Sleeping Through Trouble

Opportunities continue to abound for home medical equipment providers to collaborate with physicians, hospitals, sleep labs and entrepreneurs to enter joint ventures for sleep studies and for the provision of sleep therapy equipment.

These opportunities can be structured so that they comply with the federal law's requirements. But sometimes these ventures are invitations for disaster with the potential to expose providers to scrutiny, fines and penalties — or worse — under the anti-fraud and abuse and Medicare reimbursement requirements.

Let's look at some of the more frequent and most interesting legal blunders that home care companies make when pursuing venture opportunities for sleep labs or sleep therapy equipment, along with several collaborative arrangements that minimize legal risk.

Revenues from treating sleep ailments continue to increase dramatically. At least 45 percent of sleep patients are age 49 or under, and 60 to 67 percent are age 60 or under. This means that joint ventures in the sleep field do not necessarily need Medicare patients in order to be profitable. In fact, you may find that your best and safest collaborative opportunities involve private-pay patients only.

Also, CPAP reimbursement rules are often more generous for non-Medicare patients, and the conditions for payment are sometimes more lenient. This reimbursement reality guides many collaborators toward private-pay sleep ventures as well.

Here are five of the most important legal rules that are key for real-life sleep joint ventures.

1. A medical equipment supplier should not own a sleep lab if it wishes to get government reimbursement for CPAP referrals from that lab. But, the owners of the HME company may own the sleep lab.

   Under the Medicare reimbursement rules, a CPAP supplier may not perform polysomnographic studies that result in CPAP referrals to that supplier. This prohibition is similar to the rule for oximetry, which disallows referrals to a respiratory therapy supplier if it has a financial relationship with the entity that performs the oximetry test.

   However, the CPAP/sleep study reimbursement rule has a couple of substantial loopholes. First, it does not apply to hospitals. A hospital may provide a Medicare-reimbursed sleep study even if the hospital is also a DME supplier. Conversely, a hospital sleep study may result in a Medicare-reimbursed referral for DME supplied by the hospital.