GUEST BLOGGER
Ron Cresswell, J.D., CFE
ACFE Research Specialist

Traditionally, telehealth has been used to treat patients who cannot consult with a physician in an office setting. Such patients often live in rural areas that lack nearby physicians. Technological advances have led to new types of telehealth services, which are now used for public education, administrative functions and other purposes. Additionally, as the coronavirus pandemic demonstrates, the demand for telehealth services will continue to grow because these services can be more convenient and safe. These factors have caused rapid growth in the telehealth industry, as well as new types of fraud.

In recent years, there have been many high-profile fraud cases against telehealth companies. Here’s what fraud examiners should know about the telehealth industry along with two of the most common fraud schemes involving telehealth companies.

Telehealth and telemedicine

Although they are sometimes used interchangeably, the terms telehealth and telemedicine have different meanings. Telehealth is a broad term that refers to the use of telecommunications technology and electronic information to provide remote health-related services. Such services can include clinical medical care, health education for patients or providers, health administration and public health. Telehealth uses technology such as the internet, video conferencing, streaming video, imaging and other electronic communications.

Telemedicine is a narrow term that is limited to remote clinical services, such as diagnosing and monitoring patients. Therefore, if a physician uses video conferences to diagnose remote patients and monitor their progress, the physician is engaged in telemedicine. If a city uses streaming video on its website to educate the public about COVID-19, the city is engaged in telehealth but not telemedicine.

Telehealth companies

A telehealth company pays physicians and other health care providers to furnish telehealth services to patients. Providers might be paid a fee for each consultation, or they might be paid on an hourly or yearly basis. Telehealth companies generally make money by seeking reimbursement from a patient’s private medical insurer or the government. Some telehealth companies offer membership programs that provide telehealth services to their members in exchange for a monthly or yearly fee.

Telehealth fraud schemes

As a growing and underregulated industry, telehealth is ripe for fraud. Like other types of fraud, telehealth fraud schemes are varied and subject to constant change. However, recent events indicate that regulators are currently focused on two major types of telehealth fraud schemes.

Durable Medical Equipment (DME) Schemes

DME schemes are a traditional health care fraud scheme in which health care providers and DME companies conspire to bill the government or private insurers for medically unnecessary braces, wheelchairs or other medical equipment.

In 2019, for example, the U.S. Department of Justice (DOJ) announced criminal charges in connection with a massive health care fraud scheme that resulted in more than $1.2 billion in losses to the federal government. The scheme involved several international call centers that recruited elderly and disabled patients in the U.S. to receive medically unnecessary back, knee, shoulder and wrist braces. The call centers paid illegal bribes and kickbacks to five telehealth companies, which employed physicians to prescribe the braces after brief telephone consultations with the patients. The call centers then sold the orders to dozens of DME companies, who shipped the braces to the patients and filed fraudulent claims for Medicare reimbursement.

As illustrated in this case, telehealth companies can be very useful in these schemes. A physician working for the telehealth company can prescribe the unnecessary equipment after a brief telephone or video consultation with the patient, which is faster and less costly than an office visit. The telehealth company then receives a kickback from the DME company.

Compounding Pharmacy Schemes

Compounding pharmacies combine, mix or alter the ingredients of drugs to create a unique drug for one particular patient. There are many fraudulent reimbursement schemes involving compounded drugs because they tend to be expensive. Compounding pharmacy schemes are similar to DME schemes. Generally, a compounding company conspires with a telehealth company to prescribe medically unnecessary compounded drugs to patients. The compounding company then bills the government or private insurers for the unnecessary drugs and pays kickbacks to the telehealth company. In 2018, the CEO of a telehealth company was criminally charged in connection with a $1 billion-dollar compounding pharmacy scheme.

As telehealth services proliferate, telehealth fraud schemes will continue to evolve. The schemes of next year will not look like the schemes of today. Therefore, fraud examiners who work in the health care industry must stay informed about new developments in telehealth and the latest regulatory actions.

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