AMARILLO, TX – The DME industry, in its present form, has been around since the 1970s. For the first 25 to 30 years of its existence, the industry was relatively unregulated and was relatively simple. A DME supplier would easily and quickly obtain a PTAN, without an accreditation requirement, and the supplier would open its doors.

A Medicare beneficiary would purchase or rent an item, Medicare reimbursement was high, the profit margin was reasonable, and post-payment audits and prepayment reviews were not out of control. Those days are long gone.

With competitive bidding, aggressive post-payment audits and prepayment reviews, reimbursement cuts, and stringent documentation requirements, the old way of doing things no longer exists. The “new normal” has set in.

In today’s climate, most DME suppliers cannot rely on the old Medicare fee-for-service model as the basis of their business. Medicare is only going to pay a limited amount of money…and Medicare is only going to pay a limited number of suppliers. And yet, the demand for DME is increasing exponentially.

This increase in demand results from the 78 million baby boomers who are now retiring at the rate of 10,000 per day. The end result is that there is a huge opportunity out there for the innovative DME supplier……but that opportunity does not lie with the traditional Medicare fee-for-service model.

As a result of the demise of the traditional fee-for-service model, the cash retail model is taking center stage. While the “Greatest Generation” (the 23 million Americans who lived through World War II) expects Medicare to pay for their DME needs, the baby boomers have no such illusions. Many boomers expect to pay cash for DME. These same boomers have no intention of wasting their time waiting for Medicare approval.

Additionally, these same boomers do not want the “Cavalier” model of DME (with no service component) that Medicare will pay for; rather, they want the “Cadillac” model of DME with a robust service component. The innovative DME supplier needs to tap this cash retail market.

In doing so, the supplier may want to engage the services of a physician who will issue an order without physically meeting with the patient. For example, the physician may want to issue an order based on (i) e-mail correspondence with the patient, (ii) a survey completed by the patient and submitted to the physician, or (iii) a telephone call with the patient, or (iv) a real time video interview with the patient.

A valid physician’s order is required for a number of items of DME, even if the patient will pay cash for the item. As to whether a physician’s order is valid is governed by the laws of the state (i) in which the physician has his practice and (ii) in which the patient resides. And so if the DME supplier and the prescribing physician are in “State A,” and if the cash-paying patient is in “State B,” and if the physician does not physically meet with the patient, then whether the remote prescribing is valid will depend on the laws of State A and State B. The balance of this article will give some examples of applicable state laws.

To provide telehealth services in California, a physician must perform an examination in which the physician must “verbally inform the patient that telehealth may be used and obtain verbal consent from the patient for this use.” The physician must document the patient’s verbal consent in the patient’s medical record.  The Medical Board of California does not consider “a telephone conversation, e-mail/instant messaging conversation, or fax” to be telemedicine. Instead, the Board considers telemedicine to involve “the application of videoconferencing or store and forward technology to provide or support health care delivery.”

The Ohio Board of Medicine issued a Position Statement on Telemedicine, which provides in part the following:

Examinations: Licensees using telemedicine technologies to provide care to patients located in Ohio must provide an appropriate examination prior to diagnosing and/or treating the patient. However, this examination need not be in-person if the technology is sufficient to provide the same information to the licensee as if the exam had been performed face-to-face. If a licensee is prescribing a drug as part of a patient visit, please refer to the prescribing portion of this document.

Other examinations may also be considered appropriate if the licensee is at a distance from the patient, but a licensed health care professional is able to provide various physical findings that the licensee needs to complete an adequate assessment. On the other hand, a simple questionnaire without an appropriate examination may be a violation of law and/or subject the licensee to discipline by the Board.

Texas law limits a practitioner’s ability to practice telemedicine in Texas from another state. Such practitioners are required to obtain a specific telemedicine license in Texas and licensees are limited to “the interpretation of diagnostic testing and reporting results to a physician fully licensed and located in Texas or for the follow-up of patients where the majority of patient care was rendered in another state, and the license holder shall practice medicine in a manner so as to comply with all other statutes and laws governing the practice of medicine in the state of Texas.

It appears that the law concerning telemedicine is in flux in Tennessee. Importantly, the Tennessee Board of Medical Examiners has proposed a rule change that will fundamentally alter the practice of telemedicine in Tennessee. The new rule would require that physicians perform an in-person examination prior to providing telemedicine services. Additionally, the new rule requires that the physician perform an in-person examination at least every fourth encounter or annually, whichever comes first. We understand that the Board held its last meeting on May 19, 2014, and the Board expects to publish a new rule as soon as possible.

These four states are likely representative of how other states view the arrangement when a physician dispenses an order based on information provided by a patient other than pursuant to the traditional physical meeting between the physician and patient. As the DME supplier sells cash items across state lines, based on physician orders in which the physician does not have a traditional physical meeting with the patient, then the supplier needs to ensure that the physician orders are valid under the applicable state laws.

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. 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].