AMARILLO, TX – DME suppliers live in the proverbial glass house. Their actions are observed by governmental agencies, CMS contractors, third party payors, and the DME suppliers’ employees. It is important that suppliers recognize key compliance issues in order to avoid legal pitfalls. This article discusses, in a “Cliff Note” fashion, the key compliance issues that DME suppliers need to be aware of.
State DME Licensure
Most states require a DME supplier to have a license to sell products to residents of the state. Such licenses are product specific. A DME supplier must secure required state DME licenses. If a DME supplier fails to secure a required DME license, the supplier will be in violation of the DME Supplier Standards. It is important for a DME supplier to examine the DME licensure requirements for each state into which the supplier sells products.
All states impose sales taxes on certain products. A DME supplier must adhere to the sales tax requirements of the states into which the supplier sells products. If a DME supplier fails to collect and remit required sales taxes, it may be subject to an enforcement action. It is important for a DME supplier to look at the sales tax requirements for each state into which the supplier sells products.
In utilizing offshore subcontractors, a DME supplier must (i) ensure the protection of PHI and (ii) determine if there are restrictions or prohibitions (on the use of such subcontractors) by third-party payors. If a DME supplier does not ensure the protection of PHI in the hands of an offshore subcontractor, the supplier runs the risk of violating HIPAA. If a DME supplier does not comply with the prohibitions and/or restrictions (regarding the use of offshore subcontractors) of a third- party payor, the supplier runs the risk of violating its contract with the third-party payor and/or becoming the target of an enforcement action by the third-party payor. A DME supplier needs to enter into a HIPAA-compliant Business Associate Agreement with the offshore subcontractor and comply with the prohibitions and/or restrictions of third- party payors. For example:
- some state Medicaid programs prohibit the use of offshore subcontractors; and
- some commercial insurers require the DME supplier to obtain the prior approval of the insurers.
For DME suppliers to be able to bill Medicare, it must have a Medicare Part B supplier number (PTAN). To be eligible for a PTAN, the supplier must meet a number of requirements, including adherence to the DME Supplier Standards. If a DME supplier does not comply with a Supplier Standard, there is a risk that the National Supplier Clearinghouse (“NSC”) will take steps to revoke the supplier’s PTAN. If a DME supplier’s PTAN is revoked, it is likely that some or all of its commercial insurance contracts will be terminated. Most commercial insurers require a DME supplier to have an active PTAN as a condition to be a contracted supplier with the insurer.
Arrangements with Referring Physicians
If a DME supplier enters into an arrangement with a referring physician that results in the supplier providing anything of value to the physician, the arrangement must comply with the AKS and the federal physician self-referral statute (“Stark”).
If a DME supplier provides anything of value to a referring physician, the arrangement will violate the AKS unless the arrangement complies with (or substantially complies with) a Safe Harbor; for example, if the DME supplier is paying a physician for services (such as Medical Director services), the arrangement must comply with (or substantially comply with) the Personal Services and Management Contracts (“PSMC”) safe harbor. Among other requirements, the parties must enter into a written agreement with a term of at least one year, the methodology for calculating compensation must be fixed one year in advance, the compensation must be the fair market value equivalent of the physician’s services, and the compensation cannot take into account the anticipated business generated between the parties.
Likewise, if a DME supplier provides anything of value to a referring physician, the arrangement will violate Stark unless the arrangement complies with an exception. For example, under the Stark Non-Monetary Compensation exception, the DME supplier can spend up to $452 in 2022 on non-monetary/non-monetary equivalent gifts for a physician (e.g., meals, entertainment).
There is not a Safe Harbor that is similar to the Stark Non-Monetary Compensation exception. However, if an arrangement between a DME supplier and a physician complies with the Stark exception, it is highly unlikely that a government enforcement action will be brought against the arrangement under the AKS.
The physician’s staff do not fall under Stark, meaning that the Stark Non-Monetary Compensation exception does not apply to the staff. Meals, etc. to the staff must be examined under the AKS. There is no safe harbor that applies to meals, etc. for the staff. Even one meal could technically violate the AKS. From a practical standpoint, if meals, etc. provided to the staff are modest in price and infrequent in nature, the risk is low that a government enforcement action will be brought against the arrangement under the AKS.
With the above in mind, it is acceptable for the DME supplier (through its employed marketing reps) to engage in the following activities:
- On a periodic basis (e.g., once a quarter), drop off donuts to the physician’s staff for breakfast.
- On a periodic basis (e.g., twice a year), bring a moderately-priced lunch to the physician’s staff and present a short educational program.
- Take the physician to dinner or treat him/her to a round of golf.
The DME supplier needs to adopt a formal Marketing Policy that sets out the guidelines for the supplier’s marketing reps to follow as they conduct their marketing activities.
Arrangements with Non-Physician Referral Sources
If a DME supplier enters into an arrangement with a non-physician referral source that results in the supplier providing anything of value to the non-physician referral source, the arrangement must comply with the AKS. For example, if a DME supplier provides anything of value to the physician’s staff, (e.g., donuts, lunch with an educational program), it is important that what is offered is infrequent and is modest in value. Doing so will reduce the risk of an enforcement action under the AKS. As previously stated, the DME supplier needs to adopt a formal Marketing Policy that sets out the guidelines for the supplier’s marketing reps to follow as they conduct their marketing activities.
Marketing to Prospective Customers
In marketing to prospective customers, it is important that the DME supplier not offer anything of value to the prospective customers unless what is offered falls into an exception to the federal beneficiary inducement statute. The federal beneficiary inducement statute states that a DME supplier cannot offer anything of value to a prospective customer to persuade the prospective customer to purchase an FHCP-covered product from the supplier … unless an exception is met.
The nominal value exception allows the DME supplier to offer a gift to a prospective customer if the gift (i) has a retail value of $15 or less and (ii) is not cash or cash equivalent. The DME supplier can offer multiple gifts to a prospective customer on condition that the retail value of the gifts, in the aggregate, do not exceed $75 over a 12-month period. The term “retail value” of a gift means what the prospective customer can purchase the gift for on the open market (e.g., walk into a retail store or order the gift over the internet).
Cooperative Marketing with Affiliated Entity
As a “covered entity” under HIPAA, a DME supplier cannot disclose or use protected health information (“PHI”) unless HIPAA requirements are met. If the DME supplier communicates with its patients about services offered by an affiliated entity, such communications will violate HIPAA unless the supplier complies with HIPAA guidelines. It is important for the DME supplier to implement a robust HIPAA policy that sets out the conditions in which the supplier can disclose or use PHI to promote the services of the affiliated entity.
Cooperative Marketing with Manufacturer
A DME supplier and a manufacturer can cooperatively market together on condition that the arrangement does not violate the AKS. If the manufacturer pays for all or most of the cooperative marketing expenses, the manufacturer may be construed as giving something of value to the DME supplier to induce the supplier to sell the manufacturer’s products. If these products are covered by a federal health care program (“FHCP”), the AKS will be implicated.
In implementing a cooperative marketing program with a manufacturer, the DME supplier must ensure that both parties are contributing their pro rata share of the program’s expenses. If the cooperative marketing program will benefit the manufacturer and DME supplier equally, it is reasonable that each party contribute 50% of the expenses of the program. If the cooperative marketing program will benefit one party more than the other party, it is reasonable that the party benefitting the most will pay a greater percentage of the expenses than the other party.
Discounts and Rebates from Manufacturer
Discounts and rebates provided by the manufacturer to the DME supplier must comply with the Discount Safe Harbor to the AKS. If the discounts and rebates provided by the manufacturer are not based solely on the volume of purchases by the supplier but, rather, are also based on other actions by the supplier (e.g., converting patients from one manufacturer to another), the AKS is implicated.
Waiver of Copayments
A DME supplier is required to exert a reasonable effort to collect copayments from patients. If a DME supplier routinely waives copayments or advertises that it has a financial hardship waiver program or advertises that if the patient meets certain requirements his/her copayment will be waived or reduced, the supplier is potentially liable under the federal anti-kickback statute (“AKS”), federal beneficiary inducement statute, and Federal False Claims Act.
The DME supplier should implement a Copayment Collection Policy that states:
- Upon the sale of a product covered by a third-party payor, the supplier will bill the patient for the copayment.
- The supplier will make reasonable efforts to collect the copayment.
- The supplier will waive or reduce the copayment only if the patient establishes financial hardship.
- The supplier will not advertise that (i) it has a financial hardship waiver program and/or (ii) if the patient meets certain requirements, his/her copayments will be waived or reduced.
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. 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.
AAHOMECARE’S EDUCATIONAL WEBINAR
Transitioning from Billing Assigned to Billing Non-Assigned
Presented by: Jeffrey S. Baird, Esq., Brown & Fortunato & Lisa K. Smith, Esq., Brown & Fortunato
Tuesday, February 22, 2022
1:30-2:30 p.m. CENTRAL TIME
Since its inception in the 1970s, the DME industry has been an “assignment” industry. A DME supplier would provide a product to a Medicare beneficiary, take assignment from the beneficiary, bill and collect from Medicare, and bill the beneficiary for the copayment. As a result of lower Medicare reimbursements, and in response to the willingness of aging Baby Boomers to pay cash for “Cadillac” products, an increasing number of DME suppliers are electing to become “non-participating” suppliers and are providing Medicare-covered items on a non-assigned basis. This means that the Medicare beneficiaries pay cash up front to the suppliers. This program will discuss the multiple issues arising out of transitioning from billing assigned to billing on a non-assigned basis, including the following: (i) What does it mean to bill non-assigned? (ii) If the supplier bills an item non-assigned, can the supplier set the price without limitation? (iii) Must the supplier submit a claim to Medicare so that the beneficiary can be reimbursed? (iv) Can the supplier sell a capped rental item for cash? (v) Does the supplier need to obtain documentation supporting medical necessity? (vi) Is the supplier at risk of having to repay Medicare and/or the beneficiary in the event of a subsequent audit?