Internet leads: Use them, but be careful

Saturday, January 31, 2009

The HME industry is going through a transformation - a paradigm shift. CMS is paying less for products, expecting more from suppliers and shoving financial responsibility back on the shoulders of customers.  As a result, suppliers need to cut costs, embrace technology and compete on the basis of price and services.

The purchase of Internet leads is a cost-effective way to market. Here is how it works: An Internet lead company owns a number of Web sites that cater to specific medical needs. A prospective customer clicks onto the Web site and checks the box that says that somebody can contact him about certain products. The Internet lead company sells the “leads” to an HME supplier. The supplier contacts the leads about its products and services. The supplier pays the Internet lead company, usually on a “per lead” basis.

Conceptually, this arrangement is legally permissible. However, the supplier and the Internet lead company need to be careful.

The Internet lead company cannot be a “covered entity” (i.e. a healthcare provider) as defined under HIPAA. If the Internet lead company is a covered entity, then it will be selling “protected health information” for purposes of marketing. This is a violation of HIPAA.

It is one thing to purchase leads; it is something else for the supplier to pay money for referrals. The former is legally acceptable; the latter may violate the Medicare/Medicaid anti-kickback statute. If the lead contains basic information (name, contact information and prospective customer’s interest in a product), then the risk of enforcement action is low. On the other hand, if the purchased lead contains health and payer-specific information then, depending on the content and volume of the information, the arrangement may be construed as the purchase of a referral, not the purchase of a lead. This is not to say that an Internet lead company cannot forward to the supplier information in addition to the prospective customer’s “name, rank and serial number”; however, the parties need to be careful about how much additional information is included in the lead.

What can the supplier do once it obtains the leads? Can the supplier pick up the phone and call the leads or must the supplier mail information to the leads? The answer depends on the consent that the prospective customer initially gave to the Internet lead company. The telephone solicitation statute prohibits an HME supplier from “cold calling” Medicare beneficiaries. If the evidence shows that the prospective customer consented to being called and if the consent can be documented, then if the supplier calls the leads, it is unlikely that the government will assert a violation of the solicitation statue.

This brings us to OIG Advisory Opinion 08-19, issued Oct. 29, 2008. This is the first time that the OIG has directly addressed the purchase of Internet leads. According to the advisory, the Internet lead company would sell leads and be paid on a “per lead” basis. The OIG stated that the following factors led it to conclude that the proposed arrangement would not trigger an enforcement action under the anti-kickback statute:

- The Internet lead company is not a healthcare provider and is not affiliated with the healthcare industry. The lead company will not collect health information such as payer information, medical history and diagnosis.

- The advertising by the Internet lead company will not target federal healthcare program beneficiaries; the Web site will be publicly accessible and use by potential patients will be unrestricted.

- Compensation to the Internet lead company will not depend on whether the potential customer decides to purchase something from the provider/supplier.

- The Internet lead company will not steer patients to particular providers/ suppliers.

The advisory does not address the HIPAA and telephone solicitation issues discussed above. It does, however, set out the OIG’s guidelines as to when an Internet lead purchase arrangement will likely not violate the anti-kickback statute. An arrangement is not necessarily risky if the Internet lead company provides more than basic information about the prospective customer. But if additional information is provided, then the parties need to avoid crossing the line where the supplier is no longer purchasing leads, but it’s paying for referrals.

Jeffrey Baird is chairman of the Health Care Group at Brown & Fortunato, a law firm based in Amarillo, Texas. Reach him at 806-345-6320 or