AMARILLO, Texas — According to health care attorney Jeff Baird of Brown & Fortunato, there are a number of legal pitfalls related to subcontracts and purchasing contract suppliers involved in competitive bidding. (See Don't Ignore the Legal Pitfalls, Dec. 6.) Expanding on the topic, in the following Q&A Baird discusses guidance given by the National Supplier Clearinghouse (NSC) and the Competitive Bidding Implementation Contractor (CBIC) that impact these two arrangements. "As might be expected," Baird says, "the guidance is somewhat convoluted and is not particularly friendly to HME providers."
Question: If a sleep lab, hospital, wound care center or similar type of non-physician provider ("ancillary provider") performs patient education and set-up for ABC Medical Equipment, must the ancillary provider be accredited?
Answer: Let's say that ABC enters into a standard consignment arrangement with an ancillary provider in which the ancillary provider stores ABC's inventory on its premises; gives the patient a choice of HME providers from which the patient wishes to purchase the DME; recommends ABC if the patient expresses no choice; and sets the patient up on ABC's equipment and educates the patient on how to use the equipment.
Supplier Standard No. 12 requires that ABC "be responsible for the delivery of Medicare covered items to beneficiaries and maintain proof of delivery." The standard further says: "The supplier must document that it or another qualified party has, at an appropriate time, provided beneficiaries with necessary information and instructions on how to use Medicare-covered items safely and effectively."
There is no mention of an accreditation requirement. And yet, the NSC has issued guidance on its website that quotes Supplier Standard No. 12 and then states: "A subcontractor that only delivers the item does not need to be accredited. If the subcontractor provides more than the delivery by setting up the equipment or giving instructions about the use of the item, then the subcontractor needs to be accredited unless a professional exemption applies."
Question: Does the NSC guidance mandating accreditation have the force of law?
Answer: The NSC guidance is not a statute or a regulation. It was not issued through the notice and comment rulemaking process that is required for regulations. It is not official guidance of the kind that CMS issues through its transmittals. As stated above, the guidance is based on a supplier standard that makes no mention of accreditation.
Nevertheless, the guidance constitutes the view of the contractor that handles DMEPOS enrollment for CMS. The NSC does have the authority to revoke DMEPOS supplier numbers, and so the NSC can cause problems for an HME provider even though the NSC's interpretation of Supplier Standard No. 12 is questionable at best.
Question: So what should ABC do?
Answer: One course of action is for ABC to
ignore the NSC guidance on the basis that it does not have the
force of law, and it is based on a supplier standard that makes no
mention of accreditation. If the NSC should bring an enforcement
action against ABC (e.g., attempt to revoke ABC's supplier number),
then ABC can challenge the NSC's actions.
Obviously, there is risk associated with this course of action. A
more prudent course of action is for ABC to insist that the
ancillary provider go through "accreditation light," meaning that
the facility will be accredited for the sole purpose of educating
and setting up patients.
Question: OK, let's change directions. In last month's column you discussed the potential legal pitfalls arising out of a non-competitive bidding contract winner purchasing some (but not all) of the assets of a CB contract winner ("contract supplier"). Tell me about the CBIC guidance that has been issued since your last column.
Answer: In December, the CBIC issued a facts sheet entitled "Change of Ownership." It states: "CMS may permit the transfer of a competitive bidding contract to an entity that merges with or acquires a competitive bidding contract supplier if the new owner assumes all rights, obligations and liabilities of the competitive bidding contract. A competitive bidding contract cannot be subdivided. For the transfer of the contract to be considered, the CHOW must include the assumption of the entire Medicare competitive bidding contract, including all competitive bidding areas (CBAs) and product categories (PCs) awarded under the contract."
The fact sheet further states that "[t]he transferee should agree to purchase all assets necessary to perform the terms of the contract" and the purchaser must submit to the CBIC "[o]ne copy of a document describing the nature of the CHOW transaction."
Question: Please put this into plain English. What is the CBIC saying?
Answer: Let's say that ABC is a contract winner for three product categories in Dallas and for one product category in Kansas City. The CBIC is saying that if XYZ (a non-contract supplier) desires to purchase ABC's assets (and, in turn, assume ABC's rights under ABC's CB contract), then the asset purchase must include all of the product categories in Dallas and Kansas City.
CMS issues only one contract per contract supplier; each contract contains an attachment indicating the awarded product categories and the CBAs. XYZ must purchase all of ABC's assets necessary for XYZ to provide the product categories in Dallas and Kansas City and, in turn, seek approval to assume ABC's obligation to furnish the three product categories in Dallas and the one product category in Kansas City.
In other words, ABC cannot sell to XYZ only those assets necessary for XYZ to provide one product category in Dallas. It is all or nothing.
The wording of the fact sheet leaves open the possibility of XYZ purchasing only ABC's competitive bidding-related assets rather than all of the assets of ABC. The new guidance states that "[t]he transferee should agree to purchase all assets necessary to perform the terms of the contract."
However, there is no guidance on the standards for making such a determination. This leaves open the possibility that if XYZ is a large, sophisticated organization, then it may not need to acquire many of ABC's assets in order to perform under the CB contract.
Last, the fact that the CBIC requires a document "describing the nature of the CHOW transaction" indicates a desire by the CBIC to review transactions more closely.
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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 jbaird@bf-law.com.
