In recent columns, I have tried to give advice about loan closets in the face of changing CMS rules. Now CMS has withdrawn its new rules for the foreseeable future. With all the confusion over the past six months, I thought it would be helpful to consolidate the rules as they currently exist and offer my six recommendations for safe and effective loan closets.
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Purpose
An HME company may place an inventory of its equipment onsite at provider locations, including physician offices, hospitals and long-term care facilities, etc. The purpose of the closet is limited to distribution to patients who are bound for home, where a physician orders the equipment for home use. You should not use the closet to "borrow" inventory for in-house purposes.
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Sequence
Closets may be used only after the patient has chosen to obtain the equipment from the closet supplier (your HME company). Even though previous OIG opinions were vague on this point, CMS' actions show that a specific sequence of events is important:
The referral source identifies the need for home care equipment or services; then, the patient is informed and choice is given (the existence of the closet may be mentioned at this time); then, the patient chooses; then, if the closet supplier is chosen, that supplier is contacted and necessary information is communicated to establish the patient relationship; then (and only then), the closet's equipment may be given to the patient.
CMS' problem with loan closets clearly arose in part because many HME providers/closet owners do not follow (and document) this sequence of events as carefully as they should.
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Evidence of patients' freedom of choice is key
I strongly recommend both a script and a written document, which may be incorporated into discharge or referral forms utilized by the closet owner. This is mandatory in the hospital setting, very important if the closet owner has any sort of financial relationship with the supplier and highly recommended in all other cases. It emphasizes that there is no patient coercion and that the supplier was uninvolved until after the patient made his choice.
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Ownership
Closet equipment may become the patient's equipment, or may be loaned to the patient. Depending on the nature of the loan equipment, the supplier may establish the closet equipment as belonging to the patient. Alternatively, the closet equipment may retain its status as a loaned item, and then will be swapped out for new equipment at the time of the supplier's initial in-person interaction with the patient.
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Loan closets must not include any financial benefit to the closet owner
I recommend that any separate financial relationship between the supplier and the closet owner fall within the boundaries of the "safe harbor" regulations of the anti-kickback statute. This would apply to lease agreements, medical advisor agreements and professional or support services agreement, etc.
Such agreements should be in writing, signed by the parties, with a definite term of at least a year and a specific fee structure not tied to the volume or value of referrals. Payment must be at fair market value for necessary services actually rendered. I recommend this even if the financial arrangement only applies to private patients (not government-reimbursed).
In this regard, no remuneration should be paid to the closet owner for "convenience benefits," such as use of a private line connecting the closet owner to your store. Similarly, don't pay for use of the closet owner's personnel to facilitate paperwork or do patient setups, etc. In fact, to avoid scrutiny and reduce any appearance of impropriety, don't even allow the closet owner to provide these services at no charge.
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Watch CMS carefully
As far as I can tell, CMS' objection is that the closets may confuse the patient as to whether the physician or other professional is in fact the HME supplier. Under this reasoning, such confusion (as well as the presence of the HME company's equipment in the professional's office) would violate the supplier standard that forbids a supplier from sharing its space.
With these recommendations, closet relations may be both safe and effective. I am glad to be finished with the discussion. I'm closing the closet door behind me!
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Neil Caesar is president of the Health Law Center (Neil B. Caesar Law Associates, PA), a national health law practice in Greenville, S.C. He also is a principal with Caesar Cohen Ltd., which offers compliance training, outsourcing and consulting and the author of the Home Care Compliance Answer Book. You can reach him at 864/676-9075 or ncaesar@healthlawcenter.com.
