OTC Hearing Aid Firm Eargo Hears From US DOJ About Insurance Reimbursement Claims
Executive Summary
Directly billing insurers for OTC hearing aids may have triggered federal concern, a financial analysis firm says.
Direct-to-consumer hearing aid manufacturer Eargo Inc. is under investigation by the US Department of Justice concerning insurance claims it submits for customers, the company says in a recent filing with the Securities and Exchange Commission.
The document says the investigation is “related to insurance reimbursement claims the company has submitted on behalf of its customers covered by federal employee health plans.” Financial analysis group Washington Analysis LLC suggests in a recent report that Eargo’s business model itself may be what drew federal investigators' attention.
Eargo administers an online hearing test and allows consumers to directly order hearing aids if needed. Customers can then start using the devices with help from a “licensed hearing professional” who tunes the hearing aids and answers any questions the user may have. Unlike with conventional hearing aids, no audiologist visit is required.
Additionally, the website specifically pitches the products to federal workers, including text that says: “Are you a federal employee? You may be eligible for Eargos at no cost to you through the Federal Employees Health Benefits (FEHB) program.”
Eargo “both provides and submits … formal diagnoses, despite acknowledging that its online hearing test ‘is not a hearing evaluation performed by an audiologist.’”– John Leppard, Washington Analysis
The latest iteration of its product, a Food and Drug Administration class II-exempt device designed for people with mild to moderate hearing loss available OTC, became available in July. (Also see "Eargo's 5th Generation Hearing Aid Available OTC Hailed As 'Most Significant Launch' In Its History" - HBW Insight, 15 Jul, 2021.)
That same month, President Biden signed an executive order directing the Department of Health and Human Services by November to issue proposed rules for OTC hearing aids, a category traditionally limited to prescription-only devices. (Also see "Biden Joins House And Senate Asking For FDA's Attention On Making Hearing Aids Available OTC" - HBW Insight, 12 Jul, 2021.)
However, Eargo’s approach could still pose multiple concerns to the DOJ, said Washington Analysis analyst John Leppard in a 29 September research note.
First, while the FDA has said it won’t enforce regulations against OTC sales of hearing aids, this allows individuals to buy the devices directly from a licensed distributor, “but does not directly carry over to claims of medical necessity being submitted to third-party payers.”
Typically, health insurance claims include ICD-10 coding based on a diagnosis documented by the patient’s health care provider. But the Eargo model doesn’t appear to include the formal involvement of a licensed provider, Leppard explained.
The Health Insurance Portability and Accountability Act (HIPAA) further says “any effort to ‘knowingly and willfully’ misrepresent the conditions of health care delivery constitute a fraudulent offense,” Leppard said, adding that while there’s no sign the company is intentionally violating the law, directly submitting claims to health insurance companies without the involvement of the patient’s provider could prove problematic.
Eargo “both provides and submits – via electronic transmission under HIPAA – formal diagnoses, despite acknowledging that its online hearing test ‘is not a hearing evaluation performed by an audiologist’ and that ‘our devices are available directly to consumers without the medical evaluation of a licensed practitioner,” Leppard wrote.
He added that while the lack of formal practitioner involvement may not indicate willful fraud, it could approach misrepresentation under FEHB policies.
The analyst’s note says one way Eargo could resolve the issue would be by directly billing customers, who would be responsible to submit claims to insurance companies for reimbursement. Leppard noted, however, that this wouldn’t resolve what may be growing insurer concerns about medical necessity.
This article previously was published by Informa Pharma Intelligence's Medtech Insight newsletter.