AMARILLO, TX – As I discussed in last week’s article, for a number of reasons, DME suppliers are focusing on retail cash sales of products…both Medicare-covered products and non-covered products. With lower reimbursement, post-payment audits, and the next round of competitive bidding that will start in less than two years, suppliers understand that they need to reduce their dependency on the Medicare fee-for-service (“FFS”) program. Equally as important, DME suppliers recognize that there are 78 million Baby Boomers who are retiring at the rate of 10,000 per day. Suppliers understand that most Boomers (i) expect to have an active life, (ii) do not want to wait around for Medicare approval, and (iii) want the “Cadillac,” not the “Cavalier,” product.

This confluence of circumstances presents an opportunity for the DME supplier to develop a successful retail business in which the supplier sells products for cash. Some of the cash products will be covered by Medicare, while others will be non-covered items (e.g., stair lifts). As the supplier moves into the retail space, it needs to decide whether its retail business will (i) operate under the same legal entity that has the PTAN, or (ii) operate out of a separate legal entity that does not have a PTAN.

Last week’s article focused on the cash prices that a DME supplier can charge for Medicare-covered items if the retail business operates under the same legal entity that has the PTAN. Conversely, if a cash sale business is a separate legal entity, then there are no limitations on the prices that the entity can set for cash sales.

This article discusses (i) the advantages of setting up a cash sale business as a separate legal entity and (ii) licensure, prescription and notice requirements that the entity must comply with.

Claim Submission

While a non-participating Medicare supplier (i.e., one with a PTAN) can choose not to accept assignment and collect its usual charge from the patient, it is, nevertheless, required to submit a claim to Medicare on the patient’s behalf unless the patient specifically requests otherwise. In the event that the supplier reasonably believes that Medicare will deny the claim, it is required to obtain a signed Advance Beneficiary Notice of Noncoverage (“ABN”) from the patient in order to charge and collect from the patient. A cash sale business, established as a separate legal entity and not enrolled as a supplier with Medicare, is not subject to these requirements.

Many commercial insurance contracts require that the supplier accept assignment for covered items/services provided and prohibit the supplier from billing the patient instead of the payor. If the cash sale business is a “division” of an entity with commercial insurance contracts, it will not have the ability to engage in cash sales for covered items or services with individuals covered by such third-party insurance plans. On the other hand, if the cash sale business is a separate legal entity that is not contracted with any insurance payors, it will not have such limitations.

Audits

A DME supplier contracted with Medicare/Medicaid/commercial payors is at risk for recoupment liability in the event of an aggressive audit. If the cash sale business is only a “division” or “DBA” of a contracted DME supplier and if the contracted DME supplier does get hit with a large recoupment, then it will also adversely affect the financial condition of the cash sale “division.” On the other hand, if the cash sale business is a separate legal entity, then generally speaking, any recoupment liability imposed against the contracted DME supplier will not spill over to the legally separate cash sale business.

Future Sale/Future Investors

If the cash sale business is a “division” of a DME supplier contracted with Medicare/Medicaid/commercial payors and if the owner desires in the future to sell the cash sale business but retain the Medicare/Medicaid/commercial insurer business, then the owner has no choice but to enter into an asset sale of its cash sale business. On the other hand, if the cash sale business is a separate legal entity and if the owner decides in the future to sell the cash sale business, then it has the option of engaging in either an asset sale or a stock sale. Additionally, if the cash sale business is a separate legal entity, then it can bring in additional investors without affecting the ownership of the contracted DME supplier entity.

Licensure, Prescription and Notice Requirements

Even though the cash sale business will not have a Medicare PTAN or be contracted with other third-party payors, it must still comply with all other regulatory requirements for a business providing medical equipment. Many states require some type of medical equipment licensure or registration. This requirement may be imposed on the supplier located within the state as well as an out-of-state supplier shipping into the state. A few states (e.g., Tennessee, Colorado, and Georgia) require the DME supplier to have a “brick and mortar” presence in the state before a license will be issued to the supplier.

Additionally, the cash sale business should not dispense any legend device or supply without a valid prescription. The manufacturer’s labeling for legend devices and supplies will indicate that the items are to be dispensed only pursuant to a prescription.

42 U.S.C. 1395m(j)(4)(A) states that if a supplier furnishes DME to a Medicare beneficiary for which no payment may be made by Medicare because the supplier does not have a Medicare supplier number, then any expenses incurred for the DME will be the responsibility of the supplier. This means that the cash sale business customer will have no financial responsibility for the product; and the cash sale business will be required to refund the customer unless, before the product is furnished, (i) the customer is informed that Medicare will not reimburse the customer for the product and (ii) the customer agrees to pay cash knowing that he will not be reimbursed. In order to meet this requirement, when a customer walks into the cash sale business location and if the employee suspects that the customer is covered by Medicare, then the employee may want the customer to sign an ABN. Alternatively, the cash sale business might decide not to require a suspected Medicare customer to sign an ABN; and then in those instances when a Medicare customer subsequently complains that he was unaware that Medicare would not reimburse him, the cash sale business will reimburse the customer. This likely will not occur very often. The cash sale business should also post signs that are conspicuous to the public that say that the cash sale business is not enrolled as a Medicare supplier and that Medicare will not pay for items obtained from the cash sale business.

If the DME supplier creates a separate legal entity for its cash sale business and desires to sell items over the Internet, the cash sale business web page should have the following, in large bold type, appear as soon as the customer clicks on a link to view DME as well as immediately prior to check-out:

Notice to Medicare Beneficiaries. Medicare will pay for medical equipment and supplies only if a supplier has a Medicare supplier number. We do not have a Medicare supplier number. Medicare will not pay for any medical equipment and supplies we sell or rent to you. You will be personally and fully responsible for payment.

AAHOMECARE’S EDUCATIONAL WEBINAR

Successfully Moving Into the Retail Market

Presented by: Jeffrey S. Baird, Esq. & Todd A. Moody (pictured), Esq., Brown & Fortunato, P.C.

Tuesday, February 26, 2019

2:30-3:30 p.m. EASTERN TIME

“Leave it to Beaver” has been replaced by “Modern Family.” The old way of running a DME business no longer works. With competitive bidding, stringent documentation requirements, lower reimbursement, and post-payment audits, Medicare fee-for-service should only be a component of the supplier’s total income stream. There are 78 million Baby Boomers retiring at the rate of 10,000 per day. Boomers are accustomed to paying for things out-of-pocket. And most Boomers want the “Cadillac” product – not the “Cavalier” product – so they can have an active lifestyle well into their 80s. The successful DME supplier will be focused on selling upgrades, utilizing ABNs, and selling “Cadillac” items for cash. These retail sales may take place in a store setting, through a kiosk, or over the Internet.

When selling products for cash, there are a number of requirements that the DME supplier must meet. This program will discuss these requirements, including the following

1. state licensure;
2. selling Medicare-covered items at a discount off the Medicare allowable;
3. obtaining a physician prescription; and
4. collection and payment of sales and/or use tax;
5. qualification as a “foreign” corporation;
6. required notification to a Medicare beneficiary even though the supplier does not have a PTAN;
7. complying with federal and state telemarketing rules.

Lastly, this program will discuss the benefits of setting up a separate legal entity through which the retail business will be operated.

Register for Successfully Moving Into the Retail Market on Tuesday, February 26, 2019, 2:30-3:30 p.m. ET, with Jeffrey S. Baird, Esq. and Todd A. Moody, Esq., of Brown & Fortunato, PC.

FEES: Member: $99.00; Non-Member: $129.00

2019 Look Ahead for DME Suppliers

Presented by: Jeffrey S. Baird, Esq., Brown & Fortunato, P.C. and Andrea Stark, MiraVista, LLC

Moderated by: Liz Beaulieu, HME News

Thursday, February 28, 2019, 1:00 p.m. EST

This has become an annual event. Towards the beginning of each year, Andrea Stark (MiraVista) and Jeff Baird (Brown & Fortunato) team up with Liz Beaulieu (HME News) to present the “hot topics” that DME suppliers will face during the coming year. On February 28, 2019, Andrea, Jeff and Liz will present their 9^th “Look Ahead” webinar.  With reduced reimbursement, the looming next round of competitive bidding, aggressive audits, and the growth of managed care, the DME industry is having to remake itself. In this webinar, Andrea and Jeff will discuss (i) the most important topics that today’s DME supplier will face and (ii) how the supplier can modify its business model to succeed in 2019 and beyond. In an interactive “back and forth” manner, Andrea (pictured) and Jeff will discuss the following “hot topics”:

• Billing Multi-Function Ventilators
• Avoidance of Cash Flow Disruption
• MBI Card Distribution
• Audits
• Negotiating Managed Care Contracts
• Telehealth Pitfalls
• Relationship Between the Home Sleep Test and the CPAP Supplier
• Noridian and CGS Lookback Request
• Operating in the Competitive Bidding “GAP” Period
• Predictions for the Next Round of Competitive Bidding

Register for 2019 Look Ahead for DME Suppliers.

AAHomecare’s Retail Work Group

The Retail Work Group is a vibrant network of DME industry stakeholders (suppliers, manufacturers, consultants) that meets once a month via video conference during which (i) an expert guest will present a topic on an aspect of selling products at retail, and (ii) a question and answer period will follow. The next Retail Work Group video conference is scheduled for March 28, 2019, at 11:00 a.m. Central. Jeff Baird, Brown & Fortunato, P.C., will present “Diving Deeper into the Legal Aspects of Retail.” Participation in the Retail Work Group is free to AAHomecare members. For more information, contact Ashley Plauché Manager of Government Affairs, AAHomecare ([email protected]).

Jeffrey S. Baird, JD, is chairman of the Health Care Group at Brown & Fortunato, PC, a law firm based in Amarillo, Tex. 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 [email protected].