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Health Care Fraud Involving Home Sleep Studies: What Do California Doctors and Service Providers Need to Know?

A recent trend in health care fraud enforcement involves private insurers and the federal government targeting doctors who recommend patients for home sleep studies (HSS) and HSS service providers. Currently, the insurance companies and federal agencies including the U.S. Department of Justice (DOJ) and the U.S. Department of Health and Human Services’ Office of Inspector General (OIG) are primarily targeting doctors and home sleep study service providers in Southern California; however, doctors and service providers in other jurisdictions are at risk as well.

The current audits and investigations targeting doctors who recommend home sleep studies are primarily focused on three issues: (i) lack of medical necessity, (ii) illegal payments to patients, and (iii) unlawful use of patient information (which can be prosecuted federally as aggravated identity theft). Audits and investigations targeting home sleep study service providers are focused on these issues as well. The private insurers that are conducting audits include:

  • Aetna
  • Anthem
  • Cigna
  • United

For doctors who recommend home sleep studies (or who have recommended home sleep studies in the past), it is important to be aware of these ongoing enforcement efforts, as the consequences of facing a health care fraud audit or investigation can be severe. Any necessary remedial measures should be undertaken immediately; and, for doctors who are currently being targeted, engaging experienced health care fraud defense counsel will be critical to avoiding costly penalties. Similarly, for companies that conduct home sleep studies, taking proactive measures to address any potential issues is likely to be the most-effective way to avoid criminal prosecution.

Our federal health care fraud lawyers have a proven track record of success in these types of matters. We are available 24/7 to speak with prospective clients, and we can provide representation on an emergency basis if necessary. For a free and confidential assessment, call (214) 469-22171 now.

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Dr. Nick Oberheiden
Dr. Nick Oberheiden

Attorney-at-Law & Founder

Amanda Marshall
Amanda Marshall

Former U.S. Attorney

Local Counsel

Lynette S. Byrd
Lynette S. Byrd

Former Federal Prosecutor

Partner

Aaron L. Wiley
Aaron L. Wiley

Former Federal Prosecutor

Local Counsel

Subodh Chandra
Subodh Chandra

Former Federal Prosecutor

Local Counsel

Elizabeth K. Stepp
Elizabeth K. Stepp

Partner

Roger Bach
Roger Bach
(Non-Lawyer)

Former Special Agent, OIG

Dennis A. Wichern
Dennis A. Wichern
(Non-Lawyer)

Former Special Agent-in-Charge

Chris Quick
Chris Quick
(Non-Lawyer)

Former Special Agent, FBI

Kevin M. Sheridan
Kevin M. Sheridan
(Non-Lawyer)

Retired Supervisory Special Agent, FBI

Ray Yuen
Ray Yuen
(Non-Lawyer)

Former Supervisory Special Agent, FBI

Gamal Abdel-Hafiz
Gamal Abdel-Hafiz
(Non-Lawyer)

Former Supervisory Special Agent, FBI

5 Red Flags for Health Insurance Auditors and Federal Health Care Fraud Investigators

Now that private health insurers and federal authorities have identified compliance issues with home sleep studies, auditors and investigators are now focusing much of their effort on targeting doctors and service providers when certain “red flags” are present. However, as with most “red flags” for health care fraud, none of the factors listed below inherently suggest fraudulent or illegal activity. Rather, these red flags are simply common factors among many (but certainly not all) cases of home sleep study fraud:

  • Home Sleep Studies Involving Mandibular Advancement Devices (MAD) – Mandibular advancement devices (MAD) are oral devices resembling sports mouthpieces that are designed to prevent the collapse of the upper airway during sleep. Also known as mandibular advancement splints (MAS) and mandibular repositioning appliances (MRA), it is common for patients who have been prescribed these devices to receive home sleep study recommendations in order to test the devices’ effectiveness. However, the medical necessity of such testing is often questioned. 
  • Home Sleep Studies Involving myTAP, TAP and Other Oral Appliances – Patients using myTAP, TAP, and other oral appliances which may or may not be technically classified as MAD will often receive sleep study recommendations as well. As discussed in more detail below, insurance auditors and federal agents will often question the medical necessity of home sleep studies for patients who may need or who are currently using these devices, with this line of inquiry largely being driven by the high reimbursement rates for these studies. 
  • Home Sleep Apnea Testing (HSAT) – Home sleep apnea testing (HSAT) is one example of a home sleep study with a high reimbursement rate. While over-the-counter HSAT devices are available, prescription options are also commonly used, and the combination of these factors has led to close examination of the medical need for insurance-reimbursed and federal program-reimbursed testing. 
  • Dental Service Agreements with Doctors and Home Sleep Study Service Providers – Similar to virtually all other types of agreements between health care service providers, dental service agreements with doctors and home sleep study companies raise questions under the federal Anti-Kickback Statute. If not structured appropriately, dental service agreements between dental service organizations (DSO), doctors, and home sleep study service providers can violate the Anti-Kickback Statute’s prohibitions, and such violations can expose all parties to civil or criminal prosecution. 
  • High Volume of Home Sleep Study Recommendations and Referrals – Health insurance companies and federal authorities are increasingly relying on data analytics to identify targets for health care fraud audits and investigations. One data point that will almost invariably raise a red flag is an unusually-high number of billings for specific services (i.e. home sleep studies) compared to other providers in your area. If a significant portion of your practice involves home sleep study, this does not necessarily mean that the volume of your practice is indicative of fraud. However, it does most likely mean that you will be forced to defend the volume of your home sleep study recommendations and referrals in a health care fraud audit or investigation. 

Health Care Fraud Allegations Linked to Home Health Studies (Including Home Sleep Apnea Testing (HSAT))

Regardless of the specific issue that triggers an insurance audit or federal investigation, in most cases, auditors and investigators are targeting allegations of:

1. Ordering Home Sleep Studies that are Not Medically Necessary

Medical necessity is a key factor for both private insurance coverage and federal health care benefit program eligibility. If a home sleep study does not meet the applicable criteria for medical necessity, then billing for the study is going to trigger allegations of health care fraud. For example, the Centers for Medicare and Medicaid Services’ (CMS) general guidance on home sleep studies states:

“Medicare Part B (Medical Insurance) covers Type I, II, III, and IV sleep tests and devices if you have clinical signs and symptoms of sleep apnea. . . . Your doctor or other health care provider may recommend you get services more often than Medicare covers. Or, they may recommend services that Medicare doesn’t cover. If this happens, you may have to pay some or all of the costs. . . . Medicare only covers Type I tests if they’re done in a sleep lab facility. Your doctor must order the test.”

With regard to sleep apnea in particular, Chapter 15, Section 70 of the Medicare Benefit Policy Manual also states that: 

“Ordinarily, a single polysomnogram and electroencephalogram (EEG) can diagnose sleep apnea. If more than one such testing session is claimed . . . persuasive medical evidence justifying the medical necessity for the additional tests [will be required].”

In other words, where one EEG is sufficient to diagnose a patient’s condition, any home sleep study is likely to be deemed medically unnecessary under the Medicare regulations. Aetna, Anthem, Cigna, United, and other private health insurers generally adhere to similar types of policies regarding medical necessity. If a doctor orders a home sleep study that does not meet the threshold requirements for medical necessity, then billing the study to a private insurer, Medicare, or another federal health care benefit program can potentially create exposure for both the physician and the home sleep study service provider. 

2. Engaging in Illegal Kickback and Referral Fee Transactions with Patients and Other Providers

A significant number of home sleep study health care fraud audits and investigations have involved allegations of dentists, doctors, and testing companies paying patients for their participation. When a home sleep study is reimbursed by a federal government program or through private insurance, using a portion of the reimbursement (either directly or indirectly) to compensate the patient constitutes an illegal kickback – and this transaction can create legal exposure for both the provider and the patient. 

Referral fee arrangements between dentists, DSOs, doctors, home sleep testing companies, and other health care providers can trigger liability under the Anti-Kickback Statute as well. Unless a referral fee arrangement related to home sleep studies is specifically structured to fall within one of the Anti-Kickback Statute’s “safe harbors,” the arrangement is a potential liability for all parties involved. 

3. Making Unlawful Use of Patient Information

Making unauthorized use of patient information obtained during a home sleep study and utilizing patients’ medical records to bill for medically-unnecessary sleep testing can both potentially be charged as aggravated identity theft under federal law (and potentially under state identity theft laws as well). At the federal level, the crime of aggravated identity theft is established by 18 U.S.C. § 1028A(a)(1):

“Whoever, during and in relation to any felony violation enumerated in subsection (c), knowingly transfers, possesses, or uses, without lawful authority, a means of identification of another person shall, in addition to the punishment provided for such felony, be sentenced to a term of imprisonment of 2 years.”

“Felony violation[s] enumerated in subsection (c),” include all forms of health care fraud, as well as bank fraud, mail fraud, wire fraud, and various other crimes that are often prosecuted in connection with health care-related offenses.

Speak with a Federal Health Care Fraud Defense Lawyer in Confidence

If you would like more information about the legal risks associated with home sleep studies and related referral arrangements, or if you are currently being targeted in a health care fraud audit or investigation, we encourage you to contact us immediately. To speak with an attorney on our federal health care fraud team in confidence, call 214-692-2171 or inquire online now. 

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