New Supplier Standards Could be Costly

ATLANTA — Providers beware: There are a few sizeable
stumbling blocks within the new supplier standards final rule
issued by the Centers for Medicare and Medicaid Services on
Thursday, according to industry experts.

Under the new provisions, which take effect Sept. 27, 2010, home
medical equipment providers serving Medicare beneficiaries will no
longer be able to contract for such services as respiratory therapy
but instead must employ personnel on a full- or part-time basis.
They must be open a minimum of 30 hours a week, have a facility of
at least 200 square feet and cannot use pagers or cell phones as
their primary business phones.

They also cannot make any direct solicitation of a Medicare
beneficiary, either by phone, Internet or visit. (See CMS Issues Final Rule
on Supplier Standards for a bullet-point summary of the new
rule.)

“I had predicted two years ago — nearly three years ago
now — that these things were likely to become law. I am sorry
to say my prognostication was on point,” said health care attorney
Neil Caesar, president of the Health Law Center in Greenville,
S.C.

Caesar said that in the final rule, CMS has apparently taken
into consideration the reams of industry comments made during the
comment period after the proposed rule was issued Jan. 25,
2008. Yet there are still enough “substantial and dramatic
requirements that in many respects will alter the way some
providers do business,” Caesar observed.

“The pattern I had noticed last time … is that [CMS] is
trying to push suppliers to operate in a traditional retail context
when that is really not the kind of work they are doing,” Caesar
said.

Although CMS in the final rule said it expected “a minimal
impact, if any on small entities,” Caesar was not nearly so
complacent.

“Certainly the very small suppliers will find this to have some
economic burden,” he said. Caesar pointed out that small HME
companies often must double up when it comes to job descriptions;
with few employees, it isn’t always possible to man the business
and make deliveries, too. Under CMS’ new standards, however, every
HME facility must be staffed during business hours.

“There is no wiggle room as it is currently laid out,” Caesar
said.

Mary Ellen Conway, president of Capital Healthcare Group in
Bethesda, Md., said the no-contracting rule was especially
troublesome.

Under the new standards, providers “must employ the licensed
professional on a full-time or part-time basis, except for DMEPOS
suppliers who are: (1) awarded competitive bid contracts using
subcontractors to meet this standard; or (2) allowed by the state
to contract licensed services.”

“Economically, that is tremendously burdensome,” Conway said.
“It is also not a requirement in any other health care sectors that
I am aware.”

Conway said it is not always prudent — particularly in
this environment — for many providers to carry on-staff
respiratory and occupational therapists or nurses. It is, she said,
common practice to contract out those services. Even companies that
do have on-staff therapists and other professionals often contract
out the services when those employees are on vacation, she
said.

But Caesar said providers will not have a choice. “It will have
to turn into a W-2 relationship,” he said.

Another concern is CMS’ expansion of the no-solicitation
rule.

“What they have been prohibiting from doing by phone, CMS is
equally intent on prohibiting by Internet or visit,” said Caesar.
“It’s the communication that is the problem, it is not the
medium.”

Under CMS’ new standards, providers cannot make a direct
solicitation of a Medicare beneficiary unless:

• “The individual has given written permission to the supplier or
  the ordering physician or non-physician practitioner to contact
  them concerning the furnishing of a Medicare-covered item that is
  to be rented or purchased;

• “The supplier has furnished a Medicare-covered item to the
  individual and the supplier is contacting the individual to
  coordinate the delivery of the item; or

• “If the contact concerns the furnishing of a Medicare-covered
  item other than a covered item already furnished to the individual,
  the supplier has furnished at least one covered item to the
  individual during the 15-month period preceding the date on which
  the supplier makes such contact.”

Several of the standards focus on the physical aspects of HME
businesses.

Under the new standards, companies must have a physical facility
that is a minimum of 200 square feet (providers in lease agreements
will have until Sept. 27, 2013, to be compliant), be accessible to
the public, have permanent signage and a storage area for business
records.

They also, Caesar said, “can’t have a permanently forwarded
phone that goes to a beeper or a cell phone [or a pager]. You have
to have a phone that rings to an actual location and is picked up
by an actual human being.”

Even answering services are not completely acceptable:
“Answering machines, answering services, facsimile machines or
combination of these options must not be used exclusively as the
primary business telephone during posted operating hours,”
according to the CMS final rule.

“They are clearly indicating their intent to emphasize the
physical requirements. It’s my guess we will see a lot of activity
on this,” Caesar predicted.

In the final rule, CMS said it is altering its contract for DME
oversight by the National Supplier Clearinghouse, requiring
increased NSC onsite visits “to ensure that DMEPOS suppliers are in
compliance with the provisions.”

“We are also expanding the funding for NSC operations to support
the increased number of site visits,” CMS said. “These expanded
measures will help to ensure that only legitimate DMEPOS suppliers
are enrolled or maintain enrollment in the Medicare program.”

CMS is marketing the new supplier standards as an anti-fraud
device.

“We know the majority of medical equipment suppliers and health
care providers want to improve the health of Medicare
beneficiaries, but we also know there are those who look for any
opportunity to take advantage of beneficiaries and Medicare,
including sham operations who are not legitimate businesses,” said
Peter Budetti, CMS deputy administrator for program integrity, in
an agency statement about the final rule. “The steps we are taking
today provide us with additional tools to support our continuing
efforts to reduce Medicare fraud by helping to ensure that only
appropriately qualified suppliers are enrolled in the program.”

As well, Health and Human Services Secretary Kathleen Sebelius,
speaking in Los Angeles on Thursday, pointed to the standards as an
anti-fraud measure, specifically referencing the requirement for
proper documentation for claims, the prohibition of companies from
using pagers or cell phones as primary business phones and the
requirement that providers remain open a minimum of 30 hours a
week.

Providers need to pay attention to the new standards, Caesar
said.

“CMS has done a number of things that are clarifications rather
than modifications,” he said. “That frequently signals an intent to
crack down on that type of thing — with the ability to look
backward, as well.”

Read the entire final rule in the Aug. 27 Federal
Register.