Moving the HME Industry Forward

General Healthcare

Adverse Action – Its Effect on Related Entities

April 24, 2017

AMARILLO, TX – Assume that ABC Medical Equipment, Inc. is related to XYZ Medical Equipment, Inc. and DEF Medical Equipment, Inc. For example, assume that while the three companies do not have identical stockholders, John Smith and Jack Jones are stockholders of each company.

Assume that ABC determines that Medicare paid claims to ABC that should not have been paid. Assume that ABC does not report and repay the overpayment to CMS. Assume that there is no evidence of improper claims submissions by XYZ and DEF. Assume that CMS, perhaps through an audit, determines that ABC (i) should not have been paid for claims and (ii) failed to report and refund. As a result, assume that CMS brings an adverse action against ABC in the form of a PTAN revocation.

The question becomes: Will the adverse action against ABC negatively affect XYZ and DEF? It is this question that this article will address.

Under Section 1866j(6) of the Social Security Act, the Secretary of the Department of Health and Human Services (the “Secretary”) “may make any necessary adjustments to payments to the applicable provider of services or supplier under the program under this title in order to satisfy any amount described in subparagraph (B)(ii) due from such obligated provider of services or supplier.”  “Applicable provider of services or supplier” means “a provider or supplier that has the same taxpayer identification assigned … as is assigned to the obligated provider of services or supplier under such section, regardless of whether the applicable provider of services or supplier is assigned a different billing number or national provider identification number [(“NPI”)] under the program under this title than is assigned to the obligated provider of services or supplier.”  The Secretary holds the discretion to expand the recoupment efforts for an overpayment to any entities that share the same tax identification number, regardless of whether the entities have different billing or NPI numbers. In our example, the risk of offsets against or recoupments from XYZ and DEF is minimal, because XYZ and DEF each has its own tax identification number.

With respect to revocation of a supplier’s Medicare billing privileges, CMS will automatically review “all other related Medicare enrollment files that the revoked provider or supplier has an association with (for example as an owner or managing employee) to determine if the revocation warrants an adverse action of the associated Medicare provider or supplier.”  Simply put, it is likely that CMS will review XYZ and DEF to determine if actions against them are appropriate.

CMS has broad authority to revoke a supplier’s enrollment in the Medicare program.  The most likely reason that CMS would cite for revocation of ABC’s billing privileges would be “abuse of billing privileges,” and, more specifically, that the company has a pattern or practice of submitting claims that do not meet Medicare coverage requirements.  In making such a determination, CMS will review six different elements:

1) the percentage of submitted claims that were denied.
2) the reason(s) for the claim denials.
3) whether the provider or supplier has any history of final adverse actions (as that term is defined under § 424.502) and the nature of any such actions.
4) the length of time over which the pattern has continued.
5) how long the provider or supplier has been enrolled in Medicare.
6) any other information regarding the provider or supplier’s specific circumstances that CMS deems relevant to its determination as to whether the provider or supplier has or has not engaged in the pattern or practice described in this paragraph.

In the event that CMS reviews ABC’s practices and determines that its Medicare enrollment should be revoked due to an abuse of billing privileges, XYZ and DEF will have a credible argument that they have not engaged in similar actions and should be allowed to retain their billing privileges. This is, of course, assuming that XYZ and DEF have appropriate documentation supporting the claims they have submitted to Medicare.

Jeff Baird and Lisa Smith will be presenting the following webinar:

Oxygen: When Do the 36 Months Start Over?

Presented by: Jeffrey S. Baird, Esq., Brown & Fortunato, P.C. & Lisa K. Smith, Esq., Brown & Fortunato, P.C.
Tuesday, May 9, 2017
2:30-4:00 p.m. EASTERN TIME
When a DME supplier provides an oxygen concentrator to a Medicare beneficiary, Medicare will pay the supplier for the first 36 months and then the supplier will be obligated to service the beneficiary’s oxygen needs, for very little compensation, for the next 24 months. Occasions may arise when the beneficiary’s continuous use of the concentrator is interrupted. This interruption may be caused by one of the following: (i) the concentrator is lost, stolen, or damaged beyond repair; (ii) there is an extended break in need of greater than 60 days; (iii) the supplier sells its assets to another supplier; (iv) the supplier goes out of business; (v) the supplier files bankruptcy; or (vi) the beneficiary relocates outside the supplier’s service area. When one of these events occurs, and afterwards the beneficiary subsequently starts using a concentrator provided by the initial supplier or a concentrator provided by a new supplier, the question becomes: Can the 36 month rental period start over?

Register for Oxygen:  When Do the 36 Months Start Over? on Tuesday, May 9, 2017, 2:30-4:00 pm ET, with Jeffrey S. Baird, Esq., and Lisa K. Smith, Esq., of  Brown & Fortunato, PC.
Please contact Ika Sukh at if you experience any difficulties registering.

Member: $99.00    
Non-Member: $129.00

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