California Court Rules CMN Is Enough

Redding, Calif.

It tells like a John Grisham novel. A small-town provider and a local lawyer with no legal experience in HME bring a case against the federal government and, through sheer tenacity, last longer than anyone expects.

During the past several years, Tom Lambert, president of Maximum Comfort, has sold his house and put his company through bankruptcy reorganization to pay for a drawn-out legal battle over exactly what documentation is required for Medicare DME claims reimbursement. And in late June, a federal judge in California issued a preliminary ruling in Lambert’s favor, stating that a properly completed certificate of medical necessity (CMN) is the only proof necessary for claims payment.

In his ruling, Judge Lawrence Karlton of the U.S. District Court for the Eastern District of California said the government cannot require suppliers to obtain beneficiaries’ medical records or to make a judgment about whether DME is medically necessary.

The decision is the latest bout in a fight that began in late 1999, when, after an audit of the company’s 1998 and 1999 claims, the Region D DMERC began investigating Lambert’s business for K0011 over-utilization. While CMNs were provided with the claims, post-payment reviewers said the supplier had failed to submit the additional documentation necessary to establish medical necessity for the power wheelchairs, and concluded that Medicare had overpaid Maximum Comfort more than $785,000.

After the company appealed, two administrative law judges (ALJs) ruled in Lambert’s favor, but the Medicare Appeals Council subsequently reversed the ALJs’ decisions. Lambert then filed suit against the Department of Health and Human Services (HHS), and the case ultimately ended up in front of Judge Karlton in federal court.

Decision Sets Precedent

While Congress granted the HHS Secretary “broad discretion over the criteria required to prove medical necessity,” the judge wrote in his ruling, he continued that the existing statute “plainly specifies that Congress intended that whatever information may be required by carriers from suppliers to show the medical necessity and reasonableness of DME must be contained in a CMN.”

Once final, the ruling would have binding authority only in the district where the judge presides, but according to Jim Walsh, president of VGM Management, Ltd., and general counsel to The VGM Group, Waterloo, Iowa, the decision “has a huge psychological impact. Somebody has said the emperor has no clothes.”

In fact, the decision has become a subject of debate among industry stakeholders. While some say corroborating medical documentation is vital for preventing fraud, others insist there are problems with the CMN, which should ask the right questions and provide space for doctors to explain the product’s medical necessity.

According to Lambert, physicians, not suppliers, should be making the decisions about the medical necessity of DME. “The government can ask the physician, [who would be] under penalty of perjury, anything on that CMN.”

Walsh noted that the ruling puts the agency in a tough position. If CMS can’t police HME providers on medical necessity, whom can the agency police? “The theory Congress relied on was doctors, but doctors are very poor gatekeepers when it comes to medical equipment. They don’t know what it is; they don’t understand it and have no motivation to fight the patient who wants it. It’s a dilemma for CMS … but its solution to put the providers at risk [by making them responsible] wasn’t fair either.”

According to a statement from the Restore Access to Mobility Partnership (RAMP), “the ruling in California should spark a reform effort that establishes a new documentation policy for processing claims filed on behalf of Medicare beneficiaries. While [CMS] is currently reviewing coverage policy issues with an eye towards announcing changes by the end of the year, the California case … underscores the need for CMS to (a) issue an interim clarification to resolve problems currently being encountered; (b) include the documentation issue as part of their ongoing review; and (c) work with the industry to devise a policy that is fair to suppliers and better serves patients in need of powered mobility.”

RAMP members include the American Association for Homecare, Invacare, The MED Group, Mobility Products Unlimited, Pride Mobility, The Scooter Store and Sunrise Medical.

Don Clayback, vice president of networks for The MED Group, Lubbock, Texas, said the district court decision will focus CMS’ attention on its power wheelchair CMN. “We need to work with CMS to give them input on what is the appropriate criteria so that the CMN does prove to be an effective piece of documentation and not something that would create the opportunity for abuse,” he said. “We need that appropriate balance between too much documentation and too little.”

For legal help when the case began, Lambert turned to Bart Fleharty, a partner with the Redding law firm of Wells, Small and Selke. “When we started, this guy didn’t know a wheelchair from a flying saucer,” Lambert said, but the pair thought the case “was pretty simple if you just read the law.”

According to Fleharty, a challenge during the case was for Maximum Comfort “to stay fiscally alive.” During the appeals process, Maximum Comfort began paying back what Medicare said it owed. CMS began pre-reviewing all of its K0011 claims, and the company’s power wheelchair sales dropped 90 percent. Legal fees topped $130,000 last year.

In June 2003, Maximum Comfort filed for bankruptcy and is only now emerging from the action. Lambert sold his home and an investment property. His business has shrunk from five branches to four, and from 48 employees to 22.

“We’re a shell of what we used to be,” Lambert said. “[But] we didn’t see anywhere we could compromise. I had to keep going, because I knew I hadn’t done anything wrong.”

“We’re recommending appeal, of course,” said Ana Maria Martel, the assistant U.S. attorney for the Eastern District of California in Sacramento who represents HHS. “The judge is wrong because HHS has the right to audit and request additional medical documentation that shows, in fact, that the CMN was issued correctly. If [the government] can’t ask for additional documentation … [it will] have to audit first before paying, and can you imagine what havoc that will cause on the system?

“It will substantially slow down the processing of claims, and suppliers will have to wait months before [Medicare] pays, as they do with private insurers.”

The court ruling will remain preliminary until Judge Karlton reviews Maximum Comfort’s request to get back the funds the company repaid to Medicare. After he issues a final ruling, the government has 60 days to file an appeal.

“I’ve been getting offers of financial help for the appeals,” Lambert said. “I’m hearing people say it’s important for the industry that I stay in business. It looks like I won’t be on my own anymore.”

A CMS spokesperson said the agency had, at present, no comment.

For more, see “Washington Wit & Wisdom” on page 48.

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