AMARILLO, TX – As we have discussed in previous Medtrade Monday articles, Medicare and commercial insurers are pushing providers and suppliers away from the traditional fee-for-service (“FFS”) reimbursement model and towards a coordination of care reimbursement model.
Under the FFS model, providers and suppliers are paid for the products and services they provide…regardless of whether such products and services are effective in treating patients. This is expensive and inefficient. Conversely, under the coordination of care model, reimbursement is tied to patient outcome. The coordination of care model is premised on providers and suppliers working together.
However, CMS and the OIG have correctly determined that the federal anti-kickback statute (“AKS”), the beneficiary inducement statute, and the Stark physician self-referral statute (“Stark”) restrict the ability of providers and suppliers to (i) coordinate with each other and (ii) provide free health care products and services to patients that are designed to improve their health.
Recognizing this dilemma, the OIG published Advisory Opinion 17-01 and Advisory Opinion 19-03. These opinions approved free services by providers to patients in which such services were designed to break down socio-economic barriers to health care. Further, on October 9, 2019, (i) the OIG published proposed changes/additions to the safe harbors to the AKS and (ii) CMS published proposed changes/additions to exceptions to Stark. The goals of the proposed changes are to promote coordination of care and break down socio-economic barriers to health care.
The message for DME suppliers is that CMS and the OIG are acknowledging the importance of providers coordinating with each other and providing free health care products and services to patients…even if doing so would have historically implicated the AKS, Stark and the beneficiary inducement statute. This article focuses on two important exceptions to the beneficiary inducement statute.
The beneficiary inducement statute is implicated if a person offers or transfers remuneration to a Medicare or Medicaid beneficiary that the person knows or should know is likely to influence the beneficiary’s selection of a particular provider, practitioner, or supplier of any item or service for which payment may be made, in whole or in part, by Medicare or Medicaid. Violation of this statute may result in civil monetary penalties (‘CMPs”).
“Remuneration” is defined to include “transfers of items or services for free or for other than fair market value.” The OIG has issued guidance to clarify the definition of “remuneration.” Remuneration does not include inexpensive gifts (other than cash or cash equivalents) that have a retail value of no more than $15 per item or $75 in the aggregate per beneficiary on an annual basis.
There are two important exceptions available under the Beneficiary Inducement CMP. These two exceptions are tied to the goal of CMS and the OIG to relax the restrictions set out in the AKS, Stark and the beneficiary inducement statute. The first is the “Promote Access to Care Exception.” This exception states that remuneration does not include:
items or services that improve a beneficiary’s ability to obtain items and services payable by Medicare or Medicaid, and pose a low risk of harm to Medicare and Medicaid beneficiaries and the Medicare and Medicaid programs by –
- being unlikely to interfere with, or skew, clinical decision making;
- being unlikely to increase costs to Federal health care programs or beneficiaries through overutilization or inappropriate utilization; and
- not raising patient safety or quality-of-care concerns.
The other exception is the “Financial Need Based Exception.” This exception states that remuneration does not include:
the offer or transfer of items or services for free or less than fair market value by a person, if –
- the items or services are not offered as part of any advertisement or solicitation;
- the offer or transfer of the items or services is not tied to the provision of other items or services reimbursed in whole or in part by the program under Title XVIII or a State health care program (as defined in section 1128(h) of the Act);
- there is a reasonable connection between the items or services and the medical care of the individual; and
- the person provides the items or services after determining in good faith that the individual is in financial need.
Now let us apply these two exceptions to four hypothetical scenarios.
Scenario 1 – A Medicare beneficiary (“beneficiary”) has an office visit with a physician. The physician determines that the beneficiary needs oxygen now and without immediate oxygen, the beneficiary will likely end up in a hospital within the next 48 hours. However, it will take several days before the beneficiary can undergo the qualification test. The physician asks a DME supplier to immediately supply an oxygen concentrator to the beneficiary.
Scenario 1: Analysis – The supplier can have a policy in place that says that if the supplier places a concentrator on a beneficiary before coverage is determined, then the supplier will instruct the beneficiary that he needs to pay daily rent for the concentrator. Inasmuch as the Medicare monthly rental allowable for concentrators is low, one would think that the daily rental charged by the supplier would be low. If the beneficiary responds by saying that he does not have the financial ability to pay the daily rental, then the supplier can have the beneficiary fill out a financial hardship form, after which the supplier can determine whether or not to waive the daily rental. Essentially, this is the same procedure that the supplier can follow when it comes to waiving copayments. As previously discussed, the beneficiary inducement statute has a “nominal value” exception that states that a supplier can offer a non-monetary gift to a beneficiary that has a retail value of $15 or less; and if the supplier offers multiple gifts to a beneficiary, then the multiple gifts cannot (in the aggregate) have a retail value in excess of $75 over a 12-month period. Assume that fair market value (“FMV”) daily rent for a concentrator is $4. The supplier can argue that allowing the beneficiary to use the concentrator free of charge (for e.g., seven days) complies with the nominal value exception. That is, each “gift” consists of daily use of the concentrator, each gift has a value of $4, and the combined value of the gifts is $28. Separate and apart from the beneficiary inducement statute, the DME supplier can argue that the intent behind providing the concentrator for free is not to induce the beneficiary to purchase/rent a covered item from the supplier but, rather, the intent is (i) to provide the beneficiary access to health care and (ii) to reduce the risk of the beneficiary being admitted to the hospital—thereby saving money for the Medicare program. Ideally, the physician will provide something in writing to the supplier that states that if the beneficiary is not immediately placed on oxygen, then it is likely that he will end up in the hospital in a very short period of time.
Scenario 2 – A physician believes that a beneficiary may have COPD. So, the physician asks a DME supplier to perform a pre-screen test on the beneficiary. If the pre-screen indicates possible COPD, then the physician will order a qualification test.
Scenario 2: Analysis – Scenario 2 – The supplier can have a policy in place that says that if the supplier conducts a pre-screen on a beneficiary, then the supplier will instruct the beneficiary that he needs to pay an FMV fee to the supplier for the pre-screen. If the beneficiary responds by saying that he does not have the financial ability to pay for the pre-screen, then the supplier can have the beneficiary fill out a financial hardship form, after which the supplier will determine whether or not to waive the fee for the pre-screen. If an FMV fee for the pre-screen is $15 or less, then the supplier can argue that the free pre-screen complies with the nominal value exception to the beneficiary inducement statute. Separate and apart from the beneficiary inducement statute, the DME supplier can argue that the intent behind providing the free pre-screen is not to induce the beneficiary to purchase/rent a covered item from the supplier but, rather, the intent is (i) to provide the beneficiary access to health care and (ii) to reduce the risk of the beneficiary being admitted to the hospital—thereby saving money for the Medicare program.
Scenario 3 – A beneficiary is about to be discharged from the hospital. The physician determines that the beneficiary needs oxygen in the home and that without such oxygen, the risk is high that the beneficiary will be readmitted within the next week or two. However, it will be about a week before the beneficiary can undergo the qualification test. The physician asks a DME supplier to furnish an oxygen concentrator to the beneficiary now with the understanding that the beneficiary will likely qualify for oxygen within the next week.
Scenario 3: Analysis – The discussion set out above in Scenario 1 applies here.
Scenario 4 – A beneficiary is about to be discharged from the hospital. The beneficiary has already qualified for oxygen and DME Supplier A will set the beneficiary up on oxygen within a couple of hours after the beneficiary arrives at his home. DME Supplier B also services patients discharged from the hospital. The hospital asks DME Supplier B to provide a “traveling tank” for the beneficiary to use while being transported from the hospital to his home. Once DME Supplier A delivers the concentrator, then DME Supplier B will retrieve the tank from the beneficiary. If the beneficiary is unable to gain access to a traveling tank, then the beneficiary will likely need to remain in the hospital.
Scenario 4: Analysis – This is an interesting scenario. The delivery of the tanks benefits the beneficiary and, hence, the beneficiary inducement statute comes into play. If the “retail value” of providing the traveling tank is less than $15, and if the retail value of retrieving the traveling tank is less than $15, then the supplier can assert that the arrangement complies with the nominal value exception to the beneficiary inducement statute. Now, let us switch gears and look at this arrangement from the viewpoint of the hospital. The hospital is financially motivated to discharge the patient. If the patient remains in the hospital because there is not a traveling tank to facilitate the patient going home, then the hospital may start losing money on the patient. By delivering and retrieving the tank, the supplier might be construed to be “providing something of value” to the hospital (i.e., facilitating the discharge of the patient). The hospital is a referral source to the supplier. Hence, the federal anti-kickback statute may be implicated. As such, the safest course of action is for the hospital to pay the supplier for the short-term provision of traveling tanks to facilitate discharge. The compensation should be the FMV equivalent of the supplier’s services. If the supplier elects to deliver/retrieve tanks without charge, then the supplier can argue that the federal anti-kickback statute is not violated because the intent of the arrangement is not to motivate the hospital to refer patients to the supplier; rather, the intent is to provide access to care to patients.
It is unknown if the above arguments will be persuasive to a government enforcement agency. Before engaging in any of the above scenarios, the DME supplier needs to seek advice from its health care attorney.
AAHOMECARE’S EDUCATIONAL WEBINAR
How to Contest a Drastic Reimbursement Cut by a Medicaid Managed Care Plan
Presented by: Jeffrey S. Baird, Esq., Brown & Fortunato, P.C.
Tuesday, February 18, 2020
2:30-3:30 p.m. EASTERN TIME
Approximately 70 percent of all Medicaid patients are covered by Medicaid Managed Care Plans (“Plans”). A Plan is administered by an insurance company. The Plan receives money from the state Medicaid program to take care of Medicaid patients. The Plan, in turn, signs up patients and contracts with health care providers, including DME suppliers. The Plan is in the business of making money, meaning that it is motivated to pay as little as possible to providers. It is becoming all too common for a Plan to (i) enter into a “sole source” contract with one DME supplier (often, an out-of-state supplier) or (ii) reduce reimbursement to such an extent that only the Plan’s “preferred” supplier can afford to service the Medicaid patients … in which case the products are substandard and the services are nonexistent. This program will discuss the steps that DME suppliers can take to oppose sole source contracting and drastic reimbursement cuts. Such steps include (i) talking to the state Medicaid program; (ii) talking to state legislators with jurisdiction over the state Medicaid program; (iii) working with state legislators to sponsor legislation to counter the Plan’s actions; (iv) running an ad campaign; and (v) within certain parameters, educating the Plan’s covered lives about the problems arising out of a sole source contract and drastically reduced reimbursement.
- Understand how a Medicaid Managed Care Plan comes into existence.
- Understand the rights granted to and obligations imposed on Plans by state Medicaid programs.
- Learn the steps that DME suppliers can take to oppose sole source contracting and drastic reimbursement cuts.
Jeffrey S. Baird, JD, is Chairman of the Health Care Group at Brown & Fortunato, PC, a law firm based in Amarillo, Texas. He represents pharmacies, infusion companies, HME companies 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 firstname.lastname@example.org.
 42 U.S.C. § 1320a-7a(a)(5).
 Id. § 1320a-7a(a).
 Id. § 1320a-7a(i)(6).
 See 81 Fed. Reg.88368, 88394.
 42 C.F.R. § 1003.110(6).
 42 C.F.R. § 1003.110(8).