NEVER LET IT BE SAID THAT YOUR BUSINESS success is not in your hands. Winning despite adversities is the definition of success in today's marketplace.

Be that as it may, succeeding in the home medical equipment industry also requires an ability to understand, predict and, whenever possible, influence government entities that are outside your direct control - particularly if your company relies heavily on Medicare and Medicaid reimbursement.

To help you get a handle on these outside forces, we spotlight here the key government bodies that affect HME providers, starting with the ones most familiar to you. Read on, and you will find out how they've exerted their powers in the past and what they've got in mind for your future.

HCFA is charged with administering the Medicare and Medicaid programs as well as handling payments to health care providers, regulating laboratory testing, certifying health care facilities and developing coverage policies.

On that last point, be aware that recommendations (and pressures) from Congress as well as many of the other agencies listed here can dramatically affect which policy regulations are implemented and enforced. So while it doesn't call the shots, HCFA is responsible for firing them - and it sometimes, according to industry players, gets a bit trigger-happy.

This agency's impact can sometimes be blunted, however, because industry members working with HCFA officials and members of Congress (who oversee the agency) have the clout to influence the wording and implementation of HCFA regulations.

PAST: Before the Balanced Budget Act of 1997, HCFA often complained it had limited authority to reduce Medicare payments for HME. While the inherent reasonableness rule existed, allowing the Department of Health and Human Services to adjust Part B fee schedule amounts based on "inherent reasonableness," it was used only once, in 1994 to reduce payments for blood glucose monitors.

PRESENT: BBA '97 gave HCFA two new tools to lower reimbursement: a streamlined authority to use inherent reasonableness and the ability to conduct "competitive bidding" demonstrations. HCFA attempted to wield this IR authority via its durable medical equipment regional carriers, but it has held off pending a General Accounting Office study of the process. Although the GAO issued its report in favor of IR in June, DMERCs cannot implement reductions until HCFA publishes a final rule. HCFA said it intends to move forward with this "as quickly as possible."

As for competitive bidding, HCFA launched its first project in October 1999 in Polk County, Fla. The agency purports the project is saving beneficiaries and Medicare an average of 17 percent on items included in the process.

FUTURE: HCFA is soliciting bids from providers in San Antonio for a second competitive bidding demonstration, which is modeled after the first and is set to begin Jan. 1.

National Supplier Clearinghouse

The NSC issues Medicare supplier authorization numbers for HCFA. Part of its role is to ensure that HME providers comply with supplier standards. If providers are found to be out of compliance, the NSC has the power to inactivate their supplier numbers. DMERCs are alerted when that occurs and are instructed to deny those providers' claims. The NSC also inactivates supplier numbers if providers fail to send in their re-enrollment applications or do not bill for four consecutive quarters.

PAST: In December 1997, the OIG found that about 40 percent of HME providers participating in the Medicare program failed to meet at least one of the 11 supplier standards, which include such simple requirements as having a physical location and liability insurance. Soon after the report was issued, the NSC contracted with an agency, ChoicePoint, to conduct site visits of new suppliers.

PRESENT: HCFA has submitted a new list of 20 supplier standards to the Office of Management and Budget. Upon approval, the NSC will require providers to comply with these new standards, which industry officials do not consider overly onerous. In fact, many say the new requirements are not adequately stringent.

However, industry members claim that ChoicePoint investigators are already requiring providers to comply with the new standards. The NSC denies this, saying the investigators have been referring to the standards during their visits as an "educational tool" so providers will be ready when the new standards are approved.

FUTURE: The new standards will be approved separately from the surety bond rule - a regulation the NSC believes will require a $50,000 bond per tax identification number. The NSC cautions providers against getting a surety bond until the final regulation has been released.

Office of Inspector General, U.S. Department of Health and Human Service

Fraud gives this agency reason to exist, and thanks to the passage of the Health Insurance Portability and Accountability Act of 1996, the department gained funds and authority to "expand and intensify" its fight against health care fraud. From 1997 through 1999, the OIG excluded 8,697 individuals and companies from doing business with Medicare, Medicaid and other federal and state health programs.

The OIG has the power to issue fines and exclusions, but it relies on U.S. attorneys and the Department of Justice to obtain convictions in federal courts.

PAST: In August 1995, the OIG debuted its "Special Fraud Alerts" to heighten public and industry awareness of fraudulent health care practices. The first alert looked at home health care fraud; the second focused on the provision of medical supplies to nursing facilities. These alerts put home care fraud on the radar screens of many agencies and lawmakers for the first time.

In 1999, the OIG issued compliance guidelines for home care providers, and the DMERCs are instructed to encourage providers to follow them. You can find the guide at www.dhhs.gov/oig/modcomp/cpgfinl.htm.

PRESENT: In April, the OIG upped the penalty for improper billing of and reimbursement by Medicare. The civil money penalty per item or service improperly claimed is now $10,000, up from $2,000.

In February, the OIG issued a fraud alert concerning physicians' renting office space to providers. Such space, often referred to as consignment closets, must reflect fair market value, or anti-kickback laws might be violated.

The OIG also oversees Medicaid Fraud Control Units, which during the summer released recommendations for lower prices for some drugs, including albuterol sulfate. Several states adopted the lower payments, and the U.S. Department of Health and Human Services is considering implementing them as well.

The OIG's critical eye is not reserved for allegedly fraudulent providers. The agency offers harsh words for DMERCs and HCFA as well. In April, the OIG scrutinized the Medicare payment system, claiming HCFA contractors had paid $20.6 million for services that began after beneficiaries had died.

FUTURE: The OIG continues to expand its reach. By 2002, the agency says, it will have more than 80 field locations, with at least one office in every state. And an ongoing undercover project involving the OIG and other agencies is investigating fraud allegations related to HME providers. So far, the project has resulted in 20 convictions and nearly $1 million in savings. The OIG has announced that it expects more convictions.

U.S. Department of Health and Human Service

With an annual budget of $395 billion and employees numbering 61,654, HHS is the government's principal agency for protecting the health of all Americans. The department includes more than 300 programs, such as medical research, ensuring food and drug safety, and Meals on Wheels. Its largest subagency is HCFA.

In 1996, passage of the Health Insurance Portability and Accountability Act expanded HHS' enforcement powers and stiffened fraud penalties. The law also established the Health Care Fraud and Abuse Control Account, the first stable source of funding for fraud control. This funding is divided between HHS and the Department of Justice.

PAST: In May 1995, HHS launched Operation Restore Trust, an initiative to reduce fraud and waste in three areas of high spending growth: home health agencies, nursing homes and HME. The program exceeded the agency's expectations, recovering $187.5 million, and was expanded from five states to 17.

PRESENT: HHS has proposed reimbursement changes to some drugs, including albuterol sulfate, based on a list from the National Association of Medicaid Fraud Control Units that suggests lower prices. The Alexandria, Va.-based American Association for Homecare recommends that Congress "apply the brakes to this HHS proposal for all Medicare prescription drugs until GAO or another independent body can provide an objective view of how they are reimbursed."

In August, HHS unveiled standards to streamline the processing of health care claims. Health care providers, including HME companies, must follow the format, which all health plans must accept.

FUTURE: In his fiscal year 2001 budget, President Clinton earmarked $40 million to help HHS and its Medicare contractors reduce overpayments and fraud. Given the much-hyped success of HHS fraud efforts, providers can count on the agency to place even more emphasis on combating waste and abuse.

The Office of Management and Budget

While its effect on HME providers might be more benign than that of many other agencies, the OMB still holds some sway over providers' fates. Its mission is to evaluate the effectiveness of agency programs and policies and to set funding priorities.

The HME industry must therefore wait for the OMB to approve many new forms and procedures. For example, before bid forms can be presented to providers in a competitive bidding project, the forms must be cleared by the OMB.

The OMB is working with HCFA on potential revisions to CMNs. In March, the OMB asked HCFA to spend three years investigating the feasibility of allowing electronic signatures on CMNs. That the OMB intervened on the issue gives industry officials hope that HCFA will look into the matter instead of sit on it.

HCFA has submitted the proposed 20 supplier standards to the OMB for clearance. The standards are scheduled to go into effect 60 days after approval by the OMB.

U.S. Department of Justice

The DOJ oversees more than 110,000 attorneys, investigators, correctional personnel and more. It works with other agencies, such as HHS and the OIG, to enforce the law and pursue criminal convictions. Funding via the Health Care Fraud and Abuse Control Account, established in 1996, has enabled the DOJ and its Federal Bureau of Investigation subagency to step up investigations into health care fraud.

Often, agents from a variety of agencies investigate HME fraud, but these efforts are usually coordinated by the DOJ. Investigators are usually looking into potential kickback arrangements between providers and physicians, accuracy of CMNs and patient testing, and alleged billing irregularities.

Many times, insider knowledge is crucial to the DOJ in making its case. Under the False Claims Act, a whistle-blower can be awarded 15-25 percent of the government's recovery.

PAST: In 1999, federal prosecutors handed down 371 criminal indictments in health care fraud cases, a 16 percent increase compared with the previous year. The government won more than $524 million in health care fraud judgments, settlements and administrative impositions. Among the largest involving HME were Olsten Corp.'s $51 million civil settlement and Olsten subsidiary Kimberly Home Health Care's $10 million in criminal fines in July 1999.

PRESENT: The U.S. Attorney's Office for the Southern District of Florida opened an office in Miramar in August to combat "the estimated $5 billion worth of health care fraud committed annually in Florida." The fraud center, which can store 50,000 boxes of evidence, is the first in the United States.

Also in August, a federal grand jury launched an investigation into whether employees of Clearwater, Fla.-based respiratory services giant Lincare Holdings had violated federal health care laws.

FUTURE: Investigations often take years, and efforts to combat health care fraud didn't receive serious attention until the passage of the Health Insurance Portability and Accountability Act of 1996. Expect more settlements, indictments and felonies to unfold.

General Accounting Office

The GAO touts itself as the investigative arm of Congress. Its role is to examine the use of public funds, evaluate federal programs and provide analyses and recommendations to Congress. Often, the GAO will launch a study at the behest of a member of Congress.

Providers should pay special attention to GAO conclusions - the agency's findings and recommendations often make their way into testimony before Congress as well as the evening news and new laws. When hailing reimbursement cuts to HME, for example, lawmakers and agency officials often refer to GAO studies.

PAST: Only home care neophytes draw a blank when word of a study comparing Medicare oxygen payment rates with those of the Department of Veterans Affairs comes up at industry events. Providers can thank the GAO for the often-quoted 1997 report, which said that Medicare would have saved more than $500 million in 1996 payments for home oxygen if it had paid VA rates, even after a 30 percent markup. Numerous GAO studies have cast a critical eye on payment rates for HME and HCFA's oversight of the payment process.

PRESENT: The fate of inherent reasonableness rested largely on GAO shoulders during the first half of the year, as legislation suspended IR until the release of a GAO study examining HCFA's IR methodology and the agency's right to delegate this authority to the DMERCs. The report, released in early June, supports HCFA's use of IR, much to the disappointment of many in the industry.

FUTURE: GAO reports live long lives. Expect to see HCFA and others refer to the IR study often. However, GAO results aren't always bad news for HME companies; industry groups also refer to aspects of the reports when advocating providers' interests. For example, although the GAO generally supported IR cuts by the DMERCs, it did point out that the carriers failed to follow a uniform, rigorous survey process.

HCFA delegates its HME Medicare claims processing to independent, private insurance companies. These four DMERCs are responsible for various regions of the country. In addition to paying claims, the DMERCs have been charged with identifying potential cases of fraud and abuse and then developing those cases.

Industry associations assert that HCFA delegates too much authority to the DMERCs and that the carriers are inconsistent in their policy decisions. Recently, the GAO determined that HCFA had acted within its powers when it granted the DMERCs the independent authority to enact IR adjustments. However, the GAO agreed with industry criticism that the DMERCs have used inconsistent data-gathering methods to determine the amount of payment reductions and suggested that HCFA or the DMERCs use a more structured survey in future data quests.

After numerous studies highlighting continual errors in processing Medicare claims, HCFA is on a mission to reduce DMERC payment errors. In a letter sent to 140,000 HME providers in June, then-HCFA chief Nancy-Ann DeParle unveiled a new error-rate testing program to measure and identify payment problems. It is designed to produce information on payment accuracy to help the DMERCs assess problems in their policies and procedures.

Industry officials generally support the project, which they think will highlight inconsistencies among the DMERCs and improper claims denials. In theory, claims should be paid the same across all four DMERCs because the carriers administer payments from a federal program.

DeParle also wrote that the four DMERCs must have toll-free hotlines for providers to call for answers to billing and policy queries.

DMERC Region A: HealthNow NY is the DMERC for Region A, which covers Connecticut, Delaware, Maine, Massachusetts, New Hampshire, New Jersey, New York, Pennsylvania, Rhode Island and Vermont.

In June, HealthNow NY, Wilkes-Barre, Pa., was awarded the Medicare contract, succeeding UnitedHealthcare Group, Hartford, Conn. HealthNow will keep the same DMERC facilities and personnel in Nanticoke, Pa., and Meriden, Conn., says Donna Cupina, HealthNow's manager of beneficiary and provider communications for the DMERC transition.

Of note: After meeting with providers throughout the region, HealthNow NY learned that the call center was not meeting provider's needs.

"We've purchased a new phone system and are going to add staff for better availability of the call center," Cupina says. She also reports that the DMERC will hire a data analyst to study claims history and learn better ways to educate providers about proper billing policies. Plans are also in the works for more seminars in suburbs and rural areas.

Cupina advises providers to take advantage of the region council meetings, where they can discuss policies with DMERC officials and a representative from the HCFA regional office.

DMERC Region B: AdminaStar Federal, Indianapolis, is the DMERC for Region B, which comprises Illinois, Indiana, Maryland, Michigan, Minnesota, Ohio, Virginia, West Virginia, Wisconsin and the District of Columbia.

Of note: This DMERC made headlines in early 1999 when it decided that cover letters were attachments to certificates of medical necessity and therefore subject to a post-payment audit. After industry officials voiced concerns, HCFA said that the CMN statute does not address what information may be included in a cover letter and that it considers the two documents separate.

Region C: Columbia, S.C.-based Palmetto GBA is the DMERC for Region C, which consists of Alabama, Arkansas, Colorado, Florida, Georgia, Kentucky, Louisiana, Mississippi, New Mexico, North Carolina, Oklahoma, Puerto Rico, South Carolina, Tennessee and Texas.

Of note: This DMERC this year, touted its savings to Medicare, saying it had recovered $1.07 billion in 1999, almost twice as much as the $516 million it saved in 1998. The DMERC saved the money by ensuring that the proper payer paid before Medicare did, by holding medical reviews of claims, by conducting anti-fraud activities and by pursuing financial audits of providers. In February, however, the DMERC admitted it might have denied or paid too little for some claims and began reviews to correct the errors.

Region D: Cigna Medicare, Nashville, Tenn., is the DMERC for Region D, which covers Alaska, Arizona, California, Hawaii, Idaho, Iowa, Kansas, Missouri, Montana, Nebraska, Nevada, North Dakota, Oregon, South Dakota, Utah, Washington and Wyoming.

Of note: The Region D DMERC was the last one to issue an initial notice of inherent reasonableness under the newly streamlined IR rule set forth in BBA '97. A moratorium was later placed on using the rule pending a GAO study.