AMARILLO, TX – Last month, the Office of Inspector General (OIG) issued a report (Report) entitled “Medicare Improperly Paid Suppliers for Intermittent Urinary Catheters.”
The Report says, in part:

• From 2014 through 2021, CMS identified high improper payments for urological supplies, including intermittent urinary catheters (“catheters”).
• Because of the ongoing risk of improper payments, the OIG conducted a nationwide audit to determine whether Medicare paid suppliers for catheters in accordance with Medicare requirements from July 2021 through June 2022 (“Audit Period”).
• The OIG found that 15 out of 105 sample items did not meet Medicare requirements. Specifically, medical records did not support Medicare enrollees’ eligibility for curved-tip catheters or sterile catheter kits (“kits”). Additionally, suppliers did not meet Medicare requirements for catheter refills, proof of delivery, or a standard written order.
• On the basis of the sample results, the OIG estimates that of the $303.3 million Medicare paid for kits during the Audit Period, approximately $35.1 million was improperly paid. In addition, the OIG estimates that enrollees were responsible for approximately $8.8 million in copayments.
• The OIG determined that suppliers billed 125,426 claims for curved-tip catheters provided to female enrollees in 2023, compared with 2,753 claims for the Audit Period. This large increase in claims billed may be an indication of improper claims.

The Report is just the latest of reports by the OIG focusing on the DME industry billing for certain products. When CMS notices an uptick in claims for products, CMS and the OIG will likely focus on the reasons for the increase in claims submissions.

The message to DME suppliers is that when they find themselves billing for items that are the “flavor of the month” – that is – the suppliers are billing for items for which many other suppliers are billing, the suppliers need to be prepared to respond to an audit.

Now, let us look at the Report from a different angle. CMS contractor audits will focus on documentation (i.e., whether the supplier’s documentation supports the claims submitted). However, the catheter space has an additional – more serious – issue. It pertains to physicians billing for catheters in violation of the federal physician self-referral statute (“Stark”). A Stark issue will likely not be picked up by an auditor. This is because, as previously stated, the auditor will be focusing on documentation issues. However, a Stark issue may rise to the surface as a result of a whistleblower lawsuit.

Stark
Stark is a federal civil strict liability statute stating that, unless an exception applies, prohibits physicians (as broadly defined by Stark) from referring patients for designated health services (“DHS”) to an entity with which the physician has a financial relationship.

Definition of DHS
DHS is defined to include prosthetics, such as urological supplies. 42 CFR § 411.351.

Definition of “Referral” and Explanation of “Personally Provided”
A “referral” is defined as ordering DHS for which payment may be made under Medicare Part B. However, a “referral” does not occur if the DHS is “personally provided” by the referring physician. 42 CFR § 411.351.

The Centers for Medicare and Medicaid Services’ (“CMS’”) commentary in its 2007 Phase III Stark Final Rule provides clarification on the meaning of the phrase “personally provided.” According to the 2007 Final Rule, “there are few, if any, situations in which a referring physician would personally furnish DME and supplies … because doing so would require that the physician … personally perform all of the duties of a supplier as set forth in the supplier standards in § 424.57(c).” See 72 FR 51019, available at https://www.federalregister.gov/d/07-4252/page-51019.

According to the 2007 Final Rule, it is “highly unlikely” that a referring physician would meet the criteria for personally performed services when dispensing DME. “The dispensing of DME by a physician almost always constitutes a “referral” for the physician self-referral statute, as would the dispensing of DME by anyone else affiliated with the referring physician, such as a nurse or physician assistant.” Id. (emphasis added).

If the physician is ordering and furnishing urological supplies for which payments will be made under Medicare Part B, and if the physician is not personally providing the urological supplies, then the physician must comply with a Stark Law exception. 

In-Office Ancillary Services (IOAS) Exception to Stark
There are multiple Stark exceptions, including an exception for IOAS. See 42 CFR 411.355(b). To meet the IOAS exception, the referral for urological supplies must comply with a number of requirements, including (i) who must furnish the service, (ii) where the service is furnished, and (iii) compliance with applicable Medicare billing and coverage rules. See 42 CFR 411.355(b); CMS, Physician Self-Referral Law Frequently Asked Questions, available at https://www.cms.gov/Medicare/Fraud-and-Abuse/PhysicianSelfReferral/Downloads/FAQs-Physician-Self-Referral-Law.pdf.

Under the IOAS exception, urological supplies must be furnished personally by the referring physician, a physician who is a member of the same group as the referring physician, or an individual who is supervised by the physician or by another physician in the group practice. 42 CFR 411.355(b)(1). The urological supplies must be furnished in the same or a centralized building used for the provision of some or all of the physician’s medical services. 42 CFR 411.355(b)(2). This location requirement is not satisfied if a patient receives urological supplies by mail outside the physician’s office, as the urological supplies would not be dispensed to the patient in the office.

“Put another way, items that are designated health services to which the exception is applicable, such as intermittent catheters (which are prosthetic devices), fall within the scope of the exception for in-office ancillary services only when a patient directly receives the item in the physician’s office and in a manner that is sufficient to meet applicable Medicare billing and coverage rules. The “location requirement” at 42 C.F.R. §411.355(b)(2) would not be satisfied if a patient receives an item by mail outside the physician’s office, as it would not be dispensed to the patient in the office. This is true regardless of whether Medicare coverage and payment rules would permit the supplier to mail the item to the patient and bill the Medicare program for the item.”

Physician Self-Referral Law Frequently Asked Questions (cms.gov) page 9 (published September 20, 2021)

Violation of Stark
If a physician orders and furnishes urological supplies for which payment will be made under Medicare Part B, a “referral” under Stark occurs unless the urological supplies are personally provided by the physician.

The commentary to the Final Rule states that it is rare for a physician to personally provide urological supplies because physicians rarely perform all activities required by the DMEPOS Supplier Standard to satisfy the “personally provided” definition.

The physician’s referrals for urological supplies are for DHS because DHS is defined to include prosthetics, and urological supplies are considered prosthetics.

The IOAS exception may be satisfied if (i) the urological supplies are furnished personally by the referring physician or by an individual who is supervised by the referring physician or is supervised by another physician in the referring physician’s group practice and (ii) the urological supplies are furnished in the same or a centralized building used for the provision of some or all of the physician’s medical services.

To the extent that the urological supplies are mailed to a patient’s home, the IOAS exception is not satisfied, and such delivery will likely violate Stark. 

Jeffrey S. Baird, JD, is chairman of the Health Care Group at Brown & Fortunato, a law firm with a national health care practice based in Texas. He represents pharmacies, infusion companies, HME companies, manufacturers and other health care providers throughout the United States. Mr. Baird is Board Certified in Health Law by the Texas Board of Legal Specialization and can be reached at (806) 345-6320 or [email protected].