New Standards Take Effect Today: What the Changes Could Mean for You

GREENVILLE, S.C. — On Aug. 27, the Centers for Medicare
and Medicaid Services published a final rule on
Medicare enrollment standards for DMEPOS providers. The new
rule, based on a proposed rule issued in 2008, expands on existing
standards that providers must meet to establish and maintain
billing privileges in the Medicare program — and those new
standards become effective Sept. 27 (today).

The American Association for Homecare has asked CMS for
additional time on enforcement of the new standards, but as of
press time, there had been no response and no guidance from the
agency.

Among other things, the new standards require that HME providers
remain open and staffed at least 30 hours a week, meet minimum size
requirements in “accessible” locations and post permanent, visible
signage. The new standards also specify that providers cannot subcontract for
some services in states requiring licensure.

For example, under revised Supplier Standard No. 1, if an HME
provider is in a state that requires a licensed respiratory
therapist, the company can’t contract with an independent therapist
or outside agency, explains health care attorney Neil Caesar,
president of the Health Law Center in Greenville, S.C. Instead, HME
providers must employ the respiratory therapist — full time
or part time.

In a special series for HomeCare Monday, Caesar
provides clarification and insight on several of the new standards.
In last week’s issue, he addressed Standard No. 1 regarding
licensure (see Supplier Standard No.
1: What the Changes Could Mean for You, Sept. 20).

This week, Caesar’s comments are directed toward expansion of
Medicare’s prohibition on unsolicited contact with beneficiaries in
the expanded set of standards. Here’s what Caesar has to say:

This category includes general cold calling and solicitation
issues that have been a part of Supplier Standard No. 11, as well
as new provisions in that supplier standard regarding physician
verbal orders. This topic also now includes new Supplier Standard
No. 28, which addresses a supplier’s obligation to hold onto
referral documentation for seven years.

Supplier Standard No. 7 prior to the changes tracks
long-standing policy that prohibits sales reps from contacting
potential Medicare customers unless: they have been given written
permission to be contacted; the supplier furnished a
Medicare-covered item to them and is calling to coordinate
delivery; or the supplier previously supplied a Medicare-covered
item within the past 15 months and is now calling about a different
purchase or rental.

CMS has now extended the existing three exceptions to a broader
array of contact methods by creating a new term, “direct
solicitation,” which means “direct contact which includes, but is
not limited to — telephone, computer, e-mail, instant
messaging, or in-person contacts by a DMEPOS supplier or its agents
to a Medicare beneficiary without his or her consent for the
purpose of marketing the DMEPOS supplier’s health care products or
services or both.”

(The proposed rule from two years ago also prohibited coercive
response Internet advertising, but CMS has withdrawn this
prohibition, probably because of confusion over its meaning and
scope.)

There are certain important nuances to these revisions. First,
the solicitation must be with the patient’s consent. CMS has
required written evidence of the patient’s desire to be contacted
as one of the exceptions to the prohibition. However, a good
argument may be made that other evidence of patient consent will
suffice. This is because Standard No. 11 prohibits “direct
solicitation,” and direct solicitation only occurs when, among
other things, contact is made without the beneficiary’s consent.
Thus, if there is evidence of the beneficiary’s consent, there is
by definition no prohibited “direct solicitation,” and the
beneficiary contact therefore should be acceptable even in the
absence of written permission. This may give suppliers the avenue
they have wanted for several years to allow more customer consent
for websites that have a “click to accept” process.

Second, in its commentary to the changes, CMS responded to a
question about non-covered items. CMS focused on the problem of
one-on-one solicitation as its core concern. Because of that focus,
CMS was not persuaded that the rules should be relaxed for
non-covered items. In other words, the general prohibition against
solicitation also applies “to non-covered items if they are being
solicited by a Medicare enrolled DMEPOS supplier.” The focus is on
the recipient of the solicitation (the beneficiary), not the items
being solicited.

Third, CMS emphasized a number of times in its commentary that
marketing activities are still allowed. DMEPOS suppliers may
advertise their products or services at “health fairs, community
events, or the DMEPOS supplier’s website.” Any website intended to
be “of use to the general public” would likely fall within the
category of permitted “general advertising.” CMS noted that “a
dedicated website that can be freely accessed by the general
public, at the consumer’s choice, is not considered direct
solicitation for the purpose of this standard.”

Fourth, CMS categorizes the solicitation changes as a
“clarification” of Standard No. 11 and not a “modification.” That
means CMS’ position is that this rule is already in effect, though,
arguably, not well stated. While this position may be difficult to
maintain in a court of law, it is nonetheless important. Whenever
CMS indicates an attempt to clarify one of its rules, that usually
implies a particular concern with violations of that rule and abuse
of the system. Thus, with CMS’ emphasis on solicitation problems,
it is likely that we may see a crackdown of this rule in the
future.

CMS has also expanded this supplier standard to deal explicitly
with the issue of verbal orders from physician offices. This
formalizes (and slightly changes) a position taken by CMS several
months ago on the topic of physician orders. Specifically, CMS
takes the position “that it is inappropriate for a DMEPOS to
contact a beneficiary based solely on a physician order.” The
agency’s core concern is that the contact be with the beneficiary’s
knowledge and consent, because otherwise the supplier’s follow-up
contact after the physician’s referral would be prohibited unless
one of the exceptions applied.

The key under the new language in Standard No. 11 is that the
beneficiary must know that the physician intends to contact a
DMEPOS supplier. It is not necessary that the beneficiary (or even
the physician) know which supplier is to be contacted. Regardless,
if the patient has knowledge, then a physician verbal order to a
supplier will permit the supplier to contact the patient to
establish the necessary qualifications for the relationship.

CMS believes that this permission can easily be a standard part
of the paperwork presented to the patient in connection with the
office visit. Indeed, CMS may be rather flexible about how to
obtain this permission. It indicates that, for example, “a consent
form giving [a] hospital staff member permission to share the
beneficiary’s information with the DMEPOS supplier for the purpose
of initiating service” will be enough to allow for further contact.
Standing permission with the physician, hospital, etc., may also
satisfy this requirement.

On this general topic, CMS has also created new Supplier
Standard No. 28, which deals with ordering and referring
documentation. Specifically, suppliers are required to maintain
such documentation for seven years after the date of service. CMS’
original 2008 proposal tracked the seven-year period from the date
the claim was paid, but CMS is now recognizing that it is more
practical and useful to focus on the date of service.

Documentation issues have become vitally important because of
the many audits befalling Medicare suppliers. It is clear that a
DME supplier’s ability to produce documentation justifying the
beneficiary’s entitlement to equipment and services is essential to
payment entitlement.

For Supplier Standard No. 28, such documentation needs to
demonstrate clearly what was ordered, by whom it was ordered and
when it was ordered. Further, even though the supplier standard
requires that referral documents be kept for seven years, the
reimbursement audit rule still only allows CMS to go back three
years for all non-fraudulent claims. (The timeframe for claims
allegedly based on fraud is for a longer period.) Thus, the
supplier standard requires record retention for a longer period of
time than is required merely for reimbursement purposes.

I have two final observations about these supplier standards.
First, CMS makes clear in its commentary that its solicitation
concerns also raise questions regarding fraudulent and abusive
activities. There remains an anti-solicitation statute that applies
to these same activities, with essentially the same three
exceptions as contained in the supplier standards. Because of this
statute, cold calling abuses are viewed by CMS as evidence of
potential fraud because of the coercive message used.

Consequently, CMS contends that violations will allow it to
revoke a supplier’s billing privileges, and potentially to refer
such activities to the Office of Inspector General for further
action.

Finally, note that these revisions have significant
ramifications for companies that lose key personnel to competitors.
Often when an employee jumps ship, that person will try to swipe
customers with whom he or she has had a relationship. This is also
often done in a manner that violates the employee’s fiduciary
obligation to the former employer by appropriating proprietary
customer contact information. In many instances, however, if the
former employer tries to fight this misappropriation, the new
employer will threaten to tie the fight up in expensive litigation,
and the previous employer backs away.

Under CMS’ changes, it is clear that the customer relationship
belongs to the original supplier, the former employer. If a
departing employee communicates with previous customers, then he or
she will be engaging in solicitation activities and violating
Standard No. 11. This violation would subject both the employee and
the new employer to significant problems, including potential
revocation and investigation for fraudulent billing. This revision
thus gives employers who lose key personnel an important weapon to
utilize when protecting proprietary customer information.

Read the final rule on supplier standards, titled “Medicare
Program; Establishing Additional Medicare Durable Medical
Equipment, Prosthetics, Orthotics, and Supplies (DMEPOS) Supplier
Enrollment Safeguards” (CMS-6036-F) in the Federal
Register.

Neil B. Caesar is president of the Health Law Center (Neil
B. Caesar Law Associates, PA), a national health law practice in
Greenville, S.C. He also is a principal with Caesar Cohen Ltd.,
which offers compliance training, outsourcing and consulting and
the author of the Home Care Compliance Answer Book. You can reach
him at 864/676-9075 or [email protected].