AMARILLO, TX – There are two recurring issues that DME suppliers face. The first issue pertains to the types of arrangements that suppliers can enter into with physicians. The second issue pertains to the situation in which Supplier A is a party to a third party payor (“TPP”) contract, Supplier B is not a party to the TPP contract, Supplier B has patients who are covered by the TPP contract, and Supplier B and Supplier A want to work together in order for Supplier B to be able to service its patients covered by the TPP contract. This article addresses these two issues.

Federal Law

Federal anti-kickback statute (“Federal AKS”) – Under the Federal AKS, a DME supplier cannot give “anything of value” to any person or entity (including, but not limited to, a physician) in exchange for the person/entity referring (or arranging for the referral of) patients to the supplier who are covered by a government health care program. Under the “one purpose” test, enumerated by court decisions, if “one purpose” behind a payment (no matter how small that “purpose” is) is to reward the payee for referring (or arranging for the referral of) government health program patients, then the Federal AKS is violated notwithstanding that the “main purpose” behind the payment is to pay for legitimate services. There are a number of “safe harbors” to the Federal AKS. A safe harbor is a hypothetical fact situation such that if an arrangement falls within the fact situation then, as a matter of law, the Federal AKS is not violated. If an arrangement does not fall within a safe harbor, then it does not mean that the Federal AKS is violated. Rather, it means that an in-depth analysis of the arrangement needs to be conducted.

Stark physician self-referral statute (“Stark”) – Under Stark, if a DME supplier has a financial relationship (compensation or ownership) with a physician (or an immediate family member of the physician), then the physician cannot refer Medicare and Medicaid patients to the supplier. There are a number of exceptions to Stark. One exception is the “non-monetary compensation exception” that allows a supplier to provide gifts to a physician that do not (in the aggregate) exceed a specified dollar amount in a calendar year. For 2018, that dollar amount is $407. The gift cannot be cash or a cash equivalent such as a gift card.

State Law

Every state has one or more anti-kickback statutes that are similar to the Federal AKS. Some state anti-kickback statutes apply only when the payor is the state Medicaid program. Other state anti-kickback statutes apply when the payor is either the state Medicaid program or a commercial insurer. And other state anti-kickback statutes apply regardless of who the payor is (state Medicaid program, commercial insurer, cash-pay patient).

Most states have physician self-referral statutes that are similar to Stark. Every state has a (i) Medical Practices Act that applies only to physicians, (ii) a set of statutes specific to pharmacies, and (iii) sets of statutes that are specific to other types of health care providers. These provider-specific statutes likely address referrals to other providers, self-referrals, payments for referrals, and splitting of fees.

Arrangements With Physicians

Paying for Space – A DME supplier can rent space from a referring physician. From a kickback/physician self-referral standpoint, the safest course of action is for the parties to enter into a Space Rental Agreement in which the supplier pays the physician fixed annual rent (it can be paid monthly). The rent must be fair market value (“FMV”). Fixed annual (FMV) rent (i) is an important element of the Space Rental safe harbor to the Federal AKS and the Space Rental exception to Stark and (ii) is likely safe under the applicable state statutes. Even if the DME supplier is comfortable with the space rental arrangement from a kickback/physician self-referral standpoint, the supplier needs to be aware of the risk pertaining to the National Supplier Clearinghouse (“NSC”). From the vantage point of the NSC, if the supplier has “regular hours” at the physician’s office during which the supplier services patients (e.g., fits them with a product), then the NSC may assert that the physician’s office is another practice location for the supplier…meaning that the supplier must obtain a Medicare Part B Supplier Number (“PTAN”) for the physician’s office. The risk of the NSC taking this position is reduced if the supplier only goes to the physician’s office when the physician notifies the supplier that one or more patients need to be seen. In other words, the supplier is not at the physician’s office during set hours.

Paying for Services – A DME supplier can pay a physician for services if certain conditions are met. The parties should enter into a Services Agreement in which the supplier pays the physician fixed annual (FMV) compensation for the physician’s services. The compensation can be broken down into monthly payments. Such services must be substantive, legitimate and important; they cannot be “made up” services. Fixed annual (FMV) compensation (i) is an important element of the Personal Services and Management Contracts safe harbor to the Federal AKS and the Personal Services exception to Stark and (ii) is likely safe under applicable state statutes.

Health Fairs – A DME supplier may pay fixed daily compensation for a physician or physician employee to attend and participate in a health fair. The compensation must be the FMV equivalent of the physician’s/employee’s services at the health fair.

Education Dinner – A DME supplier may pay a lump sum amount to a physician for presenting at an education dinner so long as the following conditions are met: (i) the payment is FMV; (ii) what the physician talks about is substantive and important; and (iii) the audience will benefit from what the physician has to say.

Clinical Study – A DME supplier may engage in a clinical study that (i) is run by a hospital or university and (ii) is under the supervision of an Institutional Review Board (“IRB”). There is a possibility that a supplier can enter into a clinical study directly with a physician on condition that (i) the supplier makes a lump sum payment to the physician that is the FMV equivalent of his services and (ii) the data provided by the physician to the supplier is valuable to the supplier.

Gift Cards – A DME supplier may not give gift cards to physicians. These are “cash equivalents” and do not fall within the non-monetary compensation exception to Stark.

Non-Monetary Compensation Gifts to Physicians – A DME supplier can provide meals and similar non-cash equivalent gifts to a physician so long as the gifts, in the aggregate, do not exceed $407 in value in 2018. The allowed amount will likely increase in 2019.

Meals to the Physician’s Staff – A DME supplier can provide meals (e.g., bagels for breakfast, pizza for lunch) to the physician’s staff. The non-monetary compensation Stark exception does not apply to the physician’s staff. In fact, there is not a monetary exception that applies to the physician’s staff. The supplier must be modest in providing meals to the physician’s staff.

Stock and Bill – A “stock and bill” arrangement is also known as a “loan closet” and “consignment” arrangement. This is where the DME supplier places inventory in the physician’s office. When the physician prescribes a DME product, he will give the patient a choice of which DME supplier the patient desires to purchase the product from. If the patient does not express a preference, then the physician can recommend that the patient obtain the product from the supplier that has the consigned inventory at the physician’s office. If the patient decides to obtain the product from the supplier, then the physician will pull the product out of the “closet” and send the patient home with it. Even though a written agreement is not legally required, it is wise for the supplier and physician to execute an Equipment Placement Agreement. If the supplier pays rent to the physician for the “closet,” then the rental arrangement needs to comply with the Space Rental safe harbor to the Federal AKS and the Space Rental exception to Stark (i.e, the rent must be fixed one year in advance and be FMV). As a practical matter, any rent paid by the supplier will be minuscule.

Accessing Another Supplier’s Third Party Payor Contract

Assume that the supplier generates patients who are covered by a third party payor (“TPP”) contract for which the supplier is not on the supplier panel. Assume that the DME supplier would like to enter into an arrangement with another DME supplier that is on the panel. This can be done but as is often the case, the “devil is in the details.”

• Assume that ABC Medical Equipment has a TPP contract with BCBS. Assume that XYZ Medical Equipment does not have the contract with BCBS. Assume that ABC and XYZ wish to enter into a Subcontract Agreement. In this scenario, ABC will be the “supplier” and XYZ will be the subcontractor. ABC will need to review its contract with BCBS to determine if it addresses whether or not ABC can subcontract out its services. Some TPP agreements allow subcontract arrangements, some allow subcontract arrangements…with conditions, and some prohibit subcontract arrangements.
• Assume that the BCBS contract allows ABC to subcontract out its services. What cannot happen is for (i) XYZ to generate the patient, (ii) XYZ to collect the documents, (iii) XYZ to handle the intake (i.e., determine if the patient meets the coverage requirements under the TPP contract, (iv) XYZ to deliver the product to the patient, (v) XYZ to provide set-up and education services to the patient, (vi) ABC to bill and collect from BCBS, and (vii) ABC to remit a percentage of the proceeds to XYZ. This type of arrangement would constitute a false claim. By this I mean that while ABC would be holding itself out as the supplier of the product, in reality XYZ would be the supplier. Therefore, the claims that ABC would submit to BCBS would be false. And XYZ would have collaborated in the submission by ABC of the false claims. This type of arrangement would also constitute a kickback: XYZ would be referring patients to ABC and ABC would, in turn, be paying money to XYZ. The way that the arrangement should be properly structured is as follows: (i) XYZ generates the patient; (ii) XYZ collects the documents; (iii) XYZ transmits the documents to ABC; (iv) ABC handles the intake (i.e., it determines if the patient qualifies for coverage under the BCBS contract); (v) XYZ delivers the product to the patient, sets up the product, and educates the patient; (vi) ABC bills and collects from BCBS; (vii) ABC pays XYZ in accordance with a price list for the products and in accordance with a fee schedule for XYZ’s subcontract services; and (viii) if a patient has a repair need, then he will call ABC which can, in turn, instruct its subcontractor (XYZ) to take care of the patient.

Jeff Baird will present the following webinars:

AAHOMECARE’S EDUCATIONAL WEBINAR

Proper vs. Improper Arrangements Between DME Suppliers and Manufacturers

Presented by: Jeffrey S. Baird, Esq., Brown & Fortunato, P.C.

Tuesday, October 2, 2018

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

Manufacturers and DME suppliers are dependent on each other. The DME supplier needs to have access to products at a reasonable cost. The manufacturer is dependent on successful DME suppliers that can purchase products from the manufacturer. And so it is important for manufacturers and DME suppliers to work together. The law allows manufacturers and suppliers to work together…so long as certain legal guidelines are met. This webinar will discuss the proper arrangements that manufacturers and DME suppliers can enter into…and those arrangements that need to be avoided. For example, it is legally permissible for the manufacturer to offer volume-based discounts and rebates to suppliers. On the other hand, it is not permissible for a manufacturer (“offering manufacturer”) to offer discounts, rebates, or anything else of value to a supplier in exchange for the supplier “flipping” its customers from another manufacturer’s brand to the offering manufacturer’s brand. As yet another example, a manufacturer can generate leads for a DME supplier so long as the arrangement does not “cross the line” into kickback territory. And a manufacturer and a supplier can enter into a cooperative marketing arrangement so long as they jointly pay the expenses of the program. This program will cover these…and other…examples.

Register for Proper vs. Improper Arrangements Between DME Suppliers and Manufacturers on Tuesday, October 2, 2018, 2:30-3:30 p.m. ET, with Jeffrey S. Baird, Esq., of  Brown & Fortunato, PC.

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

AAHOMECARE’S EDUCATIONAL WEBINAR

How to Fight the Awarding of a Sole Source Contract by a State Medicaid Program

Presented by: Jeffrey S. Baird, Esq., Brown & Fortunato, P.C. & Pam F. Colbert, Esq., Brown & Fortunato, P.C.

Tuesday, October 23, 2018

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

It is the proverbial “Irresistible Force Meeting the Immovable Object:” State Medicaid rolls are continuing to expand…but Medicaid programs are constrained by limited money. In an attempt to contain costs, State Medicaid programs are contracting with Medicaid Managed Care Plans (“Plans”) to provide health care services and products to beneficiaries under a capitation payment (fee per member per month).  The Plan then contracts with providers and suppliers to provide the products and services to Medicaid beneficiaries. Plans focus on profits. In order to generate profits, Plans are (i) cutting reimbursement and (ii) contracting with a small number of providers and suppliers…and in some cases, Plans contract with only one provider/supplier. If a DME supplier is facing drastically reduced reimbursement and/or being bumped off of Plan’s panel, the supplier needs to know what responsive steps to take.  This program will (i) discuss what a Plan is and how a state Medicaid program will contract with it; (ii) examples of Plans drastically reducing reimbursement and limiting the number of DME suppliers on their panels; and (iii) steps that the supplier can take to respond to the Plan’s actions. These steps include (i) utilizing the Plan’s appeal/grievance process; (ii) determining if the state has an applicable “any willing provider” statute; (iii) filing a complaint with the State Insurance Commission; (iv) lobbying the State Medicaid program; (v) lobbying the state legislature; (vi) lobbying CMS; (vii) conducting public awareness campaigns; and (viii) contacting Medicaid beneficiaries directly.

Register for How to Fight the Awarding of a Sole Source Contract by a State Medicaid Program on Tuesday, October 23, 2018, 2:30-3:30 p.m. ET, with Jeffrey S. Baird, Esq. and Pam F. Colbert, Esq., of  Brown & Fortunato, PC.

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

Webinar Sponsored by PAMS

How to Handle the Non-Compliant Patient

Presented by: Jeffrey S. Baird, Esq., Brown & Fortunato, P.C.
Wednesday, October 24, 2018

2:00 pm – 3:30 pm EASTERN TIME

A “noncompliant patient” can take many forms. For example, an oxygen patient may negligently, recklessly or intentionally damage his concentrator. As yet another example, the oxygen patient may fail to have a face-to-face visit with his physician in order for the DME supplier to obtain a recertification CMN. And what about the oxygen patient who refuses to return his concentrator when the RUL has expired? Or what about the oxygen patient who insists on smoking when using the concentrator? This program will discuss the legal rights the supplier has in response to a noncompliant patient. Recognizing, however, that it may be unrealistic…and perhaps even risky…for the supplier to exercise its legal rights, the program will discuss practical steps that the supplier can take to deal with a noncompliant patient. Examples of practical steps include sending out reminder letters, sending out lapse notifications, offering gift card incentives to persuade a patient to return an item, and contacting the patient’s physician and/or caregiver.

Learning Objectives:

• Understand the DME supplier’s continuing obligations to the patient once the supplier provides an oxygen concentrator to the patient.
• Learn the multiple ways that an oxygen patient can accurately be classified as noncompliant.
• Learn the steps the DME supplier can take when it determines that an oxygen patient is noncompliant.
• Understand the steps the DME supplier can take to assist an oxygen patient to become compliant.

Register now for “How to Handle the Non-Compliant Patient” on Wednesday, October 24, 2018, 2:00-3:30 pm ET, with Jeffrey S. Baird, Esq., of  Brown & Fortunato, PC.

FEES:            

Member: $59.00       

Non-Member:  $89.00

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].