(Presentation Handout for 2012 Institute on Medicare and Medicaid Payment Issues)

Transcription

1 REIMBURSEMENT & COMPLIANCE ISSUES AFFECTING SUPPLIERS OF DURABLE MEDICAL EQUIPMENT, PROSTHETICS, ORTHOTICS & SUPPLIES (Presentation Handout for 2012 Institute on Medicare and Medicaid Payment Issues) TABLE OF CONTENTS Jana Kolarik Anderson, Esq., Partner Nelson Mullins Riley & Scarborough, LLP 101 Constitution Avenue, NW, Suite 900 Washington, DC Tel: I. Reimbursement Landscape 2 A. What is DMEPOS? 2 1. Durable medical equipment ( DME ) 2 2. Prosthetic Devices 3 3. Orthotic and Prosthetics 4 4. Surgical Dressings 4 5. Additional Items 4 B. Billing & Payment Generally 5 C. Competitive Bidding 9 1. Competitive Bidding Program History 9 2. How to Participate in Competitive Bidding 12 II. Summary of 2011 Enrollment Changes 16 III. Supplier Standards 18 A. Licensing 18 B. Space Requirements 19 C. Solicitation of Beneficiaries 21 D. Ordering and Referring Documentation 22 E. Prohibition on Sharing of a Practice Location 22 F. Hours of Operation 24 IV. Accreditation/Quality Standards and Surety Bond Requirements 24 A. Accreditation and Quality Standards 24 B. Surety Bond Requirement 26 V. Stark Law and Anti-kickback Statute Considerations 28 A. Stark Law In-Office Ancillary Services Exception 28 B. Supply Closet Arrangements 31

2 I. Reimbursement Landscape A. What is DMEPOS? Medicare services are furnished by two types of entities, providers and suppliers: "Provider" is defined as a hospital, a critical access hospital, a skilled nursing facility, a comprehensive outpatient rehabilitation facility, a home health agency, or a hospice that has in effect an agreement to participate in Medicare, or a clinic, a rehabilitation agency, or a public health agency that has in effect a similar agreement but only to furnish outpatient physical therapy or speech pathology services, or a community mental health center that has in effect a similar agreement but only to furnish partial hospitalization services. 1 "Supplier" means a physician or other practitioner, or an entity other than a provider that furnishes health care services under Medicare including an entity or individual that sells or rents Part B covered durable medical equipment, prosthetics, orthotics and suppliers ("DMEPOS") items to Medicare beneficiaries. 2 Generally the term "DMEPOS" encompasses the types of items included in the definition of "medical equipment and supplies" in Social Security Act ("SSA") section 1834(j)(5). DMEPOS thus includes the following: 1. Durable medical equipment ("DME") (as defined in SSA 1861(n)) means equipment furnished by a supplier or home health agency that can withstand repeated use; is primarily and customarily used to serve a medical purpose; generally is not useful to an individual in the absence of an illness or injury; and is for use in the home. 3 Examples of DME include items such as blood glucose monitors, hospital beds, nebulizers, oxygen delivery systems and wheelchairs. DME is reimbursable if the following three (3) requirements are met: (i) the equipment meets the definition of DME 1

3 (noted above); (ii) the equipment is necessary and reasonable for the treatment of the patient's illness or injury or to improve the functioning of his or her malformed body member; and (iii) the equipment is used in the patient's home. 4 Payment may be made for supplies, e.g., oxygen, that are necessary for the effective use of DME. Such supplies include those drugs and biologicals which must be put directly into equipment in order to achieve the therapeutic benefit of the DME or to assure the proper functioning of the equipment, e.g., tumor chemotherapy agents used with an infusion pump or heparin used with a home dialysis system. However, the coverage of such drugs or biological does not preclude the need for a determination that the drug or biologicals itself is reasonable and necessary for the treatment of the injury or to improve the functioning of a malformed body member Prosthetic devices (as defined in SSA 1861(s)(8)) means "devices (other than dental) which replace all or part of an internal body organ (including colostomy bags and supplies directly related to colostomy care), including replacement of such devices, and including one pair of conventional eyeglasses or contact lenses furnished subsequent to each cataract surgery with insertion of an intraocular lens." 6 Examples of prosthetic devices include cardiac pacemakers; cochlear implants; electrical nerve stimulators; parenteral and enteral (PEN) nutrition; and tracheostomy speaking valves. Prosthetic devices are covered when furnished on a physician's order. 7 This does not require a determination that there is no possibility that the patient's condition may improve sometime in the future. If the medical record, including the judgment of the 2

4 attending physician, indicates the condition is of long and indefinite duration, the test of permanence is met. 3. Orthotics and prosthetics (as defined in SSA 1861(s)(9)) mean leg, arm, back, and neck braces (orthotic/orthoses) and artificial leg, arms and eyes, including replacement (prosthetics/prostheses). These appliances are covered under Part B on a physician's order. 8 A brace includes rigid and semi-rigid devices which are used for the purpose of supporting a weak or deformed body member or restricting or eliminating motion in a diseased or injured part of the body. Back braces include, but are not limited to, special corsets, e.g., sacroiliac, sacrolumbar, dorsolumbar corsets and belts. A terminal device (e.g., hand or hook) is covered under this provision whether an artificial limb is required by the patient. Stump stockings and harnesses (including replacements) are also covered when these appliances are essential to the effective use of the artificial limb. Adjustments to an artificial limb or other appliance required by wear or by a change in the patient's condition are covered when ordered by a physician. 4. Surgical dressings (as described in SSA 1861(s)(5)) include dressings and splints, casts and other devices used for reduction of fractures and dislocations. 5. Additional items considered DMEPOS include therapeutic shoes for diabetics; 9 home dialysis supplies and equipment, self-care home dialysis support services, and institutional dialysis services and supplies; 10 and self-administered erythropoietin. 11 The general coverage rules for DMEPOS are found in the Medicare Benefit Policy Manual. More specific coverage rules are found in the Medicare national 3

5 coverage decisions ("NCDs") which provide different coverage requirements based on item types and the local coverage decisions ("LCDs") that provide difference coverage requirements based on item type in the different Durable Medical Equipment Medicare Administrative Contractors ("DME MAC") Jurisdictions. Those NCDs and LCDs can be found at Policy articles, which can also be found at the Medicare Coverage Database further detail coverage requirements in the different DME MAC Jurisdictions. B. Billing & Payment Generally DMEPOS items used during a Part A covered stay for hospital and skilled nursing facility inpatients are included in the inpatient prospective payment system (IPPS) and are not separately billable. 12 Home health agencies may bill DME to the Regional Home Health Intermediary (RHHI) or may meet the requirements of a DME supplier and bill the DME MACs. Medicare Part B payment for most DMEPOS items is made through contractors known as DME MACs (previously Durable Medical Equipment Regional Carriers or DMERCs). 13 SSA 1834 provides for implementation of a fee schedule payment methodology for most DMEPOS furnished after January 1, Specifically, the SSA provides that Medicare payment for these items is equal to 80 percent of the lesser of the actual charge for the item or the fee schedule amount for the item. 14 CMS implemented the fee schedule payment methodology through 42 CFR through , which describe how the fee schedule for each of the following categories is established: Inexpensive or other routinely purchased items (section 1834(a)(2) of the Act and section of the regulations) (rental payment or lump sum amount); 15 4

6 Items requiring frequent and substantial servicing (section 1834(a)(3) of the Act and section of the regulations) (rental payments are made on a monthly basis); 16 Customized items (section 1834(a)(4) of the Act and section of the regulations) (lump sum basis payment); 17 Oxygen and oxygen equipment (section 1834(a)(5) of the Act and section of the regulations) (rental of oxygen equipment is made on a monthly fee schedule amount during the period of need, but no longer than a period of continuous use of 36 months; payment for oxygen contents is made based on a monthly fee schedule until medical necessity ends); Prosthetic and orthotic devices (section 1834(h) of the Act and section of the regulations) (payment is made on a lump sum basis); Other items of DME (section 1834(a)(7) of the Act and section of the regulations) (rental that may not extend over a period of continuous use of longer than 13 months after which the supplier shall transfer title); and Special payment rules for transcutaneous electrical nerve stimulators (TENS) (section 1834(a)(10)(C) of the Act and section of the regulations) (rental for a period of not more than 2 months or purchase basis with purchase price being determined using the methodology for purchase of inexpensive or routinely purchased items). The Pricing, Data Analysis and Coding (PDAC) contractor (formerly known as the Statistical Analysis Durable Medical Equipment Regional Carrier or SADMERC) conducts national pricing functions for DMEPOS items and services and guides 5

7 manufacturers and DMEPOS suppliers on the proper use of the Healthcare Common Procedure Coding System (HCPCS) through product reviews and decisions. With the exception of customized items and competitively bid items, described below, a fee schedule amount is calculated for each item or category of DME that is identified by a code in the HCPCS. Specific coding information can be found in the NCDs, LCDs and Policy Articles in the Medicare Coverage Database at The Medicare payment amount for a customized item of DME is based on the Medicare carrier's individual consideration of that item. The fee schedule amount for oxygen and oxygen equipment are separate monthly payment amounts. Payment under the DME benefit is made for the effective use of DME (e.g., lancets used with blood glucose monitors). These supplies are paid for using the same methodology that we use to pay for the purchase of inexpensive or routinely purchased items. Payment for prosthetic and orthotic devices is made on a lump sum basis and is equal to the lower of the fee schedule amount calculated for the item or the actual charge for the item, less any unmet deductible amount. 18 Payment for custom molded, extradepth shoes and inserts (collectively known as "therapeutic shoes") is made based on a fee schedule (as of January 1, 2005). 19 Medicare pays for parenteral and enteral nutrition (PEN) nutrients and supplies on a purchase basis and for PEN equipment that is rented on a monthly basis. 20 For capped rental items whose first rental month occurs on or after January 1, 2006, the payment for a capped rental item may not extend over a period of continuous use of longer than 13 months. 21 Further, on the first day that begins the 13 th continuous 6

8 month during which payment is made for a capped rental item, the supplier of the capped rental item must transfer title to the item to the Medicare beneficiary. Once title has transferred, or once a purchase agreement for a power wheelchair has been entered into, the Act provides for reasonable and necessary maintenance and servicing payments. 22 Also as of January 1, 2006, monthly rental payments for oxygen equipment are limited to a 36-month period. 23 On the first day that begins the 36 th continuous month during which payment is made for the oxygen equipment, the supplier must transfer title to the equipment to the Medicare beneficiary. 24 Medicare will continue to make monthly payment for oxygen contents for beneficiary-owned oxygen equipment for the period of medical need; however, maintenance and servicing payments for beneficiary-owned oxygen equipment will be made only if they are reasonable and necessary. 25 Medicare pays for maintenance and servicing of purchased DMEPOS items in the following classes: (1) inexpensive or frequently purchased; (2) customized items, other than prosthetic and orthotic devices; and (3) capped rental items purchased in accordance with Medicare Claims Processing Manual, chapter 20, (purchase option for capped rental items) or (additional purchase option for electric wheelchairs). 26 Medicare does not pay for maintenance and servicing of purchased items that require frequent and substantial servicing, or oxygen equipment. Reasonable and necessary charges include only those made for parts and labor that are not otherwise covered under a manufacturer's or supplier's warranty. C. Competitive Bidding 1. Competitive Bidding Program History 7

9 The DMEPOS Competitive Bidding Program was mandated by Congress through section 302 of the Medicare Prescription Drug, Improvement and Modernization Act of 2003 (the MMA), which amended section 1847 of the Social Security Act. In general, the revised section 1847 requires that the Secretary implement a competitive bidding program that replaces the current DMEPOS fee schedule methodology for determining payment rates for certain DMEPOS items in competitive bidding areas ("CBAs"). The items to be covered include the DMEPOS categories bulleted above and described in section 1834(a) of the Act; enteral nutrients, equipment and supplies; and off-the-shelf orthotics for which CMS recently identified (and solicited comments on) applicable HCPCS codes. CBAs are based on metropolitan statistical areas ("MSAs") that are further identified by counties and zip codes in order to identify the boundary of each CBA clearly. The fee schedule methodology will continue to be used for payment of Medicare-covered DMEPOS non-competitively bid items or services. The payment rates for DMEPOS competitively bid items are determined by using bids submitted by DMEPOS suppliers. The Medicare DMEPOS Competitive Bidding Program is being phased in, and was intended in begin in Round One of the Competitive Bidding Program was delayed for 18 months by the Medicare Improvements for Patients and Providers Act of 2008 ("MIPPA"). MIPPA required CMS to terminate contracts awarded in Round One and to conduct the competition for the Round One Rebid in MIPPA also delayed competition for Round Two in 70 additional MSAs until 2011 and in additional areas of the country until after The Round One Rebid included the same items and services (except negative pressure wound therapy ("NPWT") pumps and related supplies/accessories) and was 8

10 conducted in the same MSAs (except Puerto Rico) as the 2007 Round One competition with certain limitations. Specifically, the Round One Rebid included 9 MSAs: Cincinnati-Middletown, OH-KY-IN; Cleveland-Elyria-Mentor, OH; Charlotte-Gastonia- Concord, NC-SC; Dallas-Fort Worth-Arlington, TX; Miami-Fort Lauderdale-Pompano Beach, FL; Orlando-Kissimmee, FL; Pittsburgh, PA; Riverside-San Bernardino-Ontario, CA; and Kansas City, MO-KS. The Round One Rebid included the following product categories: (1) Oxygen supplies and equipment; (2) standard power wheelchairs, scooters and related accessories; (3) complex rehabilitative power wheelchairs and related accessories; (4) mail-order diabetic supplies; (5) enteral nutrients, equipment and supplies; (6) continuous positive airway pressure devices (CPAPs), respiratory assist devices (RADs) and related supplies and accessories; (7) hospital beds and related accessories; (8) walkers and related accessories; and (10) support surfaces (Miami only). For the Round One Rebid, CMS received 6,215 bids from 1,011 suppliers during the 60-day competitive bidding period. CMS awarded 1,217 competitive bidding program contracts to 356 suppliers. 27 The Competitive Bidding Implementation Contractor's ("CBIC's") website at details the Round One Rebid single payment amounts that were set on January 1, The CBIC website further details the number of contracts that were offered to the Round One Rebid DMEPOS qualified suppliers in the nine (9) Round One Rebid MSAs. Based on the single payment amounts, CBIC estimates the overall weighted average savings as 32%. Round Two began in late 2011 and was expanded from 70 to 91 MSAs and a total of 100 CBAs because the three (3) largest MSAs (Chicago-Joliet-Naperville, IL-IN-WI, 9

11 Los Angeles-Long Beach-Santa Ana, CA, and New York-Northern New Jersey-Long Island, NY-NJ-PA) are subdivided into multiple CBAs. 28 The Round 2 CBAs can be found at in the Fact Sheets. The national mail order competition covers all 50 states, the District of Columbia, Puerto Rico, the U.S. Virgin Islands, Guam and American Samoa. Round 2 of the competitive bidding program includes the same products as the Round One Rebid with the addition of NPWT pumps and related accessories and the elimination of complex rehabilitative power wheelchairs and related accessories. Bidders for the national mail order competition must demonstrate that their bids cover at least 50% of all types of diabetic testing strips on the market (as a patient choice issue). In fact, such bidders must complete the National Mail Order 50 Percent Compliance form and submit it with other hardcopy documents. Highlights from the timeline for Round 2 include: beginning on November 30, 2011 when CMS announced the bidding timeline and began the bidding education program; registration closing on February 9, 2012; covered document review date for bidders to submit financial documents on February 29, 2012; 60-day bid window closing on March 30, 2012; target date of Fall 2012 for CMS to announce single payment amounts and begin the contracting process; target date of Spring 2013 for CMS to announce contract suppliers and begin contract supplier education campaign; and a target date of July 1, 2013 to implement Round 2 and national mail-order competition contracts and prices. The health reform legislation (PPACA 6410, P.L ) requires CMS to use competitively bid prices in all areas by

12 2. How to Participate in Competitive Bidding 29 In order to be eligible to bid, all suppliers must meet the requirements in 42 C.F.R For example, the suppliers must be in good standing and have an active National Supplier Clearinghouse ("NSC") billing number, meet quality standards, comply with all applicable state and local licensing requirements for the CBA(s), and be accredited by a CMS-approved accreditation organization for the item(s) being bid. Qualified suppliers that meet all the competitive bidding eligibility and financial requirements and whose composite bids are less than or equal to the pivotal bid, will be offered a contract to become a contract supplier. As part of the financial requirements, bidders are required to submit financial documents including an income statement, balance sheet and statement of cash flows; tax return extract and a credit report and score. CMS strongly recommends in its Round 2 and National Mail Order Competition Request for Bids (RFB) Instructions that these financial documents be compiled by an independent accountant. The financial documents must be submitted in hard copy to the CBIC and reflect the same time period. The credit report and score must be run no earlier than 90 days prior to opening of the bid window. Additional hardcopy documents must be submitted by particular bidders: network participants must submit legal agreements and network certification pages signed by each network member; national mail order competitors must submit the 50% compliance form; bidders that intend to subcontract must submit a letter of intent to enter a subcontracting agreement; and bidders sanctioned within the last 5 years must submit the settlement agreement and corporate integrity agreement (if 11

13 applicable). Such hard copy documents must be submitted in loose page format with the bidder number on each page. Bidders may amend their bids as many times as necessary prior to the close of the 60-day bid window. Bids must be bona fide, described by the bid instruction booklet as rational and feasible for the bidder to furnish at the bid price. CMS/CBIC further states that suppliers should not submit a bid for an item at a loss to improve their chances of winning a contract all costs should be included. If a supplier submits a non-bona fide bid for any competitive bid item in a product category, the entire bid for that product category in that CBA will be disqualified. For the national mail order competition, the entire bid will be disqualified. NOTE: Suppliers may not bid against themselves for the same product category in the same CBA. Therefore, commonly owned or commonly controlled suppliers 30 must submit one bid that includes all commonly owned and/or controlled locations that would furnish competitively bid items in the same product category in the designated CBA or that, for Round 2, would furnish mail-order diabetic testing supplies nationally. (Only locations identified in the bid are included in the contract and eligible for Medicare payment at the time the program begins.) The Act mandates that small suppliers have the opportunity to be considered for participation in the Competitive Bidding Program, so small suppliers (i.e., suppliers that generate $3.5 million or less in annual receipts, including Medicare and non-medicare revenue) have the option to form networks (between 2-20 members) for bidding purposes. 31 Networks may not participate in the national mail order competition. All members must meet all eligibility, accreditation, licensure and financial requirements at 12

14 the time of bidding. Small suppliers may join more than one network, but may not submit individual bids in the same CBA. Skilled nursing facilities and nursing facilities have the option to bid for, and be awarded, contracts to be "specialty suppliers" that only furnish competitively bid items to their own residents. Any SNF or NF awarded a contract would be paid the single payment amount for those items. Suppliers that are awarded a contract must agree to furnish the competitively bid items for the full duration of the contract period throughout the entire CBA. The length of the contract period may not exceed three (3) years. The contract supplier must furnish competitively bid items to any beneficiary who maintains a permanent residence in or who visits a CBA and who requests those items from the contract supplier. (Members of a network may share that responsibility to furnish competitively bid items in the product category throughout the CBA.) The only exceptions to this rule are the specialty suppliers as described above. Items supplied by a contract supplier must be the same items furnished to its other customers, i.e., the supplier should furnish Medicare and non- Medicare customers with the same selection of DMEPOS brands and products. Contract suppliers may use subcontractors to assist them in carrying out the terms of the competitive bidding contract: (1) to purchase inventory, (2) to maintain and repair rented equipment, (3) to deliver a Medicare-covered item, and (4) to setup and/or instruct on the use of a Medicare-covered item. If using a subcontractor, the contract supplier must ensure that the subcontractor is accredited, if applicable, and must comply with the Supplier Standards. Subcontractors and their accreditation status must also be disclosed to CMS. 13

15 Noncontract suppliers that furnish competitively bid items in a CBA are not eligible for Medicare payment for the competitively bid items for that CBA unless one or more of the following exceptions applies: (1) Suppliers of grandfathered DME Beneficiaries who are receiving oxygen and oxygen-related equipment or rented DME at the time the Competitive Bidding Program becomes effective may elect to continue to receive these items from a noncontract supplier if the supplier is willing to continue furnishing these items; (2) Repairs/replacement Beneficiaries who maintain a permanent residence in a CBA may go to any Medicare-enrolled supplier (contracted or not) for repairs or replacement parts for beneficiary-owned items; (3) Physician and other practitioners who are enrolled Medicare DMEPOS suppliers Physicians and treating practitioners have the option to furnish certain types of competitively bid items in a CBA to their own patients without submitting a bid and being selected as a contract supplier (e.g., crutches, canes, walkers, folding manual wheelchairs, blood glucose monitors, and infusion pumps that are DME); (4) Physical therapists and occupational therapists in private practice who are enrolled Medicare DMEPOS suppliers PTs and OTs in private practice have the option to furnish certain types of competitively bid items to their own patients without submitting a bid and being selected as a contract supplier (e.g., OTS orthotics); and (5) Medicare secondary payer If a Medicare beneficiary is required under his or her primary insurance policy to use a supplier that is a noncontract supplier, Medicare may make a secondary payment to a noncontract Medicare-enrolled supplier for competitively bid items. II. Summary of 2011 Enrollment Changes 14

16 The Patient Protection and Affordable Care Act, as amended by the Health Care and Education Reconciliation Act of (collectively known as the Affordable Care Act or ACA), made significant changes to Medicare, Medicaid and Children s Health Insurance Program (CHIP) to reduce fraud, waste and abuse at the provider enrollment level of program participation. CMS has established risk categories to determine what screening procedures will be used by the Medicare, Medicaid and Children's Health Insurance Program ("CHIP") during initial enrollment and revalidation. Effective March 25, 2011, DMEPOS suppliers who are newly enrolling in the Medicare program are classified in the "high" risk category of fraud, waste or abuse under CMS' new enrollment standards. 33 DMEPOS suppliers who are currently enrolled in the Medicare program are classified in the "moderate" risk level. The standard screening, applicable to all enrollees, includes verification of provider/supplier-specific requirements in the different Federal health care programs, verification of licensure, and database checks. 34 At the moderate screening level, CMS also requires unannounced pre-enrollment or post-enrollment site visits to verify compliance with the Federal health care program's requirements for currently enrolled DMEPOS suppliers. For newly enrolling DMEPOS suppliers, in addition to the screening measures already described, any owners with 5% or more direct or indirect ownership interest will be subject to a fingerprint-based criminal history record check of the Federal and State law enforcement databases. Note: CMS is expected to issue subregulatory guidance regarding the specifics of the fingerprint-based criminal history record check, which will become effective 60 days after publication. 15

17 The enrollment standards described above are the base requirements for the Medicare, Medicaid and/or CHIP program. CMS gave the States and/or CHIP programs in individual states the ability to add screening procedures for the different risk categories, or increase the risk level of the DMEPOS suppliers generally. In addition to the revised screening procedures, DMEPOS suppliers will also be subject to an enrollment/revalidation application fee per location effective March 25, The application fee will apply to all newly enrolling suppliers as well as revalidating suppliers. The application fee for 2012 is $523, and will be increased by the consumer price index (for urban consumers) (CPI-U) each year. The same CMS Final Rule that revised the enrollment standards and added an enrollment/revalidation application fee also included provisions for enforcing temporary moratoria on enrollment for Medicare, Medicaid and/or CHIP; payment suspensions pending credible allegations of fraud unless good cause for the Medicare and Medicaid programs; and cross-termination of provider/supplier participation if terminated under the Medicare, Medicaid or CHIP programs. III. Supplier Standards Suppliers must be in compliance with the current Supplier Standards to obtain and maintain Medicare billing privileges through the NSC. The thirty (30) Supplier Standards are listed at 42 C.F.R CMS (through the NSC) will revoke a supplier's billing privileges if NSC finds that a supplier does not meet a Supplier Standard. 35 (The revocation is effective 15 days after the entity is sent notice of the revocation, as specified in 42 C.F.R ) 16

18 The Supplier Standards were revised on September 27, 2010, 36 modifying the existing Standards and adding Standards 27 through 30. The Supplier Standards were revised again on March 14, The 2010/2012 changes to selected Supplier Standards included the following: A. Licensing Supplier Standard #1 (424.57(c)(1)) states that the supplier must operate its business in compliance with Federal and State laws. CMS specified that a supplier must certify in its application for billing privileges that it meets and will continue to meet State licensure requirements applicable to the DMEPOS supplier itself, as well as Federal regulatory requirements that specify requirements for the provision of DMEPOS and ensure accessibility for the disabled. Further, the 2010 provision required that the DMEPOS supplier must not contract with an individual or entity to provide licensed services unless allowed by State law. In the 2012 Final Rule, CMS changed the contracting provision in recognition of State laws that do not address contracting for services, allowing supplier to contract with a licensed individual or entity to provide the licensed services unless expressly prohibited. 38 The 2012 Final Rule also removed the compliance with local zoning requirements provision, recognizing that CMS contractors would have difficulty ensuring compliance with zoning requirements because of the wide variety of such provisions and that local enforcement was in a better position to ensure compliance, e.g., through the business license process. Note: State licensure for DMEPOS is a moving target. NSC has a summary of State licensing laws on its website at 17

19 Clearinghouse, which is a good research starting point. However, one should always verify such licensure information to ensure its validity for your product(s) and that the State has not revised/is not revising its licensure laws. Further, in the new CMS Form 855S, you must note each state in which you will be providing items/services, and NSC has been requesting copies of the licenses for those States, which means that if you have not recently done a State licensing analysis, you need to do so as soon as possible. B. Space Requirements Supplier Standard #7 requires the supplier to maintain a physical facility on an appropriate site. In the revised Supplier Standards, CMS provided more detail on what constitutes an appropriate site. An appropriate site must meet all of the following (described at (c)(7)): (1) Must meet the following criteria: (a) Except for State-licensed orthotic and prosthetic personnel described in paragraph (c)(7)(i)(a)(2), 39 maintains a practice location that is at least 200 square feet [with time frames that depend on when your current lease terminates, but with an outside compliance date of September 27, 2013]; (b) Is in a location that is accessible to the public, Medicare beneficiaries, CMS, NSC and its agents. (The location must not be in a gated community other area where access is restricted.) (c) (d) Is accessible and staffed during posted hours of operation. Maintains a permanent visible sign in plain view and posts hours of operation. If the supplier s place of business is located within a building 18

20 complex, the sign must be visible at the main entrance of the building or the hours can be posted at the entrance of the supplier. (e) Except for business records that are stored in a centralized location as described in 42 C.F.R (c)(7)(ii), is in a location that contains space for storing business records (including the supplier s delivery, maintenance, and beneficiary communication records). (f) Is in a location that contains space for retaining the necessary ordering and referring documentation specified in (f). (2) May be the centralized location for all of the business records and the ordering and referring documentation of a multistate supplier. (3) May be a closed door business, such as a pharmacy or supplier providing services only to beneficiaries residing in a nursing home, that complies with all applicable Federal, State, and local laws and regulations. Closed door businesses must comply with the requirements in this Section (c)(7). In its FAQs, the NSC stated that the 200 square foot requirement for supplier locations includes all space within the supplier location (storage, administrative areas, etc.), but does NOT include any off-site areas (inventory and/or central records storage). In addition, with regard to records storage, NSC made clear that it is not permissible to use an off-site third party to store records even if they could be retrieved quickly. 40 C. Solicitation of Beneficiaries In the 2010 Final Rule, CMS expanded Supplier Standard #11 (at 42 C.F.R (c)(11)) to provide that DMEPOS suppliers and their agents could not make a "direct solicitation" of Medicare beneficiaries, which included, but was not limited to, 19

21 telephone, computer, , instant messaging, or in-person contacts, without the Medicare beneficiary s consent for the purpose of marketing the DMEPOS supplier s health care products or services or both, except under the existing provisions at (c)(11)(i) through (iii). 41 However, the 2012 Final Rule returns to the pre-2010 Final Rule, stating: "[W]e are finalizing our proposals to remove the definition of 'direct solicitation' from (a), to revise (c)(11) to remove all references to 'direct solicitation,' and to clarify that the prohibition is limited to telephonic contact.'" 42 D. Ordering and Referring Documentation In Supplier Standard #28, CMS requires a seven (7) year retention period for ordering and referring documents, which is based on the document retention requirement in 42 C.F.R (f). E. Prohibition on Sharing of a Practice Location New Supplier Standard #29 provides that a DMEPOS supplier is prohibited from sharing a practice location (as that physical location is described on the CMS-855S) with any other Medicare supplier or provider, except in the following circumstances: (a) where a physician whose services are defined in section 1848(j)(3) of the Act or a nonphysician practitioner, as described in section 1842(b)(18)(C) of the Act, furnishes items to his or her own patient as part of his or her professional service; (b) where a physical or occupational therapist whose services are defined in sections 1861(p) and 1861(g) of the Act, furnishes items to his or her own patient as part of his or her professional service; 20

22 (c) where a DMEPOS supplier is co-located with and owned by an enrolled Medicare provider (as described in 489.2(b) of this chapter). The DMEPOS supplier (1) must operate as a separate unit; and (2) meet all other DMEPOS supplier standards. With regard to the exception related to a co-locate and ownership arrangement with a Medicare provider, the NSC's FAQs on the revised enrollment standards stated that a DMEPOS supplier owned by a hospital system could co-locate with a hospital that is also owned by the hospital system. 43 The 2010 Final Rule also stated: "This exception will allow a hospital, home health agency (HHA), skilled-nursing facility (SNF), or other Part A provider that is enrolled in Medicare to co-locate with a DMEPOS supplier that is owned by that Part A provider and is a separate unit." 44 However, the NSC noted that a Part A provider (e.g., a hospital) could not co-locate with a DMEPOS supplier if the Part A provider owned less than 100% of the DMEPOS supplier. The NSC also noted that a DMEPOS supplier in the same building as another DMEPOS supplier is not considered to be sharing a practice location with another supplier if it "has a separate suite, a separate address, a separate entrance from the outside, a separate telephone number and both suppliers are using separate equipment." 45 The suppliers must also separately meet all the Supplier Standards. A commenter noted in the 2010 Final Rule stated that a "space sharing agreement that passes under both the Anti-kickback statute and the Stark statute and regulations" should not be automatically prohibited by a supplier standard. 46 CMS disagreed, noting that the Anti-kickback and Stark statutes and regulations "do not address the full range of problems that occur when DMEPOS suppliers are commingling practice locations and 21

23 do not preclude us from establishing additional DMEPOS supplier standards." 47 Note: You must evaluate the fraud and abuse laws, supplier standards, accreditation rules, and quality standards when establishing a DMEPOS supplier. The CMS 2010 Final Rule regarding the revised Supplier Standards also reminded us that unlike many other providers and suppliers, DMEPOS suppliers are required to obtain a unique National Provider Identifier for each practice location. F. Hours of Operation Supplier Standard #30 now requires that a DMEPOS supplier be open to the public a minimum of 30 hours per week, except for those DMEPOS suppliers where a (a) physician whose services are defined in Section 1848(j)(3) of the Act furnishes items to his or her own patient(s) as part of his or her professional service; (b) a physical or occupational therapist 48 whose services are defined in sections 1861(p) and 1861(g) of the Act furnishes items to his or her own patient(s) as part of his or her professional service; or (c) DMEPOS supplier is working with custom-made orthotics and prosthetics. 49 Suppliers that meet this exemption are permitted to be open "By Appointment Only." IV. Accreditation/Quality Standards and Surety Bond Requirements A. Accreditation and Quality Standards 50 As of October 1, 2009, DMEPOS suppliers must be accredited by a Medicare "deemed" accreditation organization in order to obtain or maintain Medicare billing privileges if they furnish the following covered items and services: DME; medical supplies; home dialysis supplies and equipment; therapeutic shoes; PEN nutrients, equipment and supplies; blood products; transfusion medicine; prosthetic devices; and 22

24 prosthetics and orthotics. 51 The NSC will reject or revoke supplier billing privileges for failure to obtain and submit supporting accreditation documentation. Note: There is a difference between the Supplier Standards and the Quality Standards. Specifically, suppliers must be in compliance with the current Supplier Standards to obtain/maintain Medicare billing privileges (PTAN) through the NSC. Suppliers must be in compliance with the Quality Standards to attain accreditation by a CMS-approved accrediting organization. The NSC and the accrediting organizations are completely autonomous, so compliance with one entity does not guarantee compliance with the other. Certain supplier types are exempt from all accreditation requirements including physicians, dentists, orthotists, prosthetists, opticians, optometrists, audiologists, occupational therapists, physical therapists and podiatrists. 52 (However, if these suppliers provide products/services outside of their specialty, they will be required to be accredited to bill Medicare.) Suppliers that provider drugs and pharmaceuticals ONLY are also exempt from the accreditation requirement. If the supplier also provides equipment to administer the drugs or pharmaceuticals, the supplier must be accredited. CMS deemed ten (10) accreditation organizations ("AOs") to oversee the accreditation process and determine if DMEPOS suppliers are meeting the requirements of the quality standards for accreditation. Suppliers are responsible to contact the organization and commence the accreditation process. The deemed AOs include the following: Accreditation Commission for Health Care, Inc. (ACHC); American Board for Certification in Orthotics, Prosthetics and Pedorthists, Inc. (ABC); Board of Certification/Accreditation International (BOC); Commission on Accreditation of 23

25 Rehabilitation Facilities (CARF); Community Health Accreditation Program (CHAP); HealthCare Quality Association on Accreditation (HQAA); National Association of Boards of Pharmacy (NABP); The Compliance Team (TCT); The Joint Commission; and The National Board of Accreditation for Orthotic Suppliers (NBAOS). The Quality Standards are guidelines used by AOs as part of the accreditation process, and can be found at The Quality Standards are divided into the following areas: Business Services including Administration, Financial Management, Human Resource Management, Consumer Services, Performance Management, Product Safety and Information Management General Product-Specific Service Standards includes Preparation, Delivery and Setup, Training/Instruction to Beneficiary and Caregiver and Follow-up Appendix A deals with respiratory equipment, supplies and services Appendix B deals with manual wheelchairs and power mobility devices including complex rehab and assistive technology. Appendix C deals with custom fabricated, custom fitted, custom-made orthotics, prosthetic devices, soatic, ocular, and facial prosthetics and therapeutic shoes and inserts. B. Surety Bond Requirement 53 As of May 4, 2009, suppliers enrolling in the Medicare program for the first time, existing suppliers undergoing a change of ownership, or existing suppliers establishing a new practice location are required to submit a surety bond to the NSC with their CMS- 24

26 855S enrollment application. CMS (through the NSC) will deny billing privileges to a supplier if the supplier fails to obtain and file timely a surety bond. 54 CMS will also revoke a supplier's billing privileges if it is found not to meet the surety bond requirements. 55 A DMEPOS surety bond is a bond issued by an entity (the surety) guaranteeing that a DMEPOS supplier will fulfill an obligation or series of obligations to a third party (the Medicare program). If the obligation is not met, the third party will recover its losses via the bond. Absent an exception to the surety bond requirement, DMEPOS suppliers must obtain a bond through one of the sureties identified on the U.S. Department of Treasury's "Listing of Certified (Surety Bond) Companies" at The bond must be a continuous bond in an amount not less than $50,000 per location that has a separate NPI. 56 However, a higher bond amount will be required if the DMEPOS supplier has had a final adverse action 57 imposed against it within the past ten (10) years; specifically, the bond will be raised an additional $50,000 for each final adverse action that has been imposed. 58 Certain DMEPOS suppliers are exempt from the surety bond requirement including: Government-operated DMEPOS suppliers (if the DME supplier has provided CMS with a comparable surety bond under State law; State-licensed orthotic and prosthetic personnel in private practice making custom-made orthotics and prosthetics if (1) the business is solely-owned and 25

27 operated by the orthotic and prosthetic personnel, and (2) the business is only billing for orthotic, prosthetics and supplies; Physicians and nonphysician practitioners (as defined in section 1842(b)(18) of the Act) when items are furnished only to the physician or nonphysician practitioner's own patients as part of his or her physician service; Physical and occupational therapists in private practice if (1) the business is solely-owned and operated by the physical or occupational therapist; (2) the items are furnished only to the physical or occupational therapist's own patients as part of his or her professional service, and (3) the business is only billing for orthotics, prosthetics and supplies. 59 V. Stark Law and Anti-kickback Statute Considerations A. Stark Law In-Office Ancillary Services Exception Durable medical equipment (DME); parenteral and enteral nutrients, equipment and supplies; prosthetics, orthotics and prosthetic devices and supplies; and outpatient prescription drugs are specifically classified as "designated health services" ("DHS") under the Federal physician self-referral (commonly known as the "Stark Law"). 60 The Stark Law provides that "a physician who has a direct or indirect financial relationship with [a DHS] entity, or who has an immediate family member who has a direct or indirect financial relationship with the entity, may not make a referral for the furnishing of DHS for which payment otherwise may be made under Medicare." 61 Further, an entity that furnishes DHS pursuant to a prohibited referral may not present or cause to be presented a claim or bill to the Medicare program or to any individual, third party payer, or other entity for the DHS performed pursuant to the prohibited referral

28 In order to avoid the Stark Law s referral prohibitions, the physician must have a "direct or indirect financial relationship with [a DHS] entity" that meets an applicable exception. "Financial relationship" means (i) a direct or indirect ownership or investment interest (as defined by 42 C.F.R (b)) in any entity that furnishes DHS or (ii) a direct or indirect compensation arrangement (as defined by 42 C.F.R (c)) with an entity that furnishes DHS. 63 The Stark Law applies not only to relationships between third-party DMEPOS suppliers and physicians, but also to a physician's referrals within his/her physician practice entity. Under the Stark Law, physicians and physician group practice entities may furnish DHS pursuant to the "in office ancillary services" exception. 64 However, DME may only be furnished by physicians' offices under the in-office ancillary services exception it falls under specific categories of DME namely, (1) DME infusion pumps or (2) canes, crutches, walkers and folding manual wheelchairs, and blood glucose monitors that meet certain conditions. 65 (Note: For purposes of the in-office ancillary services exception, an item is "furnished" in the location where the service is actually performed upon a patient or where an item is dispensed to a patient in a manner that is sufficient to meet the applicable Medicare payment and coverage rules. 66 ) In addition, the services must meet the following IOAS exception conditions: 1. Who Services must be furnished personally by one of the following individuals: (i) the referring physician; (ii) a physician who is a member of the same group practice as the referring physician; (iii) an individual who is supervised by the referring physician or, if the referring physician is in a group practice, by another physician in the group practice, provided that the supervision complies with all other 27

29 applicable Medicare payment and coverage rules for the services. [Special Rule for DME only: DME is restricted in that it may only be furnished personally by the physician who ordered the DME, by another physician in the group practice or by an employee of the physician or group practice.] 2. Where Services must be furnished in one of the following locations: (i) the same building (as defined at ), but not necessarily in the same space or part of the building, in which all of the conditions of 42 C.F.R (b)(2)(i)(A), (B) or (C) are satisfied; 67 (ii) a centralized building (as defined at ) that is used by the group practice for the provision of some or all of the group practice's clinical laboratory services; (iii) a centralized building (as defined in ) that is used by the group practice for the provision of some or all of the group practice's DHS (other than clinical laboratory services). [Special Rule for DME only: DME must be exclusively furnished in the "same building."] 3. How Billed Services must be billed by one of the following: (i) the physician performing or supervising the service; (ii) the group practice of which the performing or supervising physician is a member under a billing number assigned to the group practice; (iii) the group practice if the supervising physician is a "physician in the group practice" (as defined at ) under a billing number assigned to the group practice; (iv) an entity that is wholly owned by or by that physician's group practice under the entity's own billing number or under a billing number assigned to the physician or group practice; (v) an independent third party billing company acting as an agent of the physician, group practice, or entity specified in subsections (i) through (iv) above under a 28

30 billing number assigned to the physician, group practice, or entity, provided that the billing arrangement meets the requirements of 42 C.F.R (b)(5). 68 B. Supply Closet Arrangements The Office of Inspector General ("OIG") has expressed long standing concern regarding space rental arrangements in physician office space. 69 Specifically included within the arrangements of concern to the OIG are the rental of "consignment closets" to DMEPOS suppliers who furnish items or services to the physician's or group practice's patients. 70 The concern is that such arrangements are set up as a disguised kickback from the DMEPOS supplier to the physician or group practice for referrals of DMEPOS items. Such arrangements should be structured to comply with the Federal anti-kickback statute's space rental safe harbor and the rental of office space exception to the Stark Law, as well as the Supplier Standards (including the shared space Supplier Standard #29, described above) C.F.R ; see also Social Security Act ("SSA") 1861(u), 1866(e). 2 Medicare Claims Processing Manual, ch. 20, Social Security Act ("SSA") 1861(n), 1861(s)(6); 42 C.F.R Medicare Benefit Policy Manual, ch. 15, Id. at SSA 1861(s)(8). 7 Medicare Benefit Policy Manual, ch. 15, 120(A). 8 Id. at SSA 1861(s)(12). 10 Id. 1861(s)(2)(F). 29