CMS Changes Consignment Closet Rules

BALTIMORE — On Aug. 7, CMS issued a change request
transmittal on consignment closet rules, and there are definitely
some big changes, according to health law attorney Jeff Baird.

“Basically, CMS restricts consignment/stock-and-bill
arrangements between HME companies and physicians and other
practitioners,” said Baird, chairman of the Health Care Group at
Brown &
Fortunato, Amarillo, Texas.

However, Baird said, “It does not appear that the transmittal
applies to those arrangements with non-physicians/non-physician
practitioners such as hospitals or sleep labs.”

The CMS transmittal, which adds a section to the Medicare
Program Integrity Manual, also defines “specific compliance
standards for NSC-MAC (National Supplier Clearinghouse-Medicare
Administrative Contractor) validation” of consignment closets,
including conditions consignment arrangements must meet, notes
Baird.

CMS’ new restrictions will take effect Sept. 8.

Following is a summary of the changes from Baird and Brown &
Fortunato’s Phuong D. Nguyen:

The new Program Integrity Manual provisions state that “most
consignment closets or stock-and-bill arrangements do not satisfy
the DMEPOS supplier standards” and allow a supplier to maintain
inventory at a practice location owned by a physician or
non-physician practitioner only when certain conditions are
met.

A non-physician practitioner includes physician assistants,
nurse practitioners, clinical nurse specialists, certified
registered nurse anesthetists, certified nurse midwives, clinical
social workers, clinical psychologists, and registered dietitians
or nutrition professionals. For this article, we use the term
“practitioner” to collectively refer to physicians and
non-physician practitioners.

The conditions the foregoing consignment arrangement must meet
are the following:

• Title to the DMEPOS is transferred to the practitioner at the
  time the item is furnished to the patient;

• The practitioner bills Medicare for furnishing the item under
  his, her, or its own DMEPOS billing number;

• All services concerning fitting or use of the item are performed
  by individuals being paid by the practitioner, and not by any other
  DMEPOS supplier; and

• The patient is advised to contact the practitioner concerning
  problems or questions regarding the DMEPOS item.

Under such an arrangement, the supplier is limited to the role
of a vendor to the practitioner. In addition, the NSC-MAC will also
verify that two or more Medicare-enrolled DMEPOS suppliers are not
enrolled or located at the same practice location. A practice
location must have a separate entrance and United States Post
Service post office address.

The consignment arrangement permitted under the new PIM
provisions is of limited value, for the provision of DME, due to
the requirements of the Stark law. Briefly, Stark prohibits a
physician from referring patients to entities for the furnishing of
designated health services (which includes DME), if the physician
(or an immediate family member of the physician) has a financial
relationship with the entity, unless a Stark exception applies.

There is an exception to Stark for “in-office ancillary
services,” but that exception is only applicable to limited items
of DME (i.e., canes, crutches, walkers, folding manual wheelchairs,
blood glucose monitors, and infusion pumps). Under Stark, a
physician may furnish prosthetics and orthotics under the in-office
ancillary exception, because prosthetics and orthotics are not
DME.

The transmittal references consignment arrangements with a
physician, non-physician practitioner or other health care
professional. The new provisions reference arrangements only with
physicians and non-physician practitioners, with no inclusion of
“other health care professional,” which is not a defined term.

Therefore, it appears that consignment closet and stock-and-bill
arrangements with hospitals, sleep labs or other Medicare
non-practitioner providers are not subject to the new PIM
provisions. (We will seek clarification from CMS regarding
consignment arrangements involving non-practitioner entities.)

The new PIM provisions state that “most consignment closets or
stock-and-bill arrangements do not satisfy the DMEPOS supplier
standards,” but then fails to identify which standards are not
being met or why. For this reason, even though the new provisions
appear not to apply to consignment arrangements with hospitals,
sleep labs, or other Medicare non-practitioner providers, entities
involved in consignment arrangements should not assume the
transmittal, or further CMS action, will not impact these
arrangements.

The new PIM provisions state that the parties to a consignment
arrangement will be held responsible for compliance with the new
section of the manual. Also, the conditions that the consignment
arrangement must meet are subject to verification by the NSC-MAC.
This suggests that CMS may require DMEPOS suppliers to report any
consignment arrangements entered into by the suppliers.

View a PDF of the CMS transmittal — Change Request 6528,
Transmittal 297.