Standards of Behavior (Part 2)

The revised Medicare Supplier Enrollment Standards for DMEPOS have been in force for 10 months or so, since Sept. 27, 2010. Home medical equipment providers have implemented many of these revisions without much problem. But some significant changes have gone largely unnoticed, and these can present major problems for an unwary HME provider.

Further, misunderstandings and miscommunications about the revised rules can lead to real trouble. In these times of tightened compliance obligations and increased audits, home medical equipment companies must understand the changes and their implications.

Part 1 of this series (April 2011) examined the revisions to the existing supplier standards (1, 7, 8, 9 and 11). This article focuses on four brand new standards (27 through 30), an important new regulation regarding overpayments and some pertinent facts and opinions.

New Standard 27: Licensed Oxygen Suppliers

Standard 27 only applies to DMEPOS providers of respiratory services located in states that license oxygen suppliers. Such providers must obtain their oxygen from a state licensed supplier. CMS’ stated rationale is “to ensure that oxygen suppliers promote quality in the furnishing oxygen or oxygen-related equipment.” CMS presumably is concerned that a respiratory provider located in a state that licenses oxygen could obtain inferior product or service from a non-licensed supplier.

I have four observations. First, CMS’ comments indicate the rule applies when a supplier must be either licensed or certified to distribute oxygen, even though the text of the regulation only mentions licensure. Second, CMS does not obligate a supplier to utilize an in-state licensed supplier; presumably, oxygen could be purchased from a supplier located in any other state requiring licensure.

Third, CMS states that it does not intend for this rule to impose any restrictions on a supplier’s right to subcontract the pickup and delivery of liquid and gaseous oxygen cylinders. Fourth, this standard ties to the supplier’s practice location. Thus, an entity which has practice locations in multiple states only needs to purchase oxygen from licensed suppliers in those states where licensure/certification is required.

New Standard 28: Referral Documentation

Suppliers are required under new Standard 28 to maintain documentation regarding the referring of patients and ordering of equipment for seven years after the date of service. Documentation issues have become vitally important because of the many audits targeting Medicare providers. It is essential that an HME supplier be able to produce documentation justifying a beneficiary’s entitlement to equipment and services.

Suppliers must ensure that their patient files include written referrals with clear and adequate evidence of medical appropriateness within payment parameters. A formal record retention policy (and conversely, a record destruction policy) is key to compliance with this standard.

New Standard 29: Sharing Locations

New Standard 29 addresses CMS’ concern that problems may arise when more than one provider shares a practice location. It is clear from the commentary that CMS intends to interpret this standard broadly to apply to space-sharing with any provider, not just other suppliers. CMS’ rationale seems to be that “we have found that unrelated business entities that share the same practice location often provide poor quality care or, in some case(s), are associated with fraudulent businesses or do not exist.”

CMS states at one point that it does not “believe that legitimate businesses share practice locations with competitors.” Yet the focus on competitors disappears elsewhere in CMS’ commentary. For example, one commenter asked whether two entities that did not compete, and were owned by the same owner, could share space. CMS replied that such an action was prohibited, stating that it did “not believe that it is a common practice to establish multiple DBAs at the same practice location.”

Thus, CMS’ rationale extends beyond quality concerns or suspicion of collusion regarding competitors. However, CMS did confirm that a supplier may be in an office building that, in separate suite locations, also houses other providers. In other words, the “same space” applies to a specific location with a distinct street address, not to the entire building itself.

(On this point, note that CMS’ focus is on two entities with two NPI numbers sharing space. If one supplier had two different DBAs, but one NPI number, it may be able to operate both cost centers from the same location.)

At one point in its commentary, CMS suggests that the prohibition applies to sharing other things beside space, and states, “We do not believe that legitimate DMEPOS suppliers share inventory, staffing or a practice location with a competing DMEPOS supplier.” However, CMS elsewhere states that Standard 29 is limited to the sharing of the physical location. This is almost certainly the better and more reasonable position, as shared or subcontracted resources are not uncommon among suppliers and can offer some significant cost savings.

Nonetheless, CMS’ comments suggest that it may take a hard line against any kind of activity that shares resources, whether it is equipment, personnel or whatever. I would argue that such an expansive approach overreaches the plain wording of the standard, but suppliers should exercise caution when considering any sort of co-mingling. This is especially true when the co-mingling of equipment, personnel, etc., occurs among competing suppliers; CMS’ attitude may be softer when the entities are in complementary or unrelated businesses.

On a related point, CMS acknowledges in its comments that Standard 29 focuses only on the location where the supplier “operates his or her business and meets with customers and potential customers.” So, if warehouse, storage facility or repair facility space is located elsewhere, then the space-sharing prohibition would presumably not apply to those activities. (Be careful, though, to comply with supplier standards regarding inventory, storage, etc.) A wise course of action for any kind of warehouse space-sharing may be to have distinct locations for the different entities’ equipment.

CMS has created a few exceptions to the space-sharing prohibition. One exception applies where a physician or a non-physician practitioner furnishes DMEPOS to his or her own patients as part of his or her professional service. Because of the Stark law, this overlap is limited to the types of DME allowed under Stark — walkers, crutches, glucose starter kits, etc. Another exception focuses on physical or occupational therapists who furnish items to their patients as part of their professional service. Both of these exceptions are limited to equipment provided to patients actively under the physician’s or therapist’s care.

The final exception applies to a supplier who is “co-located with and owed by an enrolled Medicare [Part A] provider.” The idea here is that a supplier owned, for example, by a hospital may have a practice location in that hospital facility without violating this standard. To qualify for this exception, the supplier must operate as a separate unit and meet all of the other supplier standards. It only applies when the DME supplier is a separate unit located within and owned by a larger facility.

This rule has important ramifications for independent DME suppliers, including pharmacies, leasing space within hospital buildings. Many such tenants must end their hospital leasehold because of Standard 29.

There are many legitimate reasons, both fiscal and operational, why two suppliers might want to share resources. When they are not competitors, it is hard to see why CMS believes substandard care or other problems are likely simply because of the economies of scale from certain shared resources. Nonetheless, CMS’ position is, for the most part, clear. A number of suppliers will be required to change their space utilization to avoid all prohibited co-mingling.

New Standard 30: Hours of Operation

New Standard 30 requires that suppliers “be open to the public a minimum of 30 hours per week.” CMS further intends for this standard to be read in combination with Standard 7, so that the hours of operation must be prominently posted for the public to see and understand.

There are no exceptions to this requirement. CMS believes a minimum number of hours “is in the best interest of the Medicare program and Medicare patients, especially for those who are disabled or have limited means of transportation.” Evidently, CMS has a significant concern that beneficiaries be able to visit the supplier during traditional business hours, and that the business be open long enough to provide convenient access for site inspections and other official regulatory activities.

It is clear that CMS is taking a hard line on this requirement, noting, “while we recognize personal emergencies do occur, we believe that suppliers should be available during posted business hours. Moreover, we believe that a DMEPOS supplier should do its best to plan and staff for temporary absences.” This hard line also poses a significant problem for DME suppliers who wish to have part-time or “appointment only” hours for some locations.

CMS takes a similar hard line with regard to hours of operation that change frequently, noting that “Medicare beneficiaries should not be advised that the supplier has temporarily changed their hours once they have made the effort to visit the supplier.” Further, such changes would make it “virtually impossible” for CMS to determine if the supplier is in operation.

CMS emphasizes that it is the supplier’s responsibility “to establish staff contingencies to ensure that their business remains open to the public in spite of a personal emergency.” Once again, CMS’ rule indicates a focus on traditional face-to-face business and retail operation activity. Very small suppliers may find it difficult to maintain consistent hours of operation in light of actual, diverse needs on the staff’s time.

There are two exceptions to this rule. First, physicians, physical therapists and other licensed health professionals who have DMEPOS supplier numbers, but who limit their DMEPOS products for use by their own patients, are not bound by the 30-hour requirement. This exception applies only to practitioners who provide a small amount of DME to their own patients, and only to that extent.

Second, the rule does not apply to suppliers who work with only custom-made orthotics and prosthetics.

New Regulation: Overpayments

CMS has added a new paragraph to the existing supplier standard regulations concerning the intertwining of supplier standard violations and overpayments. The new material is not a specific, enumerated supplier standard, but rather applies to all of the standards.

The new regulation requires CMS, the National Supplier Clearinghouse and the DME MACs to treat as “overpayments” all payments to a supplier for equipment and services rendered after the date of a revocation, felony conviction or any other “adverse legal action.” This means that any monies received by a supplier for services rendered after an adverse action will be considered overpayments, subject to recoupment.

In addition, this new language emphasizes the supplier’s obligation to report the triggering adverse action to the NSC. According to CMS, the new rule provides the agency and its contractors “with the discretion to establish an overpayment determination … for all Medicare items and services furnished from the date of the final adverse action.” This allows CMS or contractors to reopen all paid claims for services rendered on or after that date.

Despite CMS’ contention that this is merely a restatement of “business as usual,” this new regulation is important. In particular, the regulation specifically applies to “an exclusion or debarment from participation from a Federal or State health care program.”

This makes sense for companies that are excluded. However, it is likely that CMS will also apply this rule to suppliers who employ (or contract with) individuals who themselves have been excluded or debarred from the Medicare program. CMS makes clear that the potential overpayments occur from the date of the “final adverse action,” and this could mean that all services reimbursed to a supplier who hires an excluded employee or contractor will be deemed ineligible overpayments from the date of that hire. In other words, 100 percent of all Medicare billings after a prohibited hiring would be subject to repayment if this interpretation stands up to challenge.

This danger emphasizes that CMS wants suppliers (and all providers, for that matter) to crack down on internal monitoring of hiring practices to ensure that they are not employing ineligible persons. It also emphasizes the supplier’s obligation to report adverse legal events promptly.

Similarly, suppliers need to monitor the exclusion list to ensure that existing personnel have not become excluded post-hiring, because of prior violations that took a while to resolve. In both events, the consequence of careless hirings and poor screenings could bankrupt many suppliers. The lesson is clear: Carefully screen personnel and new hires to ensure they are allowed to participate in providing Medicare reimbursed services.

Closing Observations

I believe CMS would prefer to be able to license DMEPOS suppliers at the federal level and micromanage many aspects of their operations. Because the agency does not have that ability, CMS must be content with an increasing quantity of rules, including requirements that focus on day-to-day operational details. This trend toward increased and tightly focused supplier standards may continue, at least until such time as Congress might be persuaded that the volume of rules is unfair.

I do not think such congressional outcry is likely, at least for the foreseeable future. But one can dream. Wouldn’t it be interesting if CMS, the MACs and the NSC were held to the same standard of near perfection to which DME suppliers are held?

• Read the “Make Sure Who You Hire” feature to learn more about excluded individuals.

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].