AMARILLO, TX – The DME industry is a Part B industry. DME suppliers furnish products to Medicare beneficiaries, take assignment, and bill traditional Medicare under Part B. DME suppliers also bill Medicare Advantage Plans (MAPs) for products furnished to Medicare beneficiaries.
On the other hand, skilled nursing facilities and hospice providers fall into the Part A category. Traditional Medicare and MAPs pay the skilled nursing facilities and hospices on a per diem basis (e.g., $___ per patient per month). Out of these per diem payments, the skilled nursing facilities and hospices pay DME suppliers for the products/services the suppliers furnish to Part A patients.
It is common for (i) DME suppliers to enter into contracts with skilled nursing facilities and hospices to furnish products/services to their Part A patients and (ii) the skilled nursing facilities/hospices to pay the DME suppliers for the products/services. This article will discuss (i) skilled nursing facilities, (ii) hospices, (iii) how DME suppliers can work with skilled nursing facilities and hospices, and (iv) legal pitfalls to be avoided as DME suppliers, skilled nursing facilities and hospices work together.
Hospice is end of life care provided by a Medicare-certified hospice business. Hospice focuses on transition care: (i) ceasing curative disease treatment and chronic disease management; (ii) movement toward palliative care; (iii) relieving pain; (iv) managing decline; and (v) assisting family and caregivers with decline.
To be eligible for hospice services, (i) the patient must be terminally ill; (ii) the prognosis is for the patient to have less than six months to live; (iii) the patient must have declining physical and/or mental functions; and (iv) the patient must demonstrate dependence in at least three Activities of Daily Living (“ADLs”) such as bathing, dressing, getting up from a bed or chair, walking, toileting, and eating; (v) the patient must have a recent history of recurrent hospitalization; and (vi) the patient must have additional comorbidities.
The following can be locations of hospice services:
- patient’s home;
- custodial nursing home;
- assisted living facility;
- intermediate care facility;
- group home; and
- hospice in-patient facility.
Core hospice personnel include: (i) physician; (ii) nurse; (iii) social worker; (iv) nursing assistants; and (v) religious counselors.
Core hospice services include: (i) symptom management; (ii) provision of medication and supplies; (iii) education of family and caregivers in proper care; (iv) short-term inpatient care (“respite” care); and (v) family grief support.
Skilled Nursing Facilities (SNFs)
SNFs provide post-acute (post-hospitalization) care that is comparable to the level of nursing care provided in a hospital. The goal of the SNF is to enable the patient to recover sufficiently to return home after hospitalization. SNF core personnel include: (i) nurses; (ii) physical therapists; (iii) occupational therapists; (iv) speech pathologists; (v) audiologists; and (vi) nursing assistants. SNF core services include: (i) disease treatment and management; (ii) provision of medication and supplies; (iii) care levels similar to what is provided in hospitals; and (iv) rehabilitative therapy.
Hospices and SNFs primarily serve the elderly. The elderly are covered by Medicare Part A. This means that hospices/SNFs (i) provide services to Medicare beneficiaries, (ii) procure supplies from DME suppliers, and (iii) bill traditional Medicare and Medicare Advantage Plans (collectively referred to as “Medicare”). The beneficiaries can reside in their home…or they can reside in a custodial care facility, independent living facility, assisted living facility, or similar type of facility.
Hospice care is covered by Medicare Part A regardless of whether the care is provided in the beneficiary’s home or in a facility. Hospice care has low or no patient copay. A SNF is not a long-term care/custodial care facility. A beneficiary does not reside in a SNF. Rather, the beneficiary is normally discharged from the hospital and is admitted to a SNF for a limited period of time. The SNF benefit depends on length of stay.
- Days 1-20 have no patient copay (Medicare covers 100%);
- Days 21-100 have a patient copay of $200/day (2023)
- Benefit ends after day 100.
Hospice and SNF patients need DME the same way that non-hospice/SNF patients need DME. And so there is an opportunity for DME suppliers to serve hospice and SNF patients. However, DME suppliers cannot bill Part B for DME provided to hospice/SNF patients. Likewise, DME suppliers cannot bill Part A for DME provided to hospice/SNF patients.
The reason for this is that the per diem reimbursement ($___ per patient per day) the hospice/SNF receives from Medicare covers DME. Therefore, the hospice/SNF (not Medicare) will pay the DME supplier for the DME provided by the supplier to the hospice/SNF patient.
Compliance with Laws
The hospice/SNF is a referral source to the DME supplier. The hospice/SNF will refer patients to the DME supplier for products covered by Medicare. In working with a hospice/SNF, it is important that the DME supplier not violate the federal anti-kickback statute (“AKS) and related laws. In working with hospice/SNF patients, it is important that the DME supplier not violate the federal beneficiary inducement statute and related laws.
Federal and State Laws
Federal Anti-Kickback Statute (AKS)
The AKS makes it a felony to knowingly and willfully offer, pay, solicit, or receive any remuneration to induce a person or entity to refer an individual for the furnishing or arranging for the furnishing of any item or service reimbursable by a federal health care program (“FHCP”), or to induce such person to purchase or lease or recommend the purchase or lease of any item or service reimbursable by an FHCP.
Federal Beneficiary Inducement Statute
The inducement statute imposes civil monetary penalties upon a person or entity that offers or gives remuneration (in the form of a gift or otherwise) to any FHCP beneficiary that the offeror knows or should know is likely to influence the recipient to order an item for which payment may be made under an FHCP. This statute does not prohibit the giving of non-monetary/non-monetary equivalent gifts that are of “nominal value” (no more than $15 per item or $75 in the aggregate to any one beneficiary on an annual basis).
Federal Physician Self-Referral Statute (“Stark”)
Stark provides that if a physician (or an immediate family member) has a financial relationship with an entity providing designated health services (“DHS”), the physician may not refer Medicare/Medicaid patients to the entity unless a Stark exception is met. Note that the term “physician” includes other types of clinicians, such as dentists and chiropractors. DHS includes durable medical equipment and supplies.
Federal Safe Harbors
Because of the breadth and scope of the AKS, the Office of Inspector General (“OIG”) has published a number of “safe harbors.” If an arrangement meets the requirements of a safe harbor, as a matter of law the arrangement does not violate the AKS. If an arrangement does not meet the requirements of a safe harbor, it does not mean that the arrangement automatically violates the AKS. Rather, the arrangement must be carefully scrutinized under the wording of the AKS, court decisions, and published guidance by the OIG.
OIG Special Fraud Alerts and Special Advisory Bulletins
From time to time, the OIG publishes Special Fraud Alerts and Special Advisory Bulletins that (i) discuss business arrangements that the OIG believes may be abusive and (ii) educate health care providers concerning fraudulent and/or abusive practices that the OIG has observed and is observing.
OIG Advisory Opinions
A health care provider may submit to the OIG a request for an advisory opinion concerning a business arrangement that the provider has entered into or wishes to enter into in the future. In submitting the advisory opinion request, the provider must give to the OIG specific facts. In response, the OIG will issue an advisory opinion concerning whether or not there is a likelihood that the arrangement will implicate the AKS.
All states have enacted statutes prohibiting kickbacks, fee splitting, patient brokering, or self-referrals. Some state anti-kickback statutes only apply when the payor is a government health care program. Other state anti-kickback statutes apply regardless of the identity of the payor.
Arrangements with Hospices and SNFs
Assume that a provider furnishes hospice care. Medicare will pay the hospice under Part A…and the hospice will, in turn, pay the DME supplier. Assume that a facility provides services to skilled nursing patients. Medicare will pay the facility under Part A…and the facility will, in turn, pay the DME supplier. On the other hand, when a DME supplier furnishes products to a custodial care patient, the DME supplier will bill Medicare directly under Part B.
Assume that ABC owns/leases a building that provides both skilled nursing care and custodial care. In other words, the building is both a SNF and a traditional nursing home. Assume that a DME supplier provides DME to SNF and custodial care patients. The DME supplier may be tempted to provide DME to a skilled nursing patient for below fair market value (“FMV”) compensation in order to motivate ABC to refer custodial care (Part B) patients to the supplier. Doing so will result in “something of value” flowing from the DME supplier to ABC in exchange for the referral of Part B patients. This, in turn, will violate the AKS. And so it is important that ABC pay FMV compensation to the DME supplier for products/services that the supplier provides to SNF patients.
A DME supplier may be tempted to donate products and services to a hospice/SNF, or to engage in activities that will save the hospice/SNF money. The DME supplier needs to avoid doing this because such actions will likely violate the AKS.
It is not uncommon for a DME supplier to provide products/services to a hospice/SNF patient and then discover that the hospice/SNF refuses to pay for the products/services. The facility’s reasoning may be that because it is granting the DME supplier access to the facility’s Part B patients, the DME supplier should not expect payment from the facility for the DME supplier’s products and services to the facility’s Part A patients. If the DME supplier allows the facility not to pay the supplier, such inaction will violate the AKS because free products/services to Part A patients (i.e., hospice and SNF patients) constitute “something of value” provided by the DME supplier to the facility…in exchange for referrals of Part B patients by the facility to the DME supplier. Both the facility and the DME supplier are liable under the AKS.
The challenge for the DME supplier is that if it does not provide services to Part A patients for no charge … or for a charge that is below FMV … the facility will switch to another DME supplier that is willing to provide Part A services at no charge or for a charge that is below FMV. This results in the proverbial “uneven playing field.” If the DME supplier elects to acquiesce to the facility’s expectation that the DME supplier not charge for Part A services (or charge less than FMV for such services), then the DME supplier assumes the following risks:
- The Department of Justice (“DOJ”) may bring a criminal action against the DME supplier and facility for violating the AKS.
- The Part B claims submitted by the DME supplier to CMS, resulting from services rendered by the DME supplier to the facility’s Part B patients, may be construed to be “false claims” in violation of the federal False Claims Act. It is the DOJ’s position that a claim that arises from a violation of the AKS constitutes a “false claim.”
To reduce the risk of the facility expecting the DME supplier to provide free (or below FMV) services to the facility’s Part A patients, the DME supplier and facility should enter into an unambiguous written agreement that obligates the facility to pay FMV compensation to the DME supplier for the supplier’s Part A services. At the time the agreement is signed, the DME supplier may want to present to the facility a White Paper that discusses the legal obligation of the facility to pay FMV compensation to the DME supplier for its services to the facility’s Part A patients.
Assume that after the agreement is signed, the facility nevertheless refuses to pay FMV compensation to the DME supplier for the supplier’s services to the facility’s Part A patients.
- The DME supplier can direct its attorney to send a demand letter to the facility that (i) discusses what the law requires and (ii) demands that the facility pay the compensation required by the agreement.
- If the facility ignores the demand letter, the DME supplier can sue for damages under the agreement.
- The DME supplier can anonymously notify the DOJ and/or OIG of the actions of the facility … and of another DME supplier that is providing free services (or services for below FMV compensation) to the facility.
- The DME supplier can bring a whistleblower lawsuit against the facility and against another DME supplier that is providing free services (or services for below FMV compensation) to the facility.
Agreements with Subcontractors
A DME supplier (“Contractor”) may want to enter into a Subcontract Agreement (“SA”) with another DME supplier (“Subcontractor”) in which the Subcontractor will provide the products/services that the Contractor would normally provide. For example, a facility may request a product/service on a particular day and the Contractor does not have the resources (e.g., personnel) to provide the product/service on that particular day. Alternatively, a Contractor may have a contract with the owner of multiple facilities, located in different geographical areas, and the Contractor does not have the bandwidth to cover all of the locations.
Assume that the Subcontractor (i) provides products/services to a Part B patient and (ii) bills and collects from Medicare. The Subcontractor cannot pay a percentage of the compensation to the Contractor. Doing so will violate the AKS. Assume that the Subcontractor (i) provides products/services to a Part A patient and (ii) bills and collects from the facility. The Subcontractor cannot pay a percentage of the compensation to the Contractor. Doing so will violate the AKS. Assume that (i) the Subcontractor provides products/services to a Part B patient but (ii) the Contractor bills and collects from Medicare.
- The safest course of action is for the Subcontractor to bill Medicare.
- If the Contractor bills Medicare, then (i) the Contractor must handle the initial intake, assessment and coordination of care, (ii) the Contractor must have a base level of operational responsibilities and financial risk, and (iii) the Contractor must pay FMV compensation to the Subcontractor for the Subcontractor’s services.
Assume that (i) the Subcontractor provides products/services to a Part A patient but (ii) the Contractor bills and collects from the facility. The safest course of action is for the Subcontractor to bill the facility. The Contractor can bill the facility for the Subcontractor’s products/services if the contract between the facility and Contractor allows the Contractor to subcontract out certain products/services. If the Contractor bills the facility for the Subcontractor’s products/services, then the Contractor must pay FMV compensation to the Subcontractor for its products/services.
Assume that the Contractor has a relationship with multiple facilities and understands that it will need the assistance of a Subcontractor to meet the needs of the facilities. The contract between the Contractor and the facilities must give the Contractor the right to subcontract out the Contractor’s products/services. The Contractor must pay FMV compensation to the Subcontractor for the Subcontractor’s products/services. Conversely, assume that the Contractor provides legitimate products/services to the Subcontractor. The Subcontractor must pay FMV compensation to the Contractor for the Contractor’s products/services.
Gifts to Hospice/SNF Patients
The DME supplier can provide a gift to a hospice/SNF patient if the gift has a retail value of $15 or less. The gift cannot be cash or cash equivalent such as a gift card or pre-paid credit card. The DME supplier can provide multiple gifts to a hospice/SNF patient so long as the retail value of all the gifts, combined, during any given 12-month period does not exceed $75. Examples of permissible gifts are books, electronic products, food, flowers, vitamins and skin care products.
Examples of impermissible gifts are (i) cash, gift cards, pre-paid credit cards; (ii) individual gift that has a retail value in excess of $15; and (iii) multiple gifts during the course of 12 months that, combined, have a retail value in excess of $75.
Providing Products to Hospices/SNFs
A hospice provider/SNF may request a DME supplier (that serves the hospice provider’s/SNF’s patients) to donate a drug cart…or bedding…or other items…to the hospice provider/SNF. These items constitute “something of value” to a referral source. As a result, the AKS comes into play.
On the other hand, the DME supplier can deliver possession (but not title) of products (e.g., iPads) to a hospice provider/SNF so long as (i) title to the products remains with the DME supplier and (ii) the hospice provider/SNF uses the products only in conjunction with its relationship with the DME supplier.
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@example.com.