Supplier Standards Nos. 8 and 29: What the Changes Could Mean for You

On Aug. 27, the Centers for Medicare and Medicaid Services published a final rule on Medicare enrollment standards for DMEPOS providers. The rule expands on existing standards that providers must meet to establish and maintain billing privileges in the Medicare program; the new supplier standards took effect Sept. 27. In a special series for HomeCare Monday, health care attorney Neil Caesar of the Health Law Center provides clarification and insight on a number of the new standards. Here’s what Caesar has to say about Supplier Standards Nos. 29 and 8:

This week we focus on the remaining supplier standards that regulate the operations of your facility locations, new Standard No. 29 (sharing locations) and revised Standard No. 8 (on-site inspections).

New Supplier Standard No. 29, first proposed in 2008, addresses CMS’ concern that problems may arise when more than one provider shares a practice location. However, CMS is less than clear with its explanation of this standard.

First, what space sharing does CMS specifically prohibit? The first sentence of CMS’ commentary to the new standard states that Standard No. 29 prohibits a supplier “from sharing a practice location with another Medicare supplier.” Yet when you look at the wording of the standard itself, it explicitly prohibits a supplier sharing a practice location with any other supplier or provider.

One of the key issues, therefore, is the appropriate breadth of this prohibition. Elsewhere in the commentary, CMS discusses space-sharing issues involving suppliers in hospital locations, as well as space-sharing examples with non-competing providers. There would be no need for these discussions if CMS only intends this new standard to prohibit space sharing between suppliers. Thus, it is clear from the overall commentary that CMS intends to interpret this standard broadly to apply to space sharing with any provider.

Second, in defending its position CMS states “we do not believe that legitimate DMEPOS suppliers routinely share practice locations with another Medicare supplier.” 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.” Even here, though, the scope of CMS’ rationale is unclear. 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. 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 collusion suspicion or quality concerns regarding competitors.

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) operating, it may be able to operate both cost centers from the same location.

CMS emphasized that Standard No. 29 similarly prohibits complementary businesses from sharing space, as well as prohibiting two entities from sharing a location only for retail sales. 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.

The third inconsistency in CMS’ explanation of this new standard affects whether the prohibition applies to sharing other things beside space. On the one hand, in response to a question as to whether the prohibition also encompassed an “equipment or staff” sharing, CMS clarified that the restriction was limited to the sharing of the physical location. On the other hand, CMS states elsewhere, “We do not believe that legitimate DMEPOS suppliers share inventory, staffing or a practice location with a competing DMEPOS supplier.”

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. While one could argue persuasively that that this approach would overreach the plain wording of the standard, 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 No. 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 standard requirements regarding inventory, storage, etc.) The wise course of action for any kind of warehouse space sharing is to have distinct locations for the different entities’ equipment.

CMS has created a few exceptions to this 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 those 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. However, CMS did not extend these exceptions to orthotic or prosthetic fitters “because they are not individual practitioners who are furnishing items to their own patients as part of their professional service.” Instead, they were DMEPOS suppliers seeking to share “space with another supplier.”

CMS’ rationale for these exceptions is that physicians and other licensed practitioners are allowed to obtain a DME supplier number and furnish DMEPOS from their offices. Therefore, it would be impossible for CMS to apply its space-sharing prohibition to those circumstances.

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 by a hospital (or other Part A provider) may have space in that hospital facility (or other Part A 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. One commenter suggested that this same exception should apply to a pharmacy “because of the burden that separate locations would put on the patients.” CMS disagreed, and emphasized the narrow scope of the exception. Another commenter suggested that space sharing should be allowed when both entities had common ownership. CMS again disagreed. The exception only applies when the DME supplier is a separate unit located within or owned by a larger facility.

There are many legitimate reasons, both fiscal and operational, why one supplier and another might want to share resources. When they are not competitors, it is hard to see why CMS believes problems and substandard care 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.

Supplier Standard No. 8 has been modified to specify those government officials who must be given unlimited access to a supplier location. Specifically, the supplier must permit “CMS, the NSC, or agents of CMS or the NSC to conduct onsite inspections to ascertain to supplier compliance with the requirements of this section.” CMS emphasizes in its comments that surprise inspections are to be expected. This is one of the reasons why, according to CMS, all DMEPOS suppliers need to be open during all posted hours of operation.

It is certainly possible that staffers responsible for facilitating any inspections may not be present at the practice location when an unannounced site visit occurs. It is also common for supplier personnel to get flustered or nervous when confronted by inspectors. For these reasons, I strongly recommend that compliance with Standard No. 8 also include the creation of a loose-leaf binder or similar container in which all of the necessary documents to demonstrate compliance are kept. These should be kept active at each location, in a set spot such as on the top of a particular file cabinet. All appropriate personnel in each location should be trained to give this binder to the inspector when he or she arrives. At the same time, the staffer should call a designated person to coordinate the visit. (The telephone number and name of this person could be prominently listed on the first page of the binder.)

One commenter suggested to CMS that it would be unjust to deny or revoke a number based on one site visit, because the business could be closed for a legitimate unforeseen reason when the inspector arrived. CMS replied that it is essential for suppliers to establish practices and procedures to address and minimize unexpected or emergency situations. CMS does acknowledge, however, that unforeseen emergencies may still arise and “when warranted, the NSC will conduct an unannounced follow-up visit prior to denying or revoking billing privileges.”

CMS is clearly taking a hard line against routinely allowing multiple site visits before concluding whether a supplier number should be issued or reaffirmed even though the change to Standard No. 8 is characterized as a “clarification.” Suppliers should not assume that they will get a second chance when the first visit goes badly.

Neil B. 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].