Standards 10 and 12: What the Changes Could Mean to You

By all accounts, the effects of CMS’ proposed revision and
expansion of supplier standards for DMEPOS would be far-reaching.
In a special series for HomeCare Monday leading up to the March 25
deadline for comments, health care attorney Neil B. Caesar,
president of the Health Law Center, Greenville, S.C., will help
provide clarification and insight on several provisions of the
draft rule. This week, Caesar’s comments center on proposed changes
to Supplier Standards No. 10 and No. 12, which cover a supplier’s
insurance and equipment delivery and beneficiary instruction.

Prior Standard No.10 deals with liability insurance. Currently,
the standard requires that the supplier have comprehensive
insurance for at least $300,000 and that this insurance covers
“both the supplier’s place of business and all customers and
employees of the supplier. In the case of a supplier that
manufactures its own items, insurance must also cover product
liability and complete operations.”

CMS proposes an expansion of this requirement to require
insurance of at least $300,000 per incident, not just in
the aggregate. CMS also continues that the NSC must be listed on
the policy as a certificate holder. This is to enable the National
Supplier Clearinghouse to contact the underwriter to verify
coverage, and also to keep the NSC on the disposition list for any
communications from the insurer.

However, CMS also proposes a change to this notification
requirement. Specifically, suppliers would now be responsible for
providing the NSC with contract information or an individual
employed with the underwriter who can verify coverage. The NSC
wants to be able to verify coverage with an agent or, when
necessary, with the underwriter.

Moreover, CMS proposes that a supplier should be required to
obtain this insurance coverage prior to submitting its Medicare
enrollment application and supporting documentation to the NSC.
CMS’ justification is that there can be up to a 90- day lag between
the issuance of a policy and notification to the underwriter that
the policy has been issued.

The agency proposes that insurance be obtained early to ensure
that, when the NSC contacts the underwriter, enough time will have
passed so that the underwriter will know about the insurance
coverage. CMS’ position is that, if the underwriter cannot verify
coverage, the application will be denied and/or the supplier’s
billing privileges will be revoked.

This proposal, of course, raises the possibility that a new
supplier coming to the Medicare program for the first time may have
to purchase insurance whose value is premised on obtaining a
Medicare supplier number that may or may not be issued. This would
have to be viewed as a business risk for any new supplier.

It is possible that an insurer would be willing to postpone
activation of the policy until the issuance of a supplier number,
thereby intentionally saving the applicant some premium costs.
Research would be necessary in this instance to verify that this
type of activation postponement would still allow the underwriters
to be told about the policy, so that they might confirm coverage
should the NSC come knocking.

Prior Standard No. 12 deals with the delivery of product. It
currently states that the supplier must be responsible for
Medicare-covered items and must maintain proof of delivery.

CMS is proposing to clarify this standard. Specifically, CMS
specifies that the supplier is responsible for maintaining proof of
delivery in the beneficiary’s file; must furnish information at the
time of delivery as to how the beneficiary can contact the supplier
by telephone; must provide the beneficiary at the time of delivery
with instruction on how to use the equipment safely and
effectively; and must document that this instruction has taken
place.

Most advisers have specifically counseled that this [proof of
delivery and instruction on how to use the equipment] is addressed
by the supplier and the beneficiary at the time of delivery, and
that this documentation be maintained in the beneficiary’s file.
CMS has now verified that this course of action is mandatory.

CMS also confirms that it will allow a supplier to contract out
the delivery of Medicare-covered items to another individual or
entity. The NSC has gone back and forth on this question over the
years, so it is good to see it has finally confirmed that the
delivery process may be subcontracted.

However, CMS cautions that the DMEPOS supplier has ultimate
responsibility for ensuring the delivery in accordance with this
standard and for maintaining all necessary documentation to
demonstrate that the beneficiary received the Medicare-covered item
and appropriate instructions for its use.

This means any subcontract for delivery services must include
strict protocols on paperwork, prompt return of documentation, etc.
Specifically, while the delivery will be by common carrier, I
advise suppliers to deal with the paperwork requirements by direct
communication with the beneficiary. Your mileage may vary.

Finally, note that CMS characterizes its requirements for this
standard as a “clarification.” This means that the rule
is in effect right now. Any noncompliant supplier should promptly
address sufficiencies in their delivery documentation and
beneficiary instruction.

View the proposed standards.

Comments are due by March 25. Electronic comments can be
submitted at http://www.regulations.gov. Follow the
instructions under the “Comment or Submission” tab and
enter the file code CMS-6036-P.