Prohibit or Enforce?

Everybody these days is jumping on the "let's chase out the crooks" bandwagon. CMS says, "Let's get the ne'er do wells who permeate the DME industry." Our trade associations say, "Very few of us are ne'er do wells, but CMS has to do a better job of catching those who are." I say, "Please be careful." CMS knows it is easier to prohibit than enforce.

What do I mean? Well, let's take as an example the new rules that CMS recently proposed for reimbursement of CPAP and other sleep devices. Among the proposed rules was this gem:

"We are proposing to prohibit payment to the supplier of the CPAP device when such supplier or its affiliate is directly or indirectly the provider of the sleep test that is used to diagnose a Medicare beneficiary with OSA."

If this proposed rule had become law, virtually every financial connection between suppliers of CPAP and other sleep devices and sleep labs would be prohibited.

Now, don't panic. CMS just published a much tamer final version of this rule. It will only prohibit a supplier from providing CPAP devices to a beneficiary who was diagnosed with a home test provided by a sleep lab with which the supplier or any of its affiliates have a financial relationship. Sleep labs are exempt from the prohibition.

But it is still valuable to analyze the rule as it was first proposed, because it teaches us an important lesson about CMS' mindset. Prior to last month, the official rule prohibited reimbursement for CPAP only when the DME company owns the sleep lab. The proposed rule would have prohibited reimbursement whenever there was any common ownership or any other financial relationship, direct or indirect.

If you were to own 10 percent of a sleep lab, it would not be allowed to refer Medicare patients in need of CPAP to you. If your son's wife were to own 1 percent of a company that owns 1 percent of a sleep lab, that sleep lab probably would not be able to make CPAP referrals to your DME company.

The proposed rule was very broad. It applied to hospitals, networks and all other health care providers or aggregations of providers. It would have addressed the danger of fraudulent referrals by eliminating all circumstances under which any such referrals might possibly occur. Burn the bad by burning the good as well.

The problem is, as far as we can tell, CMS had no evidence to suggest that a total prohibition was necessary.

We have existing anti-kickback rules that would cover payments for referrals. We have existing rules about patient choice that would prohibit directing serious sleep lab's patients toward a specific DME supplier for denying choice. We have specific anti-fraud laws that deal with referrals absent medical necessity. These rules can all be enforced more consistently and aggressively than they are at present. These laws all work fine for their intended purposes.

Why, then, did CMS propose a new rule that would have prohibited outright all CPAP referrals from a sleep lab with any kind of financial connection to the DME company, no matter indirect or remote? Because, I propose, it is easier to prohibit than to enforce. Whenever we tell the government to "stop the bad guys," we must be aware that the natural response may be to stop the bad guys by stopping everyone.

When this rule was first proposed, interested parties could offer comments for CMS to consider before issuing the final rule. Here is what I wrote to CMS:

"The Stark and anti-kickback statutes still apply to curb inappropriate referrals or financial payments. Accreditation requirements also impose checks and balances on abuse.

"Anti-fraud rules already exist to curb overutilization of sleep devices. The Stark law, anti-kickback statutes and other rules already prohibit turnkey operations, overpayment for services, inappropriate referral pressure being placed on physicians or other referrers, etc. There is no evidence that sleep equipment referrals require more protection than do other referrals. The rules already protecting against inappropriate referrals generally should continue to suffice for C-PAP and sleep devices.

"There are a number of alternative proposals that offer sufficient protection with far less severity. For example, CMS could impose a rule requiring all financial relationships to comply with the anti-kickback safe harbors. This would result in relationships that conform narrowly to the "safety zones" which the OIG has already carved out, and would eliminate CMS' need to evaluate a questioned relationship in detail in order to determine whether it is appropriate."

I am glad that in the final rule, CMS backed away from its draconian proposed rule. But I am not surprised that the rule was proposed in the first place. It is easier to prohibit a practice than to enforce its appropriate parameters. It is easier to shoot first and justify later.