Be Warned and Be Careful

On Aug. 27, CMS issued its Phase III revisions to the Stark Law regulations. One of these changes in particular affects the relationship between physicians and home care companies. This change must be understood by every HME provider that has a financial relationship with physicians, or with entities owned in whole or in part by physicians.

The so-called Stark Law is one of the most notorious weapons in the government’s arsenal of anti-fraud legislation. While the law revolves around physicians, it impacts all referrals between physicians and providers generally, including home care companies. The rule states that a physician may not refer a patient for a “designated health service” to an entity with which the physician has a financial relationship; further, the entity may not present a claim or bill for such services.

The list of designated health services includes durable medical equipment and supplies. Thus, a physician who refers a patient for DME may not have a financial relationship with that supplier, unless that relationship falls into one of the Stark Law’s exceptions. Similarly, a physician may not provide DME in-house without qualifying under an exception.

There is a specific carve-out for some DME as part of the broader exception that covers services provided in a medical practice’s facility. But that exception is limited to ambulatory infusion pumps, blood glucose monitors and a few other ambulatory devices necessary for the patient to be able to leave the office (crutches, canes, walkers, folding manual wheelchairs, etc.).

Some attorneys and consultants have suggested for several years that a physician could ignore the DME limitations by personally providing the equipment. The idea here is that if the physician personally hands the DME to the patient, personally educates, fits and calibrates the equipment, etc., then no referral has been made and the Stark Law should not apply. In fact, some commentary surrounding the Stark Law arguably supported this response.

This potential loophole, however, has now been clearly and thoroughly closed by CMS. Specifically, CMS confirmed that any physician providing DME must be enrolled as a supplier and must personally be in compliance with all of the supplier standards.

Such a result is unrealistic. As CMS noted in its comments to the new regulations: “The enrollment requirements and professional supplier standards are not waived in those situations in which a physician furnishes DME directly to the patient.” The comments said those services to be personally performed by the physician include:

• Personally fitting the item for the beneficiary;
• Personally providing necessary information and instructions concerning use of the DME;
• Advising the beneficiary that he or she may either rent or purchase inexpensive or routinely purchased DME;
• Explaining the purchase option for capped rental DME;
• Explaining all warranties;
• (Usually) delivering the DME to the beneficiary at home; and
• Explaining to the beneficiary at the time of delivery how to contact the physician in his or her capacity as a DME supplier by telephone.

“A referring physician claiming to provide DME personally would need to maintain adequate documentation to establish that the physician personally performed these and other related DME supplier activities,” CMS said.

What does this mean for your relationship with physicians? Clearly, except in very limited instances, home medical equipment may not be provided by physicians as part of their office practice to Medicare or Medicaid patients without violating the Stark Law. The so-called loophole that would allow physicians to avoid the prohibition against DME by “personally providing” the equipment is so impractical as to be virtually impossible to satisfy on a consistent basis.

Every venture between a home care company and a medical group by which the medical group or its physicians provides DME to Medicare or Medicaid patients, or by which the physician receives some sort of financial reward for equipment provided to Medicare or Medicaid patients, must be revisited immediately. This includes sleep lab ventures and the provision of CPAP equipment.

As CMS stated in its comments, “the dispensing of CPAP equipment by a physician would almost always constitute a ‘referral’ for purposes of the [Stark Law], as would the dispensing of CPAP equipment by anyone else affiliated with the referring physician such as a nurse or physician assistant. We note that CPAP equipment is DME and does not qualify for the in-office ancillary services exception.”

These new rules take effect at the end of October, so look over your physician relationships promptly and discuss any concerns with your health lawyer.

One thing is clear: the government remains concerned about physician referrals and physician financial relationships. Be warned and be careful.

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. He can be reached by e-mail at [email protected] or by telephone at 864/676-9075.