New FTC Exemption a Boon to Healthcare Providers, Pharmaceutical Companies, and DME Suppliers

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New FTC Exemption a Boon to Healthcare Providers, Pharmaceutical Companies, and DME Suppliers


Everyone loves to hate telemarketers. Spurred on by the intensity of public disdain for the telemarketing industry, the Federal Trade Commission (FTC) last year considered whether to impose a complete ban on computer-generated telephone calls. In draft regulations that were issued for public review and comment, FTC proposed a ban on all automated calls. Fortunately for the healthcare industry, several technology companies that support healthcare service and equipment providers, led by Silverlink Communications ( Burlington, MA), rallied to inject an industry perspective before the final regulations were issued in August.

Winslow: Industry perspective.

At the end of August, FTC announced amendments to its telemarketing sales rule. The new amendments prohibit all prerecorded telemarketing sales calls, but create a limited exemption specifically for calls subject to the Health Insurance Portability and Accountability Act of 1996 (HIPAA). This exemption should come as a great relief to healthcare providers, durable medical equipment (DME) suppliers, and companies that make calls on their behalf. Without the exemption, medical device manufacturers, pharmaceutical companies, and health-related providers would have been effectively barred from using the latest technology to contact customers or patients. Such a prohibition would have hobbled industry efforts to recall products, issue reminders or warnings about medicines, or even to check on the health and welfare of customers in areas affected by natural disasters.

The FTC exemption from the new regulation permits companies subject to HIPAA to continue utilizing telephone technology for healthcare purposes. The exemption makes sense when viewed against the existing regulations that govern the healthcare industry. Extensive federal requirements for HIPAA-regulated calls already prevent the abuse and deception that plague ordinary sales calls. FTC decided that further regulation of such calls would be unnecessary, because existing regulations are effective in preventing the types of privacy violations that the amendments are intended to remedy.

According to the August amendments, calls delivering a prerecorded message made by, or on behalf of, a “covered entity or its business associate” are exempt from the new telemarketing sales rule. HIPAA defines covered entity as a health plan, a healthcare clearinghouse, or a healthcare provider who transmits any health information in electronic form. A business associate is a company other than a covered entity that performs claims processing or administration, data analysis or processing, billing, or other similar functions on behalf of a covered entity; or provides legal, accounting, management, administrative, or other services to a covered entity, where the service involves the disclosure of protected health information.

Kossuth: Improving patient compliance.

Automated telephone calls by HIPAA-regulated companies provide measurable public benefits by reducing the costs of Medicare and Medicaid programs, improving patient compliance rates with home-treatment regimens, and facilitating the record keeping that healthcare reimbursement regulations require. For example, such technology enables patients to be notified by telephone automatically when they are reaching the end of their current supply of medication or when they are due for treatment. Patient compliance is markedly improved when telephone reminders are part of a provider's marketing plan. Unlike conventional telephone banks that use human callers, automated telephone technology can reach more people faster and less expensively, thereby enhancing communications with patients and customers.

FTC's regulatory exemption means that healthcare providers and DME suppliers may continue (or begin) to use automated calls to reach patients, so long as the calls comply with the provisions of the HIPAA privacy rule and other applicable HIPAA-related regulations and statutes. Before making a prerecorded sales call, for example, a telemarketer must have an express, written, and signed consent from the intended recipient of the call. Also, the caller must allow the phone to ring for 15 seconds or 4 rings before disconnecting. Once connected, the caller must begin to identify him or herself and provide opt-out information within 2 seconds of the recipient completing his or her greeting. Where alleged violations occur, a state or a private person may file suit against a company, seeking damages or injunctive relief.

The exemption in the amended telemarketing sales rule permits healthcare providers, DME suppliers, and companies calling patients on their behalf, to keep costs low by using prerecorded messages to deliver important healthcare information to patients, thereby benefiting patients, providers, and taxpayers. The FTC exemption preserves best practices for companies that already use automated calling technology and opens the door to companies that wish to implement this option in the future.

Daniel B. Winslow is a partner and James Kossuth is an associate at the law firm of Duane Morris LLP ( Boston). Working together, they proposed the health-related exemption adopted by FTC.

© 2008 Canon Communications LLC

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