New Standards 27, 31 and 57: What the Changes Could Mean for You

By all accounts, the effects of CMS’ proposed revision and
expansion of supplier standards for DMEPOS will be far-reaching. In
a special series for HomeCare Monday, 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 are directed to proposed
new Standards 27, 31 and 57.

Proposed Standard 21 would require suppliers that provide oxygen
to obtain their supplies from a state-licensed oxygen supplier. CMS
believes that, in those states where a license is required to
supply oxygen, suppliers who obtain the oxygen from another
supplier must utilize someone licensed by that state. This is
designed to prevent suppliers from purchasing oxygen from an
outside vendor in a state where a license is required. If the state
does not require a license, then this standard would not apply.

This standard is similar to the new attitude in revised Standard
1. Again, CMS is requiring a tight nexus between the supplier and
licensed personnel or entities. Nonetheless, this new standard
raises some questions as to its interaction with Standard 1.

That standard requires suppliers to employ directly licensed
individuals instead of contracting with them on an independent
basis. Yet new Standard 27 clearly implies that the oxygen would be
allowed to come from another supplier. The only reconciliation of
these two standards would appear to be that Standard 27 applies to
the purchasing of the oxygen itself and not the subcontracting for
therapy, delivery, equipment or other ancillary services.

In other words, if you are purchasing the gas or liquid,
Standard 27 would apply. If you seek to utilize any other services,
Standard 1 would apply. Clarification of this uncertainty would be
welcome.

Proposed Standard 31 would require a supplier to resolve any tax
delinquency it might have with the Internal Revenue Service or
state taxing authority. CMS believes it important to “ensure
that Medicare payments are only being made to organizations and
individuals who have satisfied existing tax debts.”
Consequently, CMS wants the basis to revoke the billing privileges
of any DMEPOS supplier (“including physicians and
non-physician practitioners who are also enrolled as a DMEPOS
supplier [sic]”) that has failed to resolve its tax
problems.

CMS’ justification for tying together tax delinquencies and the
ongoing right to remain a supplier is nowhere articulated in its
commentary to Standard 31. I expect that CMS would argue it only
wants suppliers to participate in the Medicare program if their
hearts are pure, and tax delinquencies suggest a fiscal
irresponsibility that could present problems with the supplier’s
compliance with supplier standards.

Indeed, CMS cites a Government Accountability Office report that
found over 21,000 individuals and companies paid under Medicare
Part B during the first nine months of 2005 had tax debts totaling
over $1 billion. But CMS’ decision to act as Big Brother and
eradicate tax debt is a dangerous precedent. First, this attitude
could lead next to CMS issuing edicts about other aspects of a
supplier’s fiscal behavior, such as how quickly the company pays
its bills or how well it collects receivables.

Second, individuals and entities are allowed under the tax laws
to challenge the imposition of taxes they believe are improper.
Often, they are allowed to refuse to pay the tax until the fight is
concluded, knowing that, if they lose, they will also have to pay
interest and perhaps penalties. But the choice of whether to accept
that risk or to pay the tax and then fight for a refund should be a
business decision for the individual or company. Proposed Standard
31 would remove that choice.

Finally, proposed Standard 57 is technically not a new supplier
standard, but rather an expansion of the existing language, which
discusses the consequences of failing to meet the supplier
standards. Currently that portion of the law only discusses CMS’
ability to revoke billing privileges if the standards are not
satisfied. A new section would establish that all monies received
by a supplier that failed to report an adverse legal action or
felony conviction that precludes payment would constitute an
overpayment to the supplier, which then must be repaid.

CMS is doing two things with this new language. First, the
agency is clarifying its existing position that, because a supplier
is not allowed to participate in the program when certain adverse
legal actions have occurred and further is not allowed to utilize
the services of individuals who have been convicted of a felony or
certain other violations of the law for a specific period of time,
any monies received by the supplier during a period when either of
these circumstances apply should be deemed overpayments that must
be refunded to the government.

It also clarifies and emphasizes the requirement that the
supplier report adverse legal actions and felony convictions to the
National Supplier Clearinghouse within 30 days of the event.

Second, the new rule would assess the period within which
overpayments are calculated as going back to the date of the
conviction or adverse legal action.

This new rule emphasizes that CMS wants suppliers to crack down
on internal monitoring of hiring practices to ensure that the
supplier is not hiring ineligible persons. It also emphasizes that
CMS is taking very seriously the supplier’s obligation to report
adverse legal events promptly.

Practically speaking, the consequence of 100 percent refund of
all Medicare reimbursement for services rendered after the date of
a felony conviction or adverse legal event (including, presumably,
the date the supplier hired an ineligible person) are quite severe.
This penalty would likely bankrupt many suppliers.

Until the fairness of this position is sorted out over time, the
lesson for suppliers is clear: Be very careful to screen new hires
thoroughly to ensure that they are allowed to participate in
providing Medicare-reimbursed services, and also report adverse
court actions to the NSC promptly. Better yet, avoid adverse court
actions that trigger the reporting requirement.

Finally, in my opinion, CMS would love nothing more than to be
able to license DMEPOS suppliers at the federal level and
micromanage most aspects of their operations. Because the agency
does not have that ability, CMS has to be content with its
ever-increasing quantity of rules, including rules that focus on
day-to-day operational details. The trend towards increased and
increasingly burdensome supplier standards may continue, at least
until Congress can be persuaded that this volume of rules is
unfair.

Wouldn’t it be interesting if CMS, the DME MACs or the NSC were
held to the same standard of near perfection to which DMEPOS
suppliers are being held?

View the proposed standards.

Comments are due by Tuesday, March 25 (tomorrow). 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.