AMARILLO, TX – The DME industry has been in existence since the 1970s. The industry primarily serves the elderly, meaning that DME suppliers have largely been dependent on Medicare. DME suppliers have primarily billed Medicare on an assignment basis. That is, (i) the supplier provides the product to the Medicare beneficiary, (ii) the supplier takes assignment from the beneficiary and bills Medicare, (iii) Medicare pays the supplier 80% of the allowable, and (iv) the supplier collects the other 20% from the beneficiary. Under this “assignment” model, the successful DME supplier had to be proficient at billing and collecting from Medicare.
While the assignment model will remain with us, we are witnessing a transition to a non-assignment model. Under the non-assignment model, a non-participating supplier will (i) collect money up front from the beneficiary and (ii) submit a claim to Medicare on behalf of the beneficary in order for the beneficiary to receive reimbursement from Medicare. There are several factors behind this transition:
- Subject to certain restrictions, the supplier can charge the beneficiary whatever the supplier wants to.
- The supplier receives its money up-front.
- Many Baby Boomers are willing to pay cash for Cadillac products rather than be relegated to a “Cavalier” product paid for by Medicare.
Part One addresses (i) the anti-discrimination rule, (ii) participating vs. non-participating, and (iii) billing nonassigned. Part Two addresses selling products for cash at retail. Part Three addresses Frequently Asked Questions.
Avoiding Discrimination
CMS has an anti-discrimination rule that states that it can terminate a DME supplier’s PTAN for a number of reasons, including if the supplier “places restrictions on the persons it will accept for treatment and it fails either to exempt Medicare beneficiaries from those restrictions or to apply them to Medicare beneficiaries the same as to all other persons seeking care.” 42 C.F.R. 489.53. A supplier can set up any pricing it wants as long as it is the same for all. Suppliers can make decisions on what to take assignment on based on any algorithm as long as it is the same for all payers.
Participating vs. Non-Participating
Participating Supplier
A DME supplier elects to become a “participating supplier” by completing the Medicare Participating Physician or Supplier Agreement. When a DME supplier elects to become a participating supplier, it agrees to accept assignment on all claims for Medicare products and services and agrees to be paid the Medicare-allowed amount as full payment, less any unmet deductible and coinsurance.
Non-Participating Supplier
When a DME supplier is a “non-participating supplier,” it may accept assignment on a claim-by-claim basis. If a non-participating supplier does not accept assignment, it can collect directly from the patient for Medicare covered products and services and charge more than the Medicare allowable in such cases. The supplier is required to file the claim with Medicare on a nonassigned basis on behalf of the patient, and any Medicare reimbursement is sent directly to the patient.
Switching From Participating Supplier to Non-Participating Supplier
To terminate an existing Medicare participating supplier agreement and become non-participating, the supplier must notify the National Supplier Clearinghouse (“NSC”) in writing during the enrollment period. The annual participation enrollment period begins on November 15 and concludes on December 31 of each year.
Billing Nonassigned
Competitive Bid Items
If a non-participating supplier without a competitive bid (“CB”) contract sells or rents an item (that falls within a product category covered by CB) on a nonassigned basis to a patient residing in a CBA, the item is not covered and the patient will not be reimbursed by Medicare. The noncontract supplier is required to notify the beneficiary that it is not a contract supplier for the CB item in the CBA, and the supplier must obtain a signed ABN indicating that the beneficiary was informed in writing prior to receiving the competitively bid item or service that there would be no payment by Medicare due to the supplier’s noncontract status.
Renting a Capped Rental Item
Assume that an item is reimbursable by Medicare as a “capped rental item.” Assume that the non-participating, noncontract supplier rents the item, on a nonassigned basis, to a patient not residing in a CBA. In this situation, the supplier can collect a rental amount from the patient that is higher than the Medicare fee schedule, and Medicare will pay 80% of the Medicare fee schedule rental payment to the patient on a monthly basis.
Payment Authorization Form
The DME supplier must have the beneficiary complete a signature authorization for the claim form every month for items rented on a nonassigned basis.
Supplies and Accessories
For supplies and accessories used with beneficiary-owned equipment (equipment that is owned by the beneficiary, but was not paid for by Medicare FFS), Medicare will pay for them; however all of the following information must be submitted with the initial claim in Item 19 on the CMS-1500 claim form or in the NTE segment for electronic claims:
- HCPCS code of base equipment
- A notation that this equipment is beneficiary-owned
- Date the patient obtained the equipment
Medicare requires that supplies and accessories only be provided for equipment that meets the existing coverage criteria for the base item. In the event of a documentation request from a CMS contractor, the supplier must provide information justifying the medical necessity for the base item and the supplies and/or accessories. Note: drugs and biologicals (e.g., nebulizer drugs) are mandatory assignment items.
Repairs
Repairs to equipment that a beneficiary owns are covered when necessary to make the equipment serviceable. If the expense for repairs exceeds the estimated expense of purchasing (or renting another item of equipment for the remaining period of medical need), no payment can be made for the amount of the excess. When billing for repairs, include the HCPCS code and date of purchase of the item being repaired, the manufacturer’s name, product name, model number, MSRP of the repair item provided, and the justification for the repair.
Commercial Insurance Mandates Assignment
Under the anti-discrimination provision, the supplier can adopt a policy in which (i) it bills nonassigned for Products A, B, and C and/or (ii) it bills nonassigned for all products in which third party reimbursement is $100 or less. This policy does not discriminate against Medicare patients because this policy applies across the board.
The following question arises: If the insurance company requires the supplier to bill on an assigned basis for all products, including “Product A,” then does the supplier have the right (under the anti-discrimination provision) to sell/rent “Product A” to the Medicare patient on a nonassigned basis? The answer is “yes.” Rather than saying it will only take assignment on claims based on a certain dollar figure, the supplier can adopt a policy that a particular item will be available to a patient if the reimbursement received meets a certain dollar threshold.
The supplier can always make that item available to a Medicare patient on a nonassigned basis.
If the commercial insurance does not allow nonassigned claims, the item is only available to the patient if the insurance reimbursement meets the threshold dollar amount.
Switching to Medicare Advantage
A Medicare beneficiary may switch from Medicare FFS to a Medicare Advantage plan. The question is: “Do Medicare Advantage plans allow the DME supplier to bill nonassigned or do Medicare Advantage plans require the supplier to take assignment?” The supplier will need to look to the specific Medicare Advantage plan to see if the plan requires the supplier to take assignment or allows the supplier to bill nonassigned. If the answer is that the specific plan requires assignment, then the supplier can make the item available to the patient only if the insurance reimbursement meets the threshold dollar amount.
Payment Authorization
A request for payment signed by the beneficiary must be obtained for each claim and kept on file by the supplier. Generally, suppliers may obtain and retain in their files a one-time payment authorization. Except as specified below, once the supplier has obtained the beneficiary’s one-time authorization, later claims can be filed without obtaining an additional signature from the beneficiary. These claims may be on an assigned or nonassigned basis with the exception of DME rentals. The one-time authorization for DME rental claims is limited to assigned claims. For items rented on a nonassigned basis, the supplier will have to get a beneficiary authorization signature each month.
What the Supplier Can Charge
The supplier can charge the patient an amount higher than the Medicare fee schedule. While the supplier can charge the patient an amount lower than the Medicare fee schedule, the supplier needs to be aware of the federal statute that says that a supplier is prohibited from charging Medicare substantially in excess of the supplier’s usual and customary charges, unless there is good cause shown. In addition, the supplier needs to also be aware of (i) Medicaid statutes that say that the supplier must bill Medicaid its “usual and customary,” and (ii) provisions in commercial insurance contracts that state that the supplier must give its “best price” to the insurer.
Limiting Charge
According to CMS: “The provider may bill the beneficiary no more than the “limiting charge” for covered services. The “limiting charge” applies only to certain Medicare-covered services and does not apply to DME.
Selling Capped Rental Items
Since Medicare will not pay anything for the sale of a capped rental item, an approach may be to allow the beneficiary to rent on a nonassigned basis so that the supplier receives higher reimbursement, but the beneficiary still receives paid 80% of the Medicare allowable.
Billing for Items on Same Day
A supplier cannot submit some items assigned and others nonassigned on the same date of service.
Changing from Assigned to Nonassigned
If the supplier is non-participating, then it can change to nonassigned during the rental period.
The supplier should give the patient at least 30 days advance notice, so the patient can look for another supplier that will accept assignment.
Also, if the supplier changes to nonassigned for rental equipment, the supplier will have to obtain a beneficiary payment authorization signature for each month’s rental.
In the past, the DME MACs have stated that a supplier cannot change from assigned to nonassigned during the course of the 36 month oxygen rental. Brown & Fortunato disagrees. Language from the Federal Register makes it clear that the supplier’s notice regarding acceptance of assignment is not binding.
Oxygen Contents
A non-participating supplier can bill oxygen contents nonassigned after the 36 month rental period.
Stationary and Portable
If an oxygen patient has both a concentrator and a portable that are being billed on two different anniversary dates, one claim can be assigned and the other claim can be nonassigned.
Contents Charge
The Oxygen Policy Article makes clear that a supplier can adopt either flat rate for contents or a charge that varies based on the quantity of contents provided.
Self-Fill Cylinders
A supplier can use conserving devices, portable oxygen concentrators, etc. A supplier can technically use a self-fill unit for the individual patients as long as each patient has his/her own equipment and self-fill cylinders. The supplier can have the patient, nurse, or other caregiver fill the cylinder for the patient. The supplier cannot have one self-fill unit with a number of cylinders to fill for unnamed individuals.
Number of Cylinders
Unless it is a safety issue to have multiple cylinders in a residence, there is not a limit to what should be provided to meet that patient’s needs. The supplier is required to provide all contents that the patient needs during the month and cannot limit the number of cylinders.
Post-Payment Audits
Because relatively few DME claims have historically been billed nonassigned, there is no significant track record of CMS pursuing recoupments of nonassigned claims. Having said this, nonassigned claims are equally as vulnerable to audits as assigned claims. If a nonassigned claim is audited, the supplier will be responsible to produce the documents justifying medical necessity.
Nebulizer Drugs
The nebulizer medications should be covered if the patient meets Medicare medical necessity coverage criteria for the nebulizer and all of the following information is submitted with the initial claim in Item 19 on the CMS-1500 claim form or in the NTE segment for electronic claims: HCPCS code of base equipment, a notation that this equipment is beneficiary-owned, and the date the patient obtained the equipment.
Secondary Insurer
If the supplier does not accept assignment on an item, the billed amount will be whatever amount the supplier sets. The secondary insurer will not typically pay the difference between the billed and allowed charge. This is typically disallowed by secondary payers.
ABN
The intake process should be the same for assigned and nonassigned items. If the patient does not meet medical necessity criteria and the supplier chooses to provide and bill nonassigned, an ABN should be issued and assuming the ABN is valid, the supplier should have no repayment obligation. The supplier should not routinely be obtaining an ABN for all nonassigned claims. An ABN should be issued only when the supplier reasonably believes that the claim will be denied. In the instance that a nonassigned claim is reviewed and payment denied, the supplier will usually be required to refund the amount collected back to the Medicare beneficiary unless a valid ABN was obtained.
Required Documentation
A supplier should evaluate all patients against the LCD and policy article requirements. If a patient meets all Medicare requirements, an ABN cannot be used. A nonassigned claim can be filed with appropriate notification to the patient.
Rental Copayments
The supplier cannot collect all rental “copayments” up front because a copayment is tied to the monthly rental charge. A supplier can charge its regular charge for the equipment and collect the full amount from the patient on a nonassigned basis for the first month, and then take assignment for all subsequent month rentals. A one-time claim authorization is effective for future month rentals when assignment is accepted. A separate authorization is required for each month rental billed on a nonassigned basis.
Medicare Advantage Plans and ABNs
ABNs are specific to Medicare FFS. Whether a Medicare Advantage plan requires an ABN, or something equivalent to an ABN to hold the patient responsible if the plan denies coverage for the claim, is dependent on the particular plan.
Prior Authorization
The supplier can bill nonassigned on an item that requires prior approval. Obtaining prior approval does not mean that the supplier has to take assignment. A supplier is required to follow Medicare guidelines for coverage regardless of assignment of claim.
Prescription Items
Any item labeled as a prescription device or supply requires a prescription prior to dispensing, regardless of whether it is being sold by a Medicare supplier, “retail” company or online company with no PTAN. State licensing requirements govern who can/cannot sell prescription items. The seller of a prescription-only item should retain the prescription in its records.
Electronic Signature
Medicare should accept an electronic signature that meets the requirements of the Uniform Electronic Transactions Act (“UETA”).
Denial of Nonassigned Claim
Applicable reasons for denial of a nonassigned claim are lack of medical necessity, failure to have a Medicare supplier number, violation of telephone solicitation prohibition, denial of an Advanced Determination of Medicare Coverage (ADMC) request, and non-contracted suppliers for competitive bid items in a CBA.
Billing Secondary Insurance
A supplier is not required to bill secondary insurance on a nonassigned claim.
Hospital-Owned Supplier
If the supplier and the hospital are under the same Tax ID number (i.e., the supplier is a “department” of the hospital), and if the hospital is participating, then the supplier must be participating as well.
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. 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].
Lisa K. Smith, JD, is an attorney with the Health Care Group at Brown & Fortunato, a law firm with a national health care practice based in Texas. She represents pharmacies, infusion companies, HME companies, manufacturers, and other health care providers throughout the United States. Smith is Board Certified in Health Law by the Texas Board of Legal Specialization and can be reached at (806) 345-6370 or [email protected].
