NEMA launches code of ethics to head off federal prosecutors

January 24, 2005

In a move aimed at warding off future charges of misconduct under the Medicare anti-kickback law, the National Electrical Manufacturers Association has put together a new code of ethics for the makers of medical imaging and radiation therapy equipment. The code recommends practices that address training, consulting, charitable donations, and research.

In a move aimed at warding off future charges of misconduct under the Medicare anti-kickback law, the National Electrical Manufacturers Association has put together a new code of ethics for the makers of medical imaging and radiation therapy equipment. The code recommends practices that address training, consulting, charitable donations, and research.

Strictly excluded are "wink and nod" arrangements that tie consulting fees and donations to providers or their affiliates to the purchase of equipment. Also blacklisted are expensive dinners or receptions for healthcare providers, especially if their families or friends are included. The code nixes all-expenses-paid training or educational symposia in places they shouldn't be, for example, resorts more suited to fun than work. Even professional ball games and golf outings are verboten.

"What the feds are concerned about are kickbacks, bribes, or rebates that are concealed to look like ordinary business transactions," said Clark Silcox, NEMA general counsel.

The new code, which went into effect Jan. 1, replaces one that was written a decade ago and is no longer relevant, he said. The recent crackdown by federal authorities, mostly on pharmaceutical companies for violations of anti-kickback provisions written into Medicare law, as well as pronouncements made by the Office of the Inspector General at the Department of Health and Human Services, led NEMA to revamp its ethical guidance.

"The federal government, in my opinion, is now using its legal authority under a couple of statutes to influence business practices in a way that reduces Medicare costs to some extent by taking some of the marketing costs out," Silcox said.

These statutes have been around for awhile, according to Silcox, but they have not been aggressively enforced. That began to change three or four years ago. No prosecutions have yet occurred in the radiology industry, nor are any investigations under way, at least none known to NEMA.

"That doesn't mean that when the prosecutors finish what they think is cleaning up the pharmaceutical industry, they won't turn their attention to other industries that sell or purchase goods or services for which payments may be made in whole or in part under a federal healthcare program," he said.

With this in mind, the association launched a preventive effort to keep its members from running afoul of federal authorities. NEMA began by looking at ethical guidelines that had already been written. One set of guidelines, produced by AdvaMed (the Advanced Medical Technology Association), addressed some but not all of the issues pertaining to the medical imaging and radiotherapy industry. (Some members of NEMA are also members of AdvaMed.) A working group composed of NEMA members adopted some of the AdvaMed guidelines and created others.

The final draft recommends that training and education, when conducted by vendors, be done in places suited to those activities, such as medical facilities or vendor training sites. Travel and lodging for attendees would be acceptable, but not for their guests. Companies might pay the cost of meals or receptions but not entertainment, such as sporting events, theater tickets, or a round of golf.

The code allows continued support of third-party educational conferences through such means as educational grants. Reimbursements might pay for expenses, but only those incurred by faculty or staff involved in the conference.

Sales and promotional meetings involving healthcare providers are acceptable, but hospitality expenditures should be modest and "subordinate to the purpose of the meeting," according to NEMA. Reimbursements for travel costs incurred by healthcare providers traveling to examine equipment onsite would be appropriate if the expenses were reasonable, but only if equipment demonstrations could not be adequately performed at the healthcare provider's site. When reimbursing for onsite visits, expenses for guests, such as family members, would not be appropriate.

The long-standing practice of healthcare providers serving as consultants to vendors is justified, if done for a bona fide reason. Specifically, there must be a need for the work and actual work must be done. The code further requires that these arrangements be in writing and signed by both parties, that compensation be at fair market value for the services rendered and not related to the volume of business generated by the healthcare provider or an affiliate, that travel expenses be reasonable, and that any hospitality expenses be modest and not in the form of sporting or entertainment tickets.

Donations are good, so long as they are made to charitable organizations and not directly to healthcare providers. Under no circumstances can they be associated with a purchase, lease, recommendation, or use of the vendor's products.

Research grants must be legitimate and well-defined in a written agreement, according to NEMA. The agreements must be managed by vendor representatives who have no role in selling products or services to those receiving the grants, nor can they be linked to sales made at any time.

Although Silcox would not rule out enforcement of the code by NEMA sometime in the future, he noted that NEMA has no special procedures put in place to enforce the code, nor does the association have any immediate plans to track member compliance. But it is in each member's best interests to incorporate it in their internal compliance programs, because the code is designed to keep members out of trouble with federal prosecutors.

NEMA examined the actions and pronouncements of federal authorities when writing the code, then checked its final draft with legal counsel for the DHHS inspector general. The goal was to be certain that the code would serve its purpose.

"We knew that some companies would have to change their business practices in some ways," Silcox said. "We wanted to be sure that what was in the code was what the federal government considered to be a good and proper way to conduct business now and in the future."