NEW INDUSTRY STANDARDS for Medicare providers are expected to replace old ones this month, and the man charged with implementing them says the new ones will be replaced someday, too.

"I believe this is an evolutionary process," says Tom Hood, director of the National Supplier Clearinghouse, "and we'll be going through it again."

There is no official link between standards for accreditation-which, remember, is voluntary-and official Medicare supplier standards set forth by the Health Care Financing Administration.

Intellectually, however, they spring from the same mindset. And as pressure from Congress to cut costs has increased in recent years amid horror stories of fraud and abuse, HCFA has responded with ever-increasing attempts to rein in providers or at least to make it look that way.

"In this era of compliance programs, we-and I say we because I consider myself part of the industry-all try to prove we're honest and forthright citizens overcoming the stigma of past abuses," says Hood. "It's not a bad idea as long as we're careful with the pendulum. Time will tell."

Still, you might ask, why new standards?

Because HCFA says the old standards were only "minimal safeguards" from potential fraud and abuse and seeks "expanded safeguards" to better screen applicants and revoke supplier numbers of those who do not meet the standards.

"The industry is changing rapidly and the 11 old standards were vague and open to interpretation," says Hood. "The 20 new ones, which incorporate the 11 old ones, are an attempt to clarify requirements for participation."

HCFA, in a regulatory impact analysis prepared for Congress, says new standards would aid in barring fraudulent providers from participating in Medicare and would also help recover some funds from those who defraud the program-without affecting the majority of honest providers.

HCFA claims these steps are necessary since "the market has failed to address these problems because of the motivation for unseemly profits, inadequate control by gatekeepers and insufficient information on the part of Medicare beneficiaries to detect abuse."

While providers might disagree, HCFA states that any additional costs imposed by the standards would be outweighed for most organizations by benefits gained from continuing as a Medicare provider. In other words, consider the alternative.

Perhaps a brief history lesson is helpful for any discussion of the new standards. The Social Security Act of 1994 established Medicare supplier standards to "protect beneficiaries from abusive practices." HCFA has gone further with the new proposed standards, considering them a tool to "prevent fraud and abuse."

To receive reimbursement for Medicare items, a home medical equipment provider must have a supplier authorization number. To get a supplier number, a provider must meet supplier standards. Once new standards take effect, perhaps as soon as this month, they will be applied when a provider's number is renewed.

Of the 20 standards, many are nothing more than, as HCFA states, "extensions of good business practices that we believe currently are being met by the vast majority of suppliers."

They include following applicable regulations, providing accurate information on billing number applications, carrying liability insurance (the final rule could mandate $500,000 minimum), instructing beneficiaries about the safe use of delivered equipment andhaving a business telephone number.

Revised standards will require providing "pertinent information and documentation" when requested. There also is a requirement that providers advise beneficiaries of their option to rent or purchase inexpensive equipment and another to explain warranty coverage to beneficiaries so that Medicare will not be billed for repairs covered under warranty.

The standard requiring a provider to maintain a physical facility on an appropriate site has been expanded. The facility must now have space for storing business records and cannot be a post office box or commercial mailbox. HCFA officials claim this revision will ensure providers are accessible to beneficiaries (as opposed to running the business from the trunk of a car) and will aid in eliminating fraudulent providers.

The most controversial standard is the one requiring a surety bond. But because of numerous delays in implementing surety bonds for home health agencies, the surety bond requirement for HME has been separated from the other 20 proposed standards and will be dealt with later.

All providers with a supplier number should know they are subject to site inspections by the National Suppliers Clearinghouse to verify facts on the application.

Miriam Lieber, a Sherman Oaks, Calif.-based consultant, says inspections should last 20 minutes and be no problem for a compliant provider.

"But be careful because there are some bogus people out there pretending to be inspectors," she says. "Be sure they are dressed professionally and that they have a letter from the NSC signed by Tom Hood in blue ink. And if they ask to take any equipment for inspection, don't give it to them. I recommend having a management-level person deal with the inspector so there are no slip-ups."

Remember, there really is a reason for all of these standards. In a word, reimbursement.

Medicare will not pay for any Medicare-covered items provided by a supplier of durable medical equipment, prosthetics, orthotics and supplies prior to the date HCFA issues a DMEPOS supplier number. Nor will it pay for any covered items provided by a DMEPOS supplier during any period when a DMEPOS supplier number is revoked or during a period of exclusion.

Medicare will issue a DMEPOS billing number, or reissue a number previously issued, to a supplier that submits a completed application to furnish Medicare-covered medical equipment and supplies, as defined in section 1834(j)(5) of the Act. This will happen after the supplier meets, and certifies in its application for a billing number that it meets, the following new supplier standards:

(1) A supplier must agree to comply with the provisions of Title XVIII of the Act and any applicable regulations.

(2) A supplier must operate its business and furnish Medicare-covered items in compliance with all applicable federal and state licensure and regulatory requirements.

(3) A supplier must not make, or cause to be made, any false statement or misrepresentation of a material fact on an application for a billing number. A supplier must provide complete and accurate information in response to questions on its application for a billing number. Any changes in information supplied on the application must be reported within 35 days of the change.

(4) A supplier's application for a billing number must be signed by an individual whose signature binds a supplier.

(5) A supplier must agree to furnish to HCFA all information or documentation HCFA requires, including these:

(i) Information or documentation needed to process or adjudicate Medicare claims;

(ii) Upon request, copies of contracts with third parties for furnishing Medicare-covered items to Medicare beneficiaries;

(iii) Upon request, documentation that it has advised beneficiaries that they may either rent or purchase inexpensive or routinely purchased equipment and about the purchase option for capped rental equipment;

(iv) Upon request, documentation that it has advised Medicare beneficiaries about Medicare-covered items covered under warranty;

(v) Upon request, documentation demonstrating that it has delivered Medicare-covered items to Medicare beneficiaries;

(vi) Upon request, documentation that it maintains and repairs directly, or through a service contract with another company, Medicare-covered items rented to beneficiaries;

(vii) Upon request, proof of liability insurance; and

(viii) Any other information required by this or other Medicare requirements.

(6) A supplier must fill orders from its own inventory or by contracting with other companies for the purchase of items necessary to fill the order. A supplier may also fabricate or fit items for sale from supplies it buys under contract. A supplier may not contract with any entity that currently is excluded from the Medicare program, with any state health care programs or with any other federal government executive branch procurement or nonprocurement program or activity.

(7) A supplier must advise beneficiaries that they may either rent or purchase inexpensive or routinely purchased equipment, and of the purchase option for capped rental equipment, as defined in Sec. 414.220(a) of this subchapter.

(8) A supplier must honor all warranties expressed and implied under applicable State law. A supplier must not charge the beneficiary or the Medicare program for the repair or replacement of Medicare-covered items or for services covered under warranty. This standard applies to all purchased and rented items, including capped rental items, as described in Sec. 414.229 of this subchapter.

(9) A supplier must be responsible for the delivery of Medicare-covered items to beneficiaries. A supplier must provide beneficiaries with necessary information and instructions on how to use Medicare-covered items safely and effectively.

(10) A supplier must answer questions and respond to complaints a beneficiary has about the Medicare-covered item that was sold or rented. A supplier must refer beneficiaries with Medicare questions to the appropriate carrier.

(11) A supplier must maintain and repair directly, or through a service contract with another company, Medicare-covered items it has rented to beneficiaries.

(12) A supplier must accept returns from beneficiaries of substandard (less than full quality for the particular item) or unsuitable items (inappropriate for the beneficiary at the time it was fitted and/or sold).

(13) A supplier must disclose consumer information, which must include these supplier standards, to each beneficiary whom it supplies a Medicare-covered item.

(14) A supplier must comply with the disclosure provisions in Sec. 420.206 of this subchapter.

(15) A supplier cannot convey or reassign a supplier number.

(16) A supplier must maintain a physical facility on an appropriate site. The physical facility must contain space for storing business records including the supplier's delivery, maintenance and beneficiary communication records. For purposes of this requirement, a post office box or commercial mailbox is not considered a physical facility.

(17) A supplier must maintain a primary business telephone at the physical facility. This telephone number must be listed under the name of the business and in the business portion of the local telephone company directory. The exclusive use of a beeper number, answering service, pager, facsimile machine, car phone or an answering machine may not be used as the primary business telephone for purposes of this regulation.

(18) A supplier must have a comprehensive liability insurance policy that covers both the supplier's place of business and any and all customers and employees of the supplier.

(19) As required by sections 1834(a)(17)(A) and 1834(h)(3) of the Act, a supplier of a Medicare-covered item must agree not to contact a beneficiary by telephone regarding the furnishing of a Medicare-covered item to the individual unless one of the following applies: (i) The individual has given written permission to the supplier to make contact by telephone regarding the furnishing of a Medicare-covered item;

(ii) The supplier has furnished a Medicare-covered item to the individual and the supplier is contacting the individual only regarding the furnishing of such Medicare-covered item; or

(iii) If the contact is regarding the furnishing of a Medicare-covered item other than a covered item already furnished to the individual, the supplier has furnished at least one covered item to the individual during the 15-month period preceding the date on which the supplier makes such contact.

(20) Only a supplier that is licensed to dispense the drug may bill for a drug used as a Medicare-covered supply with durable medical equipment or prosthetic devices. A supplier of drugs must bill and receive payment for the drug in its own name. HC