The Future of HME

There is a perfect storm of events that is pushing HME suppliers into the retail market. First, Medicare is broke. Second, there are 78 million Baby Boomers who are accustomed to paying their own way. Third, Boomers are accustomed to shopping retail. This perfect storm opens opportunities for the innovative and aggressive supplier. For purposes of this program, I define retail market as any market that does not involve the federal or state government as the payor. The following are the statutory and regulatory issues that the HME supplier must address as it pushes into the retail market:

Federal Anti-Fraud Statutes, Safe Harbors, OIG Advisory Bulletins, OIG Special Fraud Alerts, and Supplier Standards—Most HME suppliers that venture into the retail market also bill Medicare for covered items. When the suppliers move into the non-Medicare market, they need to be aware of how federal statutes and regulations impact their retail business. For example, let’s say that ABC Medical Equipment enters into a 1099 independent contractor arrangement with John Smith, a marketing rep. He generates both commercial and Medicare business for ABC. However, ABC pays commissions only for the commercial business. The OIG has stated that the commissions being paid are also rewarding Smith for generating Medicare business—hence, a violation of the anti-kickback statute.

State Anti-Fraud Statutes—All states have anti-fraud statutes. These are similar to their federal counterparts. Some state statutes come into play only when the payor is the state’s Medicaid program. Other state statutes apply even when the payor is a commercial insurer.

Selling Items to Cash-Paying Customers at a Discount off the Medicare Allowable—Assume that ABC sells Medicare-covered items and takes assignment. Assume that ABC sells the same items for cash at a discount off the Medicare allowable. In doing this, ABC needs to be aware of the federal statute that prohibits an HME supplier from charging Medicare substantially in excess of the supplier’s usual charges, unless there is good cause.

Purchase of Internet Leads—This is a hot area in terms of government and contractor enforcement actions. When purchasing Internet leads, it is critical that the HME supplier not violate the Medicare anti-kickback statute. When communicating with leads, it is equally as critical that the supplier not violate the telephone solicitation statute.

Tapping into Non-Traditional Payor Sources—In order to survive, the HME supplier must lessen its dependence on Medicare fee-for-service. It is important for the supplier to look for other sources of income: cash sales, long term care facilities, hospices, the VA, TRICARE, workers compensation and self-pay employers.

Collection of Co-Payments—The law requires the HME supplier to make a reasonable effort to collect co-payments, regardless of whether the payor is Medicare or a commercial insurer. Failure to make such a reasonable effort can expose the supplier to liability under the Medicare anti-kickback statute, state anti-kickback statutes, federal and state inducement statutes, federal and state false claims acts and state insurance fraud statutes.

Bankruptcy, Estates, Divorce and Other Self-Pay Scenarios—As the supplier makes a reasonable effort to collect co-payments, the supplier needs to understand the steps it can take in the event that the customer files bankruptcy, dies, becomes disabled or goes through a divorce. Sales Taxes—If the HME supplier has a physical presence in a state and sells products to customers there, then the supplier will be responsible to pay sales taxes.

Qualification as a Foreign Corp.—Let’s say that ABC is incorporated in Indiana and ABC mails products into Colorado. Under the law ABC is a foreign corporation to Colorado. Must ABC qualify as a foreign corporation in Colorado?

Communications with Prospective Customers—Separate and apart from the telephone solicitation statute and Supplier Standard #11, the HME supplier must be aware of, and comply with, FTC and FCC regulations and with the federal CAN-SPAM Act. Equally as important, all states have statutes and regulations addressing communicating with potential customers; the supplier must be aware of the state statutes and regulations.

State Licenses—Even if the HME is selling products commercially, the supplier needs to know about state licensure requirements. The NSC posts them on its website. However, it is not entirely accurate and it is the supplier’s responsibility to confirm the requirements.