Applying Technology to the Business of Health Care

New Jersey Law Journal

APRIL 30, 2012  

Applying Technology to the Business of Health Care

BY JONATHAN BICK    Bick is of counsel at Brach Eichler LLC in Roseland. He is also an adjunct professor at Pace and Rutgers law schools, and the author of 101 Things You Need to Know About Internet Law (Random House 2000).

In recent years, health-care analysts and advocates of the Internet have raised expectations for gaining significant cost savings from applying e-commerce to health-care related activities, including medical service and supply procurement. The health-care services and products industry could significantly enhance its ability to deliver quality products and services to consumers by using e-commerce to improve the information associated with the supply chain.

Last March, the United States Department of Health and Human Services (DHHS) issued Advisory Opinion 12- 02, which dramatically expands the ability of health-care providers to engage in e-commerce.

The application of e-commerce to medical goods and services is likely to result in three significant benefits. First, it could result in e-commerce providers becoming a trusted source of health-care products and services. Second, it could improve customer satisfaction by allowing people to browse and purchase products whenever they want. Third, it could allow direct selling to customers and businesses, cut out the middleman, streamline business processes, reduce operating expenses and increase profits.

The DHHS Opinion allows an Internet site owner/operator to display coupons and advertising from health-care providers, including but not limited to medical practitioners, hospitals, health-care systems, insurance companies, drug companies and pharmacies. This Opinion expands medical e-commerce while simultaneously reducing the legal liability for engaging in medical e-commerce by seemingly barring the imposition of certain penalties and sanctions.

Distributors of medical services and goods, particularly medical equipment providers, have started using e-commerce. Those users have reported sustained contribution to their bot tom line in the form of cost savings or higher revenues. Additionally they have experienced increased profitability. The medical services and goods e-commerce consortiums have brought together Baxter, Johnson & Johnson, Abbott Laboratories, Medtronic and GE Medical Systems, as well as McKesson, Cardinal, Owens and Minor, and Fisher Scientific.

Previously, it was widely believed that hosting an Internet site that al-lowed the posting of discount coupons, and certain advertising for health-care providers, suppliers and other entities, would result in civil monetary penalties under Section 1128A(a)(7) of the Social Security Act, as this section relates to the commission of acts described in Section 1128B(b) of the Social Security Act, the federal anti-kickback statute. Alternatively, it would constitute grounds for sanctions under the civil monetary penalty provision prohibiting inducements to beneficiaries, Section 1128A(a)(5) of the Social Security Act.

Traditionally, buyers of medical goods and services cooperate to negotiate discounts in exchange for larger order volumes. This cooperation allows for volume discounts based on multiple buyers and a single supplier.

Until now, technical difficulties have suppressed the use of e-commerce for medical services and goods. In particular, health-care markets traditionally pre-negotiate discounts on medical goods and services, which are difficult to integrate into existing e-commerce software systems.

This difficulty arises because traditional Internet e-commerce software systems cannot accommodate special arrangements, such as prior negotiations. Rather, the systems are designed to facilitate transactions based on the item for sale.

In the past, pre-negotiated medical contracts were associated with the buyer and not just the item for sale. The DHHS Opinion allows discounts for sale times, which in turn allow medical services and goods providers to use of traditional e-commerce software systems for facilitating the sales of medical goods and services.

DHHS expressly considered a trans-action, wherein an Internet site owner/ operator would display downloadable coupons for health-care items and services, and display advertising on behalf of individuals and entities operating in the health-care industry. These e-coupon and e-advertisements would be generated as a result of a contract between the Internet site owner/operator and health-care providers and suppliers, including physicians who desired to post such coupons and advertisements.

In particular, the DHHS Opinion would allow coupons that would include discounts on items eligible for reimbursement by federal health-care programs. However, the advertisement could not offer “free service” coupons, but only coupons for a price reduction for goods or services. The DHHS Opinion would also allow advertisements of various forms, including both banners and pop-ups.

The advertisements could appear on both the Internet owner/operator’s sites, as well as the Internet site of a third party, including Internet sites that resulted from a specific search. For example, if a patient searches the site for coupons in a particular ZIP code, the Opinion allows advertisements linked by an advertiser to a ZIP code to appear. Additionally, advertisers use links to their own Internet sites in the advertisements.

The DHHS Opinion found that providers posting coupons on Internet sites would have the option to discriminate among Internet site users, to allow pre-negotiated discounts. It also would allow the use of coupons and other discount-related advertising, depending on the level of participation by a buyer or a buying group. This bifurcated discounting system would be applicable to goods and services offered by health-care practitioners, hospitals and health systems, insurance companies, drug companies, pharmacies and others.

The DHHS Opinion considered both the beneficiary inducement statute and the Federal anti-kickback statute. It stated that e-commerce related marketing and advertising presented a low risk of fraud or abuse for several reasons.

First, the Internet owner/provider of the medical e-commerce site contemplated in the DHHS Opinion is not a health-care provider or supplier, and as a result, the transactions considered by the DHHS Opinion were distinguishable from Internet transactions involving marketing by health-care providers and suppliers. Second, the payments from the providers of medical services and goods are for a set fee and do not depend on Internet site users using coupons or obtaining services from the providers who pay for the advertisements. Third, all the advertising would be directed to customers who chose to receive it rather than the general public. Fourth, the Internet owner/operator of the medical e-commerce site would not be improperly influenced to render medically unnecessary services or inappropriate services based on the customer’s possession of the coupon.

It should be noted that the medical e-commerce transactions allowed by the DHHS Opinion are analogous to the traditional medical commerce trans-actions that are allowed for the general-circulation print media. Such traditional medical commerce transactions normally do not raise federal anti-kickback statute concerns. Furthermore, the accuracy and non-deceptive requirements set forth in the DHHS Opinion are nearly identical to those associated with print advertising requirements for traditional medical commerce.