AMARILLO, TX – The medical community has embraced the significance of obstructive sleep apnea (“OSA”) on patients’ health. While at one time only pulmonologist and other specialists understood OSA, this understanding has spread to primary care physicians and to the general public. For example, it is not uncommon for certain types of employers to require their employees to undergo OSA testing. Medicare, Medicaid and commercial insurers cover OSA testing and the subsequent sleep therapy (e.g., the provision of CPAPs and disposables).
The increased demand for CPAPs and disposables creates opportunities for DME suppliers. However, a word of caution must be noted: the DME supplier can have no involvement with an HST.
Let’s make a distinction.
- Overnight Oxygen Qualification Test – A DME supplier can have some involvement with an overnight oxygen qualification test. The supplier can (i) own the oximeter, (ii) deliver the oximeter to the Medicare beneficiary’s home, (iii) pick up the oximeter the next morning, and (iv) transmit the raw data to the IDTF. If the physician orders oxygen for the beneficiary, and if the beneficiary chooses to obtain the concentrator from the DME supplier that served as courier for the oximeter, then the DME supplier can provide the concentrator to the beneficiary.
- HST – Logic would suggest that a DME supplier can have the same involvement with a home sleep test (“HST”) and be able to provide the CPAP to the Medicare beneficiary. This is not the case. Assume that ABC Medical Equipment, Inc. owns HST devices. The beneficiary’s physician orders an HST for the beneficiary. At the physician’s request, ABC delivers the HST device to the beneficiary, assists the beneficiary with set-up and use of the HST device, retrieves the HST from the beneficiary the next morning, and transmits the test results to the physician. If the physician orders a CPAP for the beneficiary, and if the beneficiary elects to obtain the CPAP from ABC, then if ABC provides the CPAP it runs the risk of violating the Medicare CPAP payment prohibition.
The Medicare CPAP payment prohibition states as follows:
No Medicare payment will be made to the supplier of a CPAP device if that supplier, or its affiliate, is directly or indirectly the provider of the sleep test used to diagnose the beneficiary with obstructive sleep apnea. This prohibition does not apply if the sleep test is an attended facility-based polysomnogram.
It is important to understand how Medicare defines an “affiliate.” The definition of an “affiliate” for purposes of the prohibition is “a person or organization that is related to another person or organization through a compensation arrangement or ownership.” The term “compensation arrangement” is not defined in the section of the CMS regulations that the prohibition appears, but the same term is used in, and defined by, the Stark statute as “any arrangement involving any remuneration . . . .”
Medicare will not pay ABC for the CPAP if ABC is the “provider of the sleep test.” That term is defined as “the individual or entity that directly or indirectly administers and/or interprets the sleep test and/or furnishes the sleep test device used to administer the sleep test.” When promulgating this definition, CMS provided some clarity in the Final Rule when it stated the following:
We have defined a provider of sleep test as an individual or entity that directly or indirectly administers and/or interprets the test and/or furnishes the sleep test device. By indirect we mean that one or more intermediary actors are used to accomplish the sleep test to its end. For example, if a DME supplier contracted with a sleep test provider to furnish HST, that supplier would indirectly provide the HST. Directly providing the test means there are no intermediary actors—no intervening persons or entities between them.
In our example, because ABC furnishes the HST device to the beneficiary, there is a risk that ABC will be considered as the “provider” of the test. Because the physician will actually be the individual to submit claims for the sleep test, it can be argued that the physician (not ABC) is the direct provider of the HST. However, there is a risk that ABC will be considered an “indirect provider” of the HST because ABC is the entity that (i) delivers the HST device, (ii) assists the beneficiary through the set-up and education process, (iii) retrieves the HST device from the beneficiary, and (iv) transmits the data to the physician.
The safest course of action is for the DME supplier to have no involvement with the HST administered to a Medicare beneficiary.
Finally, let me make several additional points:
- This payment prohibition applies to Medicare fee-for-service (“FFS”) patients. As to whether or not there is a similar prohibition with commercial insurance patients (including Medicare Advantage patients), the supplier will need to examine the insurance contracts and the insurance company’s payment/coverage guidelines.
- If a supplier determines that it has violated the payment prohibition, then the supplier needs to refund the money it has been paid for the CPAPs and the disposables.
- Where the payment prohibition can come into play for the DME supplier is when it is about to sell. In conducting due diligence, if the buyer determines that the payment prohibition has been violated, then it is likely that (i) the purchase price will be lowered or the (ii) the buyer will walk away.
AAHOMECARE’S EDUCATIONAL WEBINAR
Steps to Successfully Buy and Sell a DME Supplier
Presented by: Jeffrey S. Baird, Esq., Brown & Fortunato, P.C. & Tom A. Knapp, Esq., Brown & Fortunato, P.C.
Thursday, September 19, 2019
3:00-4:00 p.m. EASTERN TIME
When a person intends to buy … or sell … a DME supplier, there are a number of documentation and regulatory issues that must be addressed. First, the seller must take a number of steps to make itself more “attractive.” The buyer and seller need to decide whether the transaction will be an “asset” sale or a “stock” sale. The parties will need to engage in the normal transactional steps: (i) mutual nondisclosure agreement, (ii) letter of intent, stock purchase agreement/asset purchase agreement, and (iii) other closing documents.
The buyer will need to engage in three types of due diligence: financial, corporate and regulatory. And the parties will need to meet a number of regulatory requirements such as submitting change of ownership notifications.
This program will discuss all of these (and other) issues associated with the purchase and sale of a supplier.
Register for Steps to Successfully Buy and Sell a DME Supplier on Thursday, September 19, 2019, 3:00-4:00 p.m. ET, with Jeffrey S. Baird, Esq. and Tom A. Knapp, Esq., of Brown & Fortunato, PC.
Jeffrey S. Baird, JD, is chairman of the Health Care Group at Brown & Fortunato, PC, a law firm based in Amarillo, Texas. 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 email@example.com.