Federal E-Sign Act: What It Means For The HME Provider

(May 2012)

The signature of the Medicare beneficiary is important. The HME provider needs the beneficiary’s signature on an AOB. Before an HME provider calls a prospective customer, the provider needs the beneficiary’s written permission. And the list goes on. Fortunately, technology and a federal statute have intervened to make it easier for the provider to obtain the beneficiary’s signature. In a number of instances, a “blue ink” signature is not required. Let me explain…….

The Electronic Signatures in Global and National Commerce Act (“E-Sign Act”) provides: “Notwithstanding any statute, regulation, or other rule of law…….with respect to any transaction in or affecting interstate or foreign commerce – (1) a signature, contract, or other recording relating to such transaction may not be denied legal effect, validity, or enforceability solely because it is in electronic form…..”

The E-Sign Act defines “electronic” in the following way: “The term ‘electronic’ means relating to technology having electrical, digital, magnetic, wireless, optical, electromagnetic, or similar capabilities.”

There are other key definitions under the E-Sign Act. The “electronic record” is defined as “a contract or other record created, generated, sent, communicated, received, or stored by electronic means.” The E-Sign Act defines “electronic signature” as “an electronic sound, symbol, or process, attached to or logically associated with a contract or other record and executed or adopted by a person with the intent to sign the record.” The E-Sign Act defines “record” as “information that is inscribed on a tangible medium or that is stored in an electronic or other medium and is retrievable in perceivable form.”

The provision of DME falls within the E-Sign Act. The threshold question is whether there is a “transaction” subject to the E-Sign Act. The E-Sign Act defines “transaction” as “an action or set of actions related to the conduct of business, consumer, or commercial affairs between two or more persons, including any of the following types of conduct – (A) the sale, lease, exchange, licensing, or other disposition of (i) personal property, including goods and intangibles, (ii) services, and (iii) any combination thereof; and (B) the sale, lease, exchange, or other disposition of any interest in real property, or any combination thereof.” In a somewhat circular manner, the E-Sign Act defines “consumer” to mean “an individual who obtains, through a transaction, products or services which are used primarily for personal, family, or household purposes.” It is clear that the provision of DME falls within the definition of “transaction.”

Here is one “real world” example how the HME provider can utilize the E-Sign Act. The federal telephone solicitation statutes say that an HME provider cannot call a Medicare beneficiary (who is a potential customer) unless the beneficiary has given “written permission” to be called. The question is: Does “written permission” need to be a blue ink signature? Under the E-Sign Act, the answer is “no.” “Written permission” fits under the definition of “record” insofar as the beneficiary’s permission must be documented in “written” form. Therefore, the E-Sign Act is applicable to the telephone solicitation statute’s requirement that the beneficiary give written permission for telephone contact. This also means that a beneficiary’s permission “may not be denied legal effect, validity, or enforceability solely because it is in electronic form.” Therefore, it is logical to conclude (and in the author’s opinion, it is correct to conclude) that the following constitutes “written permission” in satisfaction of the telephone solicitation statute: (i) beneficiary pulls up a web page for diabetic supplies; (ii) the beneficiary inputs his name, address, phone number, and other information onto the web page; (iii) the beneficiary checks a box that says “I consent to be called by [the manager of the web page] and by [the specific DME company that will call the beneficiary];” and (iv) the beneficiary hits “submit.”

The E-Sign Act discusses the potential of a federal agency not recognizing the applicability of the Act. The E-Sign Act maintains a federal agency’s ability to specify the standard and format of records filed with the agency. The E-Sign Act provides: “Subject subsection (c)(2) of this section, nothing in this subchapter limits or supersedes any requirement by a Federal regulatory agency, self-regulatory organization, or State regulatory agency that records be filed with such agency or organization in accordance with specified standards or formats.” While a federal agency may require a record be in a paper form, it must have a compelling reason to do so. The E-Sign Act provides: “Nothing in subsection (b) of this section (other than paragraph (3)(B) thereof) shall be construed to grant any Federal regulatory agency or State regulatory agency authority to impose or re-impose any requirement that a record be in a tangible printed or paper form.” Paragraph (3)(B) states: “Notwithstanding subsection (c)(1) of this section, a Federal regulatory agency or State regulatory agency may interpret section 7001(d) of this title to require retention of a record in a tangible printed or paper form if – (i) there is a compelling governmental interest relating to law enforcement or national security for imposing such requirements; and (ii) imposing such requirement is essential to attaining such interest.” CMS has not published any guidance, let alone a regulation interpreting the E-Sign Act, for the written permission required by the telephone solicitation statute. Therefore, it is the author’s opinion that under the E-Sign Act, CMS does not have legal grounds to deny written permission that is in electronic form from a Medicare beneficiary.

So let us revisit a beneficiary electronically giving his permission (on a web page) to be called by an HME provider. The telephone solicitation statute requires (i) written permission; (ii) for contact by telephone; (iii) regarding the furnishing of DMEPOS. Focus on the term “written.” The term “written” implies some affirmative action on the part of the beneficiary. If the written permission were on a tangible medium (such as paper), it is clear that CMS would accept a statement that was authored by the provider, but signed by the beneficiary. Therefore, if the written permission were in electronic form, CMS should also accept a statement that was authored by the provider as long as the statement was signed by the beneficiary. As stated above, the E-Sign Act defines “electronic signature” to mean “an electronic sound, symbol, or process, attached to or logically associated with a contract or other record and executed or adopted by a person with the intent to sign the record.” If a Medicare beneficiary checks a box on an online form that is directly adjacent to a statement or text (giving an HME provider permission to call the beneficiary), then it is reasonable to conclude that the beneficiary has electronically signed the statement and, therefore, gave his or her written permission to be called.

This monograph is not intended to be legal advice or legal opinion on any specific facts or circumstances. The contents are intended for general information purposes only. The law pertaining to this monograph may have changed following the date of the monograph. The reader should consult his or her own attorney for legal advice concerning the contents of this monograph. Except where noted, attorneys are not certified by the Texas Board of Legal Specialization.

Prepared by:

Health Care Group
Brown & Fortunato
P.O. Box 9418
Amarillo, Texas 79105-9418
(806) 345-6300
(806) 345-6363 (fax)
www.bf-law.com

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