Keep the Closet Doors Open

Loan closet doors continue to slam shut. These relationships, also known as stock-and-bill arrangements or consignment closets, allow a home care company to place HME on premises with a provider for distribution to certain patients on their departure from the provider’s location.

Such loan closets can be useful in many situations, and have withstood scrutiny by the Office of Inspector General twice, in April 2002 and again in November 2008. However, CMS has decided that as of March 1, 2010, such arrangements will no longer be permitted in the offices of a “physician, non-physician practitioner or other health care professional.”

CMS’ theory seems to be that loan closets suggest there are multiple providers operating out of the same practice location, creating patient confusion and a violation of the suppler standards. On thinking about the implications of CMS’ recent actions, I have four insights:

1. Closets must only come into use after the patient has chosen to obtain the equipment from the particular home care company with the closet Even though the OIG opinions were vague about the sequence of events, CMS’ actions show that a specific sequence of events is important: The referral source identifies the need for home care equipment or services; then, the patient is informed and choice is given (the existence of the closet may be mentioned at this time); then, the patient chooses; then, if the closet supplier is chosen, that supplier is contacted and necessary information is communicated to establish the patient relationship; then (and only then), the closet’s equipment may be given to the patient.
2. Evidence of patients’ freedom of choice is key I strongly recommend both a script and a written document, which may be incorporated into discharge or referral forms utilized by the closet owner. This is mandatory in the hospital setting, very important if the closet owner has any sort of financial relationship with the supplier and highly recommended in all other cases because it emphasizes that there is to be no patient coercion and that the HME company did not get involved until after the patient made his or her choice.
3. Loan closets must not include any financial benefit to the closet owner I recommend that any financial relationship between the HME and the closet owner must fall within the boundaries of the “safe harbor” regulations of the anti-kickback statute. This would apply to lease agreements, medical advisor agreements and professional or support services agreements, etc. The agreement should be in writing, signed by the parties, with a definite term of at least a year and a specific fee structure not tied to the volume or value of referrals. Payment must be at fair market value for necessary services actually rendered. I recommend this even if the financial arrangement only applies to private patients (not government-reimbursed). In this regard, no remuneration should be paid to the closet owner for “convenience benefits,” such as use of a private line connecting the closet owner to the HME. Similarly, don’t pay for use of the closet owner’s personnel to facilitate paperwork or do patient set-ups, etc. In fact, to avoid scrutiny and reduce any appearance of impropriety, I recommend that you not even allow the closet owner to provide these services at no charge.
4. Watch CMS carefully As far as I can tell, CMS’ objection is that the closets may confuse the patient as to whether the physician or other professional is in fact the HME supplier. Under this reasoning, such confusion, as well as the presence of the HME company’s equipment in the professional’s office, would violate the supplier standard that requires a home care company not to share its space with another provider.

I do not think this reasoning holds up well under analysis. Other relationships between HME companies and professionals — support service arrangements, etc. — also include the intertwining of the “health care professional” with the HME company. Nonetheless, CMS has taken this position. It may be prudent to reevaluate or restructure those relationships to withstand any CMS challenge that suppler standards may be violated in those circumstances as well.

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Neil 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].