suppliers and telemarketers are potentially liable for false claims for payments generated by impermissible solicitations. Claims for items or services that are generated by prohibited telephone solicitations are considered false claims. Both the DME supplier and the telemarketer are subject to criminal, civil, and administrative penalties for causing the filing of false claims. The Alert, therefore, expands the prohibition against payments for false claims and the potential penalties for filing such claims applying to claims generated by independent marketing agencies.

Details about the Social Security Act: Pursuant to Section 1834(a)(17)(A), suppliers of Medicare-covered items may not make unsolicited telephone calls to Medicare beneficiaries regarding the furnishing of covered items, except in three specific circumstances:

  • The beneficiary has given the supplier written permission to make contact by telephone;
  • The contact regards an item the supplier has already furnished to the beneficiary; or
  • The supplier has furnished the beneficiary with at least one covered item during the fifteen-month period preceding the date the supplier contacts the beneficiary.

If a supplier improperly contacts a beneficiary, Section 1834(a)(17)(B) prohibits Medicare payments for items furnished subsequent to the unsolicited contact. Specifically, the statute provides that no payment shall be made for any item furnished by a supplier that knowingly contacted a beneficiary in violation of the law. The OIG classifies these claims for payment as false; violators will be potentially subject to criminal, civil, and administrative penalties.

Summary: Section 1834(a)(17) of the Social Security Act prohibits both unsolicited telephone contacts to Medicare beneficiaries by suppliers of Medicare-covered items, and payment for items furnished subsequent to prohibited contacts. The Alert expands these prohibitions by applying them to independent marketing agencies working on behalf of DME suppliers. It also requires DME suppliers to verify that information purchased from third parties and marketing activities which are conducted by such parties do not involve prohibited activities.

Ms. Holloman, a second year law student at University of North Carolina Law School, was a Summer Associate at Dickstein Shapiro in July 2003. Ms. Parver is a partner in the Health Law Services Practice of Dickstein Shapiro Morin & Oshinsky LLP, a Washington, D.C.-based law firm. She may be reached at 202-775-4728 or parverc@dsmo.com.

[From theĀ Summer 2003 issue of AnswerStat magazine]