AMARILLO, TX – Assume that a group of investors come together to create a DME company “from scratch.” This article discusses the steps that need to be taken.

For purposes of this article, assume that the new DME company is called “ABC Medical Equipment, Inc.” Payments to ABC will come from (i) traditional Medicare fee-for-service (“FFS”), (ii) Medicare Advantage Plans (“MAPs”), (iii) traditional Medicaid FFS, (iv) Medicaid Managed Care Plans (“MMCPs”), (v) employer-sponsored group health insurance, and (vi) cash-pay patients.

• To bill traditional Medicare FFS, ABC will need to secure a Medicare Part B supplier number (“PTAN”).
• To bill traditional Medicaid FFS, ABC will need to secure a Medicaid provider number.
• With very few exceptions, a MAP will not enter into a contract with a DME supplier unless the supplier first obtains a PTAN. The rationale is that the MAP relies on the vetting process the DME supplier must go through to qualify for a PTAN (i.e., accreditation, surety bond, state DME licensure).
• With very few exceptions, a MMCP will not enter into a contract with a DME supplier unless the supplier first obtains a Medicaid provider number. The rationale is that the MMCP relies on the vetting process the DME supplier must go through to qualify for a Medicaid provider number.
• With very few exceptions, a state Medicaid program will not issue a Medicaid provider number to a DME supplier unless the supplier first obtains a PTAN. The rationale is that the state Medicaid program relies on the vetting process the DME supplier must go through to qualify for a PTAN.

The steps to set up and implement ABC are as follows:

• ABC will be incorporated (corporation) or organized (LLC).
• ABC will obtain accreditation from a CMS designated accrediting organization (“AO”). AOs include ACHC, The Joint Commission, HQAA, and The Compliance Team. ABC will adopt policies and procedures designed to comply with CMS’s Quality Standards. ABC will receive a site visit from the AO’s surveyor. If everything goes smoothly, ABC should become accredited within approximately one to two months.
• Most states require DME suppliers to obtain state DME licenses. For example, if ABC is located in Illinois, ABC will need to obtain the required Illinois DME license.
• ABC will obtain a $50,000 surety bond for each location from which ABC serves Medicare patients. If ABC owes money to CMS (e.g., as a result of an audit) and does not repay it, CMS can take money out of the bond.
• Continuing with the assumption that ABC is in Illinois, after ABC has completed the above steps, it will apply for a PTAN for its Illinois location. This is accomplished online with a submission to CMS Provider Enrollment. The application will need to show that ABC is in compliance with CMS Supplier Standards (e.g., proof of ownership of inventory, proof of liability insurance, separate address and telephone number, proper signage). Provider Enrollment will send an inspector to the Illinois location prior to issuance of the PTAN. The inspector will ask questions designed to determine if ABC is in compliance with the Supplier Standards. If everything goes smoothly, ABC should receive its PTAN approximately two to three months following submitting its application.
• If ABC starts selling products to consumers residing in other states, ABC will likely need to obtain an out-of-state DME license in each of those states. Normally, this is a simple process and can be accomplished within a couple of weeks. There are a few states that will not issues a DME license unless the supplier shows that it has a “brick and mortar” location in the state. State “brick and mortar” statutes have exceptions.
• ABC will need to determine if it is required to collect and remit sales tax in the states in which it sells products.
• If ABC intends to bill Medicaid programs in multiple states, it will need to obtain Medicaid provider numbers in those states. In many states, Medicaid provider numbers are relatively easy (and not very time consuming) to obtain. Other states make it more difficult to obtain a Medicaid provider number. Some states will not issue a Medicaid provider number unless the DME supplier has a “brick and mortar” location in the state…or within “x” miles from the state’s border. There are exceptions to these “brick and mortar” statutes.
• As ABC moves into other states, it needs to communicate with the commercial insurers (that ABC is contracted with) to determine if the contracts cover patients residing in the states.

An alternative to forming a new DME supplier is for the investors to purchase the stock/membership interest of an existing DME supplier (“XYZ Medical”).

• XYZ’s Tax ID number will remain in place.
• XYZ’s PTAN, accreditation, state DME licensure and surety bond will remain in place. Change of ownership (“CHOW”) notifications will need to be given to the appropriate agencies/entities.
• In most states, the Medicaid provider number will remain in place. In some states, XYZ will need to obtain a new Medicaid provider number. However, XYZ should be able to able to operate under its existing provider number until it receives its new number.
• XYZ’s third-party payor (“TPP”) contracts should remain in place. CHOW notifications will likely need to be given to the TPPs before/after closing.
• With a stock/membership interest purchase, the investment group will likely not be responsible for XYZ’s pre-closing liabilities. However, such liabilities will remain with XYZ after closing.

Jeffrey S. Baird, JD, is chairman of the Health Care Group at Brown & Fortunato, PC, 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 [email protected].

AAHOMECARE’S EDUCATIONAL WEBINAR

Compliance Program: Mistake Avoidance, Company Valuation, Audits, and 60 Day Rule

Presented by: Jeffrey S. Baird, Esq., Brown & Fortunato & Wayne van Halem, The van Halem Group

Tuesday, December 3, 2024

1:30-2:30 p.m. CENTRAL TIME
Implementation of a formal compliance program has a “real world” impact on DME suppliers. A compliance program is a blueprint (“roadmap”) for the supplier’s employees to follow as they fulfill their employment responsibilities. The program (i) anticipates the multiple daily decisions the supplier must make and (ii) erects guardrails to follow in making the decisions. In short, a functioning compliance program helps DME suppliers avoid mistakes. If a DME supplier decides to sell, the purchaser will conduct due diligence, meaning that it will examine the supplier’s operations to determine if they are legally compliant. A noncompliant operation (e.g., providing CPAPs in violation of the Medicare CPAP Payment Prohibition) will greatly reduce the selling supplier’s value to a prospective buyer. DME suppliers are audited by multiple sources. If the supplier operates within the compliance program’s guardrails, the risk of an audit leading to a bad outcome is greatly reduced. And then there is the 60 Day Rule and Six-Year Lookback. If a DME supplier determines that it has been improperly submitting claims to Medicare, the supplier is obligated to investigate the matter and then report and refund the claims to Medicare. Depending on the circumstances, the supplier may have to conduct a Six-Year Lookback. A functioning compliance plan will reduce the risk of improperly submitting claims that result in in applicability of the 60 Day Rule and Six-Year Lookback.

This program will examine (i) how a compliance program should be drafted and adopted by the DME supplier, (ii) how the program should be updated on a regular basis, and (iii) how following the guardrails contained in the program will reduce the number of mistakes, maintain  the value of the supplier, reduce bad audit outcomes, and reduce the risk of having to conduct a Six-Year Lookback.

Register for Compliance Program: Mistake Avoidance, Company Valuation, Audits, and 60 Day Rule on Tuesday, December 3, 2024, 1:30-2:30 p.m. CT, with Jeffrey S. Baird, Esq. and Wayne van Halem.

Members: $99
Non-Members: $129