Up to Standard

They’re baaaak. CMS has decided to take yet another stab at revising its supplier standards for home medical equipment providers. The agency has proposed a number of clarifications and revisions to the existing 21 supplier standards as well as a handful of new standards for Medicare DMEPOS enrollment.

CMS is couching its revisions as supposed enhanced tools for the fight against fraud and abuse. However, many of the changes seem to pigeonhole suppliers into a specific storefront retail operation with a showroom, general business hours and significant public traffic. This push toward homogenocity may be a particular hardship for small suppliers and those who cater to specialized markets.

The Implications

HME providers should strive to understand the implications of these revisions before they become official. (The comment period on the new standards proposal was slated to end March 25, 2008.)

First, these proposed changes reflect issues that CMS believes are important. Whether the change reflects a clarification, a revision or a new standard, CMS has addressed these issues because the agency deems them to be of immediate importance. This also means that these changes may likely reflect a focus from the National Supplier Clearinghouse on its investigation and enforcement activities over the next few years.

Second, some of the modifications implicate the anti-fraud rules. Standard No. 11, for example, concerns cold-calling and certain inappropriate marketing activities by home care companies. Violations of these rules will subject a supplier to potential revocation of its supplier number. But, it will also likely subject the supplier to challenge because of abusive marketing practices and to potential repayment of revenues and penalties.

Third, a number of the changes are characterized as “clarifications.” This means that CMS intends that the standard that is being “clarified” already means what the clarification states. It is not a new rule; it is the same rule, just worded more clearly. Therefore, CMS’ position is that the rule as restated in the “clarification” already is in effect, and suppliers are already subject to its provisions.

A supposed clarification can be challenged, of course. But that is a difficult procedure, and it is important to appreciate which modifications to the standards CMS considers already to be in force.

Clarifications Vs. Revisions

For example, let’s take a look at the differences between “clarifications” and “revisions” by examining the proposed revisions to Standard No. 1.

This standard presently states that a supplier must operate its business according to all state and federal licensure and regulatory requirements. Basically, that’s been interpreted to date to require that a supplier have all the necessary DME licenses, specialty certifications, occupancy permits and everything else required under federal, state or local law.

The proposed changes include a clarification and a modification. In the clarification, CMS is making it clear the government has no responsibility whatsoever for helping a supplier determine what licenses or other kinds of requirements are necessary to operate in that state.

“While the NSC maintains information regarding state licensure laws, we do not believe that the NSC is responsible for notifying any supplier of what licenses are required or that any changes have occurred in the state licensing requirements,” CMS’ comments say.

This will mean any supplier who historically has taken the attitude “If I missed something, the NSC will tell me and I will fix it then,” cannot embrace that lackadaisical approach should this clarification take effect.

Further, CMS makes clear that if a supplier contends there is an exception to a state rule, the company will have to show clear evidence that the state has that exception in place. That means a supplier would not be able to rely on a telephone comment from some state official or an inference about what other companies are doing to conclude that the state rules do not apply. Clear, written evidence will be necessary.

Because CMS has characterized these changes as a “clarification,” this reemphasis probably means the NSC already intends to take a hard line about compliance with state, local or federal rules. Suppliers should proactively verify their ongoing compliance as soon as practical. Noncompliance could well lead to a revocation challenge.

Subcontracting — Yes or No?

The modification to Standard No. 1 is that CMS intends to bring everything “in house” for the supplier.

Specifically, CMS contends that any state license required in order for a supplier to supply certain services must belong to the supplier itself or to its employees. In other words, suppliers will not be allowed to have a contract relationship with an individual or entity for licensed services but must hire the licensed individual as a W-2 employee.

In explaining the rationale for this change, CMS said, “We believe that we are enrolling DMEPOS suppliers, not third-party agents that subcontract their operations … therefore to ensure that only qualified suppliers are enrolled …we maintain that a DMEPOS supplier … cannot contract with an individual or entity to provide the license service(s).”

This modification would require significant staffing changes for many suppliers who currently contract on an independent basis with respiratory therapists, nurses and other individuals subject to state licensure and other related requirements.

The proposed change also raises serious questions about subcontracting under competitive bidding. Suppose a supplier in a competitive bidding area operates in a state that requires licenses for respiratory therapists or technicians. Would such a supplier be allowed to subcontract with another supplier (as is permitted under the competitive bidding rules) for the provision of respiratory equipment or services in a geographically remote area? The answer is murky, at best.

On a related point, some states require respiratory therapists to remain independent. How will Standard No. 1 provide for a supplier’s use of licensed respiratory therapists in those states?

In my opinion, CMS is imposing an unnecessary hardship on suppliers with this rule. Suppliers already must be responsible for their personnel’s performance, regardless of employment status. There are many less disruptive ways for CMS to gain compliance assurances: Subcontractors can be identified and listed; performance and supervision requirements could be monitored.

Further, W-2 employment status does not, in itself, create a mechanism or an obligation for the supplier to ensure that the employee is performing consistent with licensure requirements. Regardless, if this change takes effect, the supplier’s relationships with agencies or independent professional groups will change dramatically.

Wait, There’s More

Here are a few other observations.

First, these standards were drafted with no input from the NSC Advisory Committee, which is composed of large and small suppliers and advisors from across the country.

It is not surprising that the revisions reflect the philosophy apparently embraced by CMS in its recent activities: One way to combat waste, fraud and abuse in the industry is to try to fit everybody into one specific mold, both large and small suppliers alike.

In this case, the mold appears to be a stand-alone retail operation in which personnel maintain the storefront at all times, answering the on-site, land-line phone, taking orders from the storefront and greeting customers, while additional personnel make deliveries, conduct set-ups and maintenance, etc.

The fact that this one-size-fits-all philosophy does a disservice to specialty operations, closed shops and very small suppliers does not presently appear to be of substantial concern to CMS. Whether this is insensitivity or indifference to the very small or specialty supplier remains to be seen.

Second, at the beginning of its commentary to the proposed supplier standards changes, CMS lists some interesting statistics for fiscal year 2007. According to the commentary, in April 2007 there were 116,471 individual DMEPOS suppliers. However, due to the affiliation of some suppliers with chains, there were 65,584 unique billing numbers.

CMS also opines “that approximately 30 percent of the DMEPOS suppliers are located in rural areas and that the vast majority of DMEPOS suppliers are small entities (based on Medicare reimbursement alone).”

Applying some basic arithmetic, this suggests that somewhere between 20,000 and 35,000 suppliers are based in rural areas. Further, the CMS information implies that at least 40,000 to 70,000 suppliers are small entities.

It is ironic that, with so many suppliers being acknowledged by CMS as “small entities,” in its proposed supplier standards changes, the agency appears to shape everyone into the traditional retail mold more commonly associated with larger suppliers.

Third, CMS also notes that, in FY 2007, the largest concentrations of suppliers were in five states: California (approximately 9 percent, or 6,000 to 11,000 suppliers), Texas (approximately 7 percent, or 3,500 to 8,000 suppliers), Florida (approximately 7 percent, or 3,500 to 8,000 suppliers), New York (approximately 6 percent, or 4,000 to 7,000 suppliers), and Pennsylvania (approximately 5 percent, or 3,000 to 5,000 suppliers).

It is realistic to expect that much of the investigative and enforcement activities by CMS, NSC and the various DME MACs will be focused on these five states.

Finally, it is valuable to realize that we are in the early stages of a struggle that will probably last for years, where the government simultaneously wants home medical equipment suppliers to function as fungible commodities, with initiatives such as competitive bidding suggesting that cheaper is almost always better.

Yet, at the same time, the government wants to emphasize operational requirements that tell home care companies when, how and with what tools they must provide enhanced services to their patients.

We must seek to ensure that the government finds (and reimburses) the right balance between these distinct philosophies. Our mission is to communicate clearly to CMS about what works, what is fair, and what is unfair. Remember, it is common for law enforcement to push too far and too hard in its efforts to main- tain order.

It is the responsibility of all of us to combat that government excess with well-articulated comments and effective resistance, even while we continue to emphasize legal and ethical behavior.

To view CMS’ proposed supplier standards revisions and changes, see the Federal Register, Jan. 25, 2008.

Neil B. Caesar is president of the Health Law Center (Neil B. Caesar Law Associates, PA), a national health law practice in Greenville, S.C., focusing on business opportunities and regulatory issues for health care providers. He is also a principal with Caesar Cohen Ltd., which offers compliance training, outsourcing and consulting, and author of the Home Care Compliance Answer Book series. Caesar may be reached by phone at 864/676-9075 or email at [email protected].

Revisions and Changes to Existing Standards

Here is a brief overview of the clarifications and revisions CMS has proposed to its current Medicare DMEPOS supplier standards for enrollment.

• Standard No. 1: Requires a supplier to operate its business and furnish Medicare-covered items in compliance with all applicable federal and state licensure and regulatory requirements. Clarification: The supplier is responsible for figuring out applicable federal and state requirements. The NSC has no responsibility to assist in this hunt and will not tolerate suppliers who do not put forth the effort. Proposed Revision: If a state requires a specific license to furnish certain services, CMS seeks to require the supplier to hire the licensed individual as a W-2 employee. Contract relationships would no longer be permitted.
• Standard No. 7: Currently requires a supplier to maintain a physical facility on an appropriate site, the facility containing space for storing enumerated business records. Clarification: “Appropriate site” requires accessibility during posted business hours, visible signage and posted hours of operation. In a building complex, the sign must be visible at the main entrance of the building. The place of business must be staffed during the posted hours of operation. These same rules apply to “closed door” suppliers. Proposed Revision: CMS would require suppliers to maintain business records for seven years after the claim has been paid. Also, CMS is soliciting comments on whether to establish a minimum square footage requirement.

• Standard No. 8: Allows CMS to conduct on-site inspections to ascertain compliance with the supplier standards. Proposed Revision: Emphasizes that billing privileges are subject to the NSC’s ability to conduct on-site inspections.
• Standard No. 9: Currently requires the primary business telephone to be a land line, and prohibits exclusive use of certain alternate communication devices as the primary business telephone. Proposed Revision: Would exclude the use of cell phones and beepers/pagers as a method of receiving calls from the public, or using “call forwarding” during posted hours of operation.
• Standard No. 10: Currently requires comprehensive liability insurance of at least $300,000. Clarification: Self-insurance is permitted. Proposed Revision: Comprehensive liability insurance must be in the amount of at least $300,000 per incident. Also, liability coverage would have to be obtained prior to submitting a Medicare enrollment application.
• Standard No. 11: Imposes limiting conditions on a supplier’s ability to “cold call” beneficiaries by telephone. Clarification: Except in limited circumstances, cold-calling is similarly impermissible by all other means, including computer email or instant messaging, coercive response internet advertising, or in-person contacts. Violations of this section may result in revocation of billing privileges and further investigation under fraud-and-abuse rules.
• Standard No. 12: Currently requires a supplier to be responsible for delivery of Medicare-covered items and maintain proof of delivery with appropriate documentation.
• Clarification: Identifies five specific obligations connected to the delivery process. Materials in this article have been prepared by the Health Law Center for general informational purposes only. This information does not constitute legal advice. You should not act, or refrain from acting, based upon any information in this presentation. Neither our presentation of such information nor your receipt of it creates nor will create an attorney-client relationship.
  Proposed New Supplier Standards
  
  In addition to revision and clarification of existing standards, CMS has also proposed the addition of a handful new supplier standards for Medicare DMEPOS enrollment.
  • Standard No. 27: Would obligate suppliers in a state that licenses oxygen suppliers to subcontract only with a state-licensed suppliers. In a state that does not require licensure for oxygen supplies, the supplier would be free to obtain oxygen from any source, in any state.
  • Standard No. 28: Would require a supplier to maintain documentation identifying who ordered and referred equipment, supplies or services, and to maintain this information for seven years after claim payment; would also require the supplier to maintain information sufficient to support the medical necessity for the item.
  • Standard No. 29: Would prohibit a supplier from sharing a practice location with another provider, including physician groups or other providers.
  • Standard No. 30: Would require a supplier to be open to the public at least 30 hours per week, excepting suppliers who work with custom-made or fitted orthotics and prosthetics.
  • Standard No. 31: Would prohibit a supplier from having a past delinquency with federal or state taxing authorities. This prohibition would include a criminal or civil charge of tax evasion, even if there was no conviction.
  • Standard No. 57: Would expand the rules about program exclusion because of ineligible persons working for a supplier by allowing CMS to assess and correct an overpayment from the time the supplier should have reported the existence of an adverse legal action or felony conviction to the NSC. This revision seems to suggest that CMS may intend to seek repayment from all suppliers that provide services while ineligible persons are under their employ or in an ownership position.