Q&A with Jeff Baird: Guidance on Supplier Standards Clear as Mud

AMARILLO, Texas — “Over the past several weeks, it feels
like we have gone down the proverbial rabbit hole into Alice in
Wonderland,” said health care attorney Jeff Baird. “CMS’ written
guidance and verbal comments regarding supplier standards have
defied logic in some instances and have been contradictory in other
instances.”

With the following questions and answers, Baird said, “I’ll try
to explain what is going on and try to give some clarity to HME
providers.”

Question: Mrs. Smith is 78 years old. She has never been
a customer of ABC Medical Equipment. Dr. Jones sends an order for
DME to ABC. Can ABC call Mrs. Jones and in order to coordinate
delivery and set-up?

Answer: Supplier Standard No. 11 was revised
effective Sept. 27, 2010, to provide that an HME supplier agrees
“not to make a direct solicitation (as defined in [Sec.] 424.57
(a)) of a Medicare beneficiary unless one or more of the following
applies:

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

• 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.”

Sec. 424.57 (a) states: “Direct solicitation means direct
contact, which includes, but is not limited to, telephone,
computer, e-mail, instant messaging or in-person contact, by a
DMEPO supplier or its agents to a Medicare beneficiary without his
or her consent for the purpose of marketing the DMEPOS supplier’s
health care products or services or both.”

In an Aug. 27, 2010, Federal Register comment, CMS
stated: “[I]f a physician contacts the supplier on behalf of the
beneficiary with the beneficiary’s knowledge, and then a supplier
contacts the beneficiary to confirm or gather information needed to
provide the particular covered item (including the delivery and
billing information), then that contact would not be considered a
direct solicitation for the purpose of this standard. This is the
case even if the physician has not specified the precise DMEPOS
supplier that will be contacting the beneficiary regarding the item
referred by that physician.”

A prior FAQ entitled “Telemarketing” stated: “Question —
Does a supplier have to collect and maintain documentation from the
physician reflecting that the physician has contacted the supplier
with the beneficiary’s knowledge? Answer — No. However, it
would be a business decision on the part of the supplier whether to
collect and obtain such documentation for [its] records.”

In short, CMS’ Aug. 27 comment and its “Telemarketing” FAQ
provide that Dr. Jones is not required to obtain Mrs. Smith’s
signature in order for ABC to call Mrs. Smith (in response to Dr.
Jones’ order) to arrange delivery and set-up; and that ABC does not
have to maintain documentation confirming that Mrs. Smith was aware
that Dr. Jones contacted ABC on her behalf. (Of course, it would be
wise for ABC to maintain such documentation in the event the
company is ever questioned about Mrs. Smith’s knowledge concerning
the order from Dr. Jones.)

Then, in an FAQ on Jan. 14 this year, CMS contradicts itself by
stating: “Question — Is a supplier contacting the beneficiary
based on the receipt of a physician order considered an
“unsolicited” contact? What if a supplier contacts the beneficiary
based solely on the physician order (and, therefore, the contact is
without the beneficiary’s knowledge that the physician would be
contacting a supplier on the beneficiary’s behalf)? Answer —
Yes, it is unsolicited unless the physician has written permission
from the beneficiary allowing the supplier to contact the
beneficiary.”

CMS did not answer the question. The question is whether ABC can
contact Mrs. Smith based on an order from Dr. Jones without Mrs.
Smith’s knowledge. The answer is clearly “no.” Unfortunately, CMS
gives an answer that contradicts its Aug. 27 comment and
contradicts the “Telemarketing” FAQ.

CMS’ answer that Dr. Jones must have the written permission from
Mrs. Smith contradicts its earlier guidance that Mrs. Smith must
only be aware that Dr. Jones is ordering DME on her behalf.

From a practical standpoint, CMS’ Jan. 14 FAQ does not fit into
the real world. Dr. Jones has a fiduciary relationship with Mrs.
Smith; he is her agent. As her physician, he has the absolute right
to order tests and products for Mrs. Smith. It is unworkable for
Dr. Jones to be required to obtain Mrs. Smith’s signature when he
orders DME (or, for that matter, any test, service or product) for
her. All that should be necessary is that Mrs. Smith be
aware of what Dr. Jones is doing. CMS recognized this in
its 8/27/10 comment and in the “Telemarketing” FAQ.

It defies reason for CMS, then, to contradict itself in its Jan
14 FAQ. Perhaps recognizing the contradiction, on an Open Door
Forum call Jan. 20, CMS stated that due to enforcement issues, CMS
“will not tell contractors to implement the expanded provision”
until the issues are addressed. This statement is consistent with
other recent verbal statements made by CMS and/or its
contractors.

OK, so what does all of this mean to ABC from a practical
standpoint? I would hope — and it would be reasonable to
expect — that CMS will issue a correction to its Jan. 14 FAQ.
If such a correction is not made, then I would hope — and it
would be reasonable to expect — that when CMS starts
enforcing the revised Supplier Standard No. 11, it will not bring
enforcement actions against ABC just because Dr. Jones does not
obtain Mrs. Smith’s signature.

Here are the steps (from the safest to those that contain risk)
that the supplier can take:

• ABC can elect not to call Mrs. Smith unless ABC is confident
  that Dr. Jones has obtained her signature;
• ABC can elect not to call Mrs. Smith unless ABC is confident
  that Dr. Jones made Mrs. Smith aware that Dr. Jones was placing an
  order for DME; or
• ABC can elect not to call Mrs. Smith unless ABC has received an
  assurance from Dr. Jones that it is his policy to inform his
  patients when he orders DME for them.

Regardless of which step ABC takes, when ABC calls Mrs. Smith,
the first words out of ABC’s mouth should be: “Mrs. Smith, this is
ABC Medical Equipment. Your physician (Dr. Jones) sent us an order
for DME. Were you aware that he was going to do this?” If the
answer is “yes,” then ABC should ask: “Would you like for us to
come to your home and deliver the equipment ordered by Dr. Jones?”
If the answer to the first question is “no,” then ABC should
politely end the telephone conversation and not deliver the
equipment.

Question: Can ABC mail literature, through the United
States Post Office, to Mrs. Smith?

Answer: As with the preceding question and
answer, this question pertains to Supplier Standard No. 11. In a
comment contained in the Aug. 27 Federal Register, CMS
stated: “We believe that “direct solicitation” occurs when a DMEPOS
supplier or its agents directly contacts an individual Medicare
beneficiary by telephone, e-mail, instant messaging, or in-person
contact without his or her consent for the purpose of marketing the
DMEPOS supplier’s health care products or services or both.” This
is essentially the same language as quoted in Sec. 424.57(a) in the
previous answer.

This comment appears to allow ABC to mail literature to Mrs.
Smith through the United States Post Office. Receiving something in
the mailbox is not intrusive. Mrs. Smith does not have to contend
with a pushy salesperson. She can simply throw the envelope in the
trash.

However, in its Jan. 14 FAQ, CMS stated the following: “Question
— Does “direct solicitation” include mailings through the
U.S. Post Office? Neither the rule, nor the preamble, appears to
address this. Answer — We believe that general mass
advertising through the post office is not prohibited. Targeted
mailings to specific beneficiaries are prohibited.”

This defies logic. Regardless of whether the envelope that
appears in Mrs. Smith’s mailbox is a result of “general mass
mailing” or a “targeted mailing,” the fact remains that it is
simply an envelope that Mrs. Smith can throw in the trash. Plus,
what is the definition of “general mass advertising” and “targeted
mailing?”

The Jan. 14 FAQ is simply wrong. During the Jan. 20 Open Door
Forum, CMS described how the revised Supplier Standard No. 11 was
expanded to prohibit direct solicitation. CMS stated that direct
solicitation included activities such as e-mails, instant messaging
and in-person contacts. No mention was made of mailing literature
through the U.S. Post Office.

On the Open Door call, CMS stated that for now, its contractors
will not enforce the expanded provision. So what does this mean to
ABC from a practical standpoint? Once again I would hope —
and it would be reasonable to expect — that CMS will issue a
correction to its FAQ. If such a correction is not made, then I
would hope — and it would be reasonable to expect —
that when CMS starts enforcing the revised Supplier Standard No.
11, it will not bring an enforcement action against ABC because ABC
mails literature to Mrs. Smith.

Here are the steps (from the safest to one that contains some
risk) that ABC can take:

• ABC can mail literature to Mrs. Smith so long as ABC’s action
  cannot be construed to be a “targeted mailing;” or
• ABC can mail literature to Mrs. Smith without worrying about
  whether it can be construed to be a “targeted mailing,” and go with
  the assumption that CMS will not be so illogical as to bring an
  enforcement action against ABC.

Question: ABC directs John Brown to set up equipment on
Mrs. Smith. Must Brown be licensed?

Answer: Revised Supplier Standard No. 1 states,
in part: “If a state requires licensure to furnish certain items or
services, a DMEPOS supplier (a) must be licensed to provide the
item or service; (b) must employ the licensed professional on a
full-time or part-time basis, except for DMEPOS suppliers who are
… allowed by the state to contract licensed services
….”

In other words, according to this standard, if a state says that
Brown must be licensed, then Brown must be an employee (not an
independent contractor) of ABC unless state law
specifically allows Brown to be an independent contractor.

And yet, in the Jan. 14 FAQ, CMS contradicts itself, stating:
“We are interpreting our regulation … to mean that a supplier
may contract with an individual or other entity to provide licensed
services unless state law expressly prohibits such an arrangement.
Similarly, the restrictions … shall only require an
employment arrangement where state law expressly prohibits other
contractual arrangements (e.g., independent contractor
arrangements). In the absence of an express prohibition against
independent contractor and other contractual arrangements (e.g.,
through relevant state law, through relevant case law, etc.), we
interpret our regulation to allow such arrangements.”

Frankly, I like the FAQ much better than I like the language of
the standard itself. It is my hope that CMS will revise the
language of the standard to comport with what CMS says in the
FAQ.

Jeffrey S. Baird, Esq., is chairman of the Health Care Group
at Brown &
Fortunato, P.C., a law firm based in Amarillo, Texas. He
represents pharmacies, infusion companies, home medical equipment
companies and other health care providers throughout the United
States. Baird is Board Certified in Health Law by the Texas Board
of Legal Specialization. He can be reached at 806/345-6320 or
[email protected].