HIPAA and the Promotion of Cash Sales

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Increasingly, DME suppliers are seeking to diversify their income stream by selling products for cash. Assume that XYZ Medical, Inc. has a PTAN and its principal business is to provide Medicare-covered items on an assigned basis. In an effort to lessen its dependence on Medicare, assume that XYZ wants to promote, to its existing customers, a line of cash-only “Cadillac” products. In doing so, assume that XYZ does not set up a separate legal entity for the cash sales – but rather – XYZ sells cash items under its existing corporate entity. In other words, XYZ’s Part B business and cash sales business are under the same Tax ID #. The question is whether HIPAA allows XYZ to promote its cash products to its existing customers.

Generally, unless an exception applies, covered entities are prohibited from “using” or “disclosing” a patient’s PHI unless the covered entity obtains a HIPAA compliant authorization for such disclosure. Prohibitions on use or disclosure of PHI extend to using or disclosing PHI for marketing purposes. Marketing is defined as any communication “about a product or service that encourages recipients of the communication to purchase or use the product or service.” The law excepts the following marketing communications from the requirement to obtain a HIPAA authorization:

  1. A face-to-face communication by the covered entity to an individual.
  2. A nominal-value promotional gift provided by the covered entity.

As another exception to the marketing restriction, HIPAA allows communications made by the covered entity to patients to describe a “health-related product or service” provided by the covered entity. Thus, in our example, if the cash products that XYZ offers are “health related,” then XYZ may contact its existing customers and educate them regarding XYZ’s cash products. For example, XYZ can (1) mail hard copy literature to its customers, (2) send an email to its customers, and even (3) under certain conditions, call its customers. If XYZ calls a customer within 15 months following the last time that the customer obtained a Medicare-covered product from XYZ, then the phone call will not violate Supplier Standard #11 nor the telephone solicitation statute. The reason for this is because the phone call will comply with an exception to the supplier standard and statute.

Read the full story from Medtrade.


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