DMEPOS Round 2021 Competitive Bidding: Potential Pitfalls

competitive bidding

2021 competitive biddingBy: Matt Fischer

With the 2021 competitive bidding round on the horizon for durable medical equipment (DME) providers, both those that are established as well as those fairly new to the industry must take note of the potential pitfalls that may be encountered when competing to become a Medicare contract supplier.

The durable medical equipment, prosthetics, orthotics, and supplies (DMEPOS) competitive bidding program was first established by the Medicare Prescription Drug, Improvement, and Modernization Act of 2003.  Under this program, DMEPOS suppliers submit bids (i.e. applications) and compete to furnish specific items in competitive bidding areas commonly referred to as CBAs.  Additionally, suppliers are not just bidding for the rights to a particular CBA but also for a single payment amount that will replace the current Medicare fee schedule payment.  The payment will be determined by using the bids submitted.  As of December 31, 2018, all contacts have expired.  As a result, there is currently a temporary gap period.  The upcoming bidding process is loaded with requirements.  Therefore, compliance with each requirement is crucial.  Here are a few pitfalls to watch out for: Continue reading

Pharmacy or DME: The Time is Ripe to Become Both

pharmacy dme

pharmacy dmeBy: Michael Silverman

People looking to enter the direct-to-consumer medical supply business often question whether becoming a pharmacy or durable medical equipment provider (DME) is a “better” endeavor.

Now, more than ever, due to industry changes and because of the synergies between the two, the answer is “ become both.”

Think about it.Continue reading

CERT Review and Top Five Medicare Documentation Errors

By: Matthew Fischer

In CMS’ latest “MLN Connects” newsletter, the agency discusses the Comprehensive Error Rate Testing (CERT) program and the top five documentation errors committed by providers.  Providers should pay close attention when CMS releases these types of notices.  If selected for CERT review, providers are subject to potential action such as post-payment denials, payment adjustments, or other actions depending on the results of the review.  Therefore, providers should ensure they fully understand Medicare’s documentation requirements and how to meet these demands. Continue reading

DMEPOS Medicare Coverage & Reimbursement

DME medicare

DME medicareBy: Michael Silverman

Providers need to comply with all the Medicare ‘red tape’ but need not let fear of non-compliance inhibit their practice from offering Durable Medical Equipment Prosthetics & Orthotics Supplies (“DMEPOS”) to Medicare beneficiaries.

Here’s an overview of the steps providers need to take to enroll as a supplier of DMEPOS with Medicare to be eligible for Part B coverage and reimbursement:Continue reading

Chiropractic Practice Expansion: The DMEPOS Licensure Process

florida physician self-referral statute

DMEPOS LicenseBy: Michael Silverman

Adding Durable Medical Equipment Prosthetics & Orthotics Supplies (“DMEPOS”) to a Chiropractic Practice is a great way to not only increase revenues, but most importantly it is a great way to increase overall patient satisfaction and care.

Providing patients with easy access to DMEPOS allows for more comprehensive care, enabling providers to help further stabilize injuries, maximize patient recoveries, and minimize patient down time. Many existing patients are already buying and utilizing DMEPOS such as back braces, so there is an opportunity to provide that additional supervision and care through an existing practice.

Examples of DMEPOS that would complement a Chiropractic Practice and which patients are likely already using:Continue reading

DME License, Operation and More in Florida – a Brief Legal Look

DME operationBy: Susan St. John

So you are considering starting a home medical equipment aka durable medical equipment (HME or DME) business to provide products and services to patients in Florida (and perhaps in other states, but that’s a topic for another day). In addition to deciding what products and/or services you are going to provide and your physical location, there a few things you need to know, steps to be taken, and information to be collected, to apply for an HME/DME license in Florida to get up and going.

The Basics

Florida defines an HME provider as “any person or entity that sells or rents or offers to sell or rent to or for consumers, any HME and service or HME that requires HME services.” Section 400.925(7), Florida Statutes. Further, HME “includes any product as defined by the Food and Drug Administration’s Federal Food, Drug, and Cosmetic Act, any products reimbursed under the Medicare Part B Durable Medical Equipment benefits, or any products reimbursed under the Florida Medicaid durable medical equipment program. HME includes oxygen and related respiratory equipment; manual, motorized, or customized wheelchairs and related seating and positioning, but does not include prosthetics or orthotics or any splints, braces, or aids custom fabricated by a licensed health care practitioner; motorized scooters; personal transfer systems; and specialty beds, for use by a person with a medical need.” Section 400.925(6), Florida Statutes.Continue reading

Justice Department Hits Physician Owned Distributorships (PODS)

money doctorFor the first time, the Department of Justice (DOJ) has fired a shot at a physician owned distributorship (POD).  In the case, the DOJ suit claims that the ownership interest of a neurosurgeon in a spinal surgery device distributorship has caused him to perform unnecessary surgeries.

PODs have been the source of considerable controversy for years.  A couple years ago, they caught the attention of Congress.  The Office of Inspector General of the Department of Health and Human Services (“OIG”) has even issued a Fraud Alert making clear their dislike of PODs and sending a clear shot across the bow of those who are in that industry.  In 2006, the Office of the Inspector General of HHS and CMS expressed major concerns about PODs, and cited concerns about “improper inducements.”  At that time, the OIG stopped short of prohibiting them, but called for heightened scrutiny.  CMS itself has stated that PODs “serve little purpose other than providing physicians the opportunity to earn economic benefits in exchange for nothing more than ordering medical devices or other products that the physician-investors use on their own patients.”

Continue reading

The Stark Law Regulations: A Review

The Stark Regs (1) forbid doctors and their immediate family members from referring their patients to businesses they own which provide “designated health services,” and (2) contains a long list of permitted financial relationships between health care providers.  The list of what constitutes a “designated health service” (DHS) includes PT, rehab, diagnostic imaging, clinical lab, DME, and home health.  A “physician” means an M.D., D.O., chiropractor, podiatrist, optometrist or dentist.  An “immediate family member” is a husband or wife; birth or adoptive parent, child, or sibling; stepparent, stepchild, stepbrother, or stepsister; father-in-law, mother-in-law, son-in-law, daughter-in-law, brother-in-law, or sister-in-law; grandparent or grandchild; and spouse of a grandparent or grandchild.  In short, if you or your family member owns a DHS, don’t refer to it.  Unless of course your situation falls within one or more of the gazillion exceptions.

A few key changes from the third set of revisions (so called Stark III) which affect physicians are helpful to keep in mind.  For instance, the way fair market value of physician compensation is determined  in the Stark II regs has been simplified and now depends on an amorphous consideration of the transaction, its location and other factors.  The clear formulas contained in Stark II was dropped and this makes the need for an expert FMV study even more compelling.Continue reading

OIG Shoots Down Physician Owned Distributorships (PODS)

Physician owned distributorships (PODs) have been the source of considerable controversy for years.  A couple years ago, they caught the attention of Congress.  Now, the Office of Inspector General of the Department of Health and Human Services (“OIG”) has issued a Fraud Alert making clear their dislike of PODs and sending a clear shot across the bow of those who are in that industry.

PODs distribute various things, most commonly surgical implants and devices, that are reimbursed by insurers.  A patient needs a spinal rod, a surgical implant/device company makes it and a distributor rep distributes it.  Device/implant companies usually contract with distributorships to sell their products.  Distributorships contract with reps who are paid commissions for sales.  Surgeons who actually order the devices sometimes think “Since I’m the one doing the surgery and ordering all this stuff, why can’t I earn something from that?  I’m not ordering anything I don’t need or that I don’t think is good for the patient.”  PODs are one way for physicians to financially benefit from the sales of devices and items their patients need, but they have never been more controversial than now.Continue reading

DME Leads: When is a Lead a Referral?

By: David W. Hirshfeld, Esq.

Durable medical equipment is commonly sold through sales leads generated through telephone and/or internet contact.  These leads often begin with a seemingly innocuous internet survey or an application for something unrelated to DME.  This “raw” lead may be as basic as a person’s name, telephone number or email address, and age.  The lead is then further developed and “qualified” by obtaining more details about the subject; such as: whether and by whom the subject is insured, what (if any) medical issues does the subject suffer from, the name of the subject’s physician.  Ultimately, the lead is sold to a DME vendor who uses the lead to accomplish the sale of medical equipment or supplies.  In the course of a lead’s birth and life, it is handled by a chain of companies, some of whom purchase the lead, add a level of detail to it, and sell it for a higher price.  In the past year or so, several lead generation companies from the “middle of the chain” have come to me asking me whether their business model gives rise to an illegal kickback.  After a bit of research, I gave the lawyerly answer: “It depends.”

The Federal anti-kickback statute provides that it is a felony for a person or entity to knowingly and willfully offer or pay any remuneration to induce a person to refer an individual for the furnishing or arranging for the furnishing of any item for which payment may be made under a Federal health care program, or the purchase or lease or the recommendation of the purchase or lease of any item for which payment may be made under a Federal health care program.[1]  Florida’s corollary to this Federal law is the Florida Patient Brokering Act, but the Florida statute applies to all health care services, regardless of whether paid for by a Federal program.[2]  The Federal law creates criminal liability, and includes a knowledge requirement.  Congress recognized that business models exist that may appear as willfully paying remuneration in exchange for a referral, but which have more innocent motivations, and are less likely to result in abuse to the health care program at issue.  In order to give the health care industry a measure of comfort, Congress created several “safe harbors.”  If a business model fits within a safe harbor, then it is deemed to not be an illegal kickback under Federal and Florida law.

The Department of Health and Human Services Office of the Inspector General (“OIG”) is the agency charged with enforcing the Federal anti-kickback statute.  In November 2008 the OIG considered a situation in which an advertising company created a website that would give prospective patients contact information for a list of chiropractors in their area, in response to a zip code entered by the prospect.  The prospect paid nothing for the service, but the chiropractors paid the advertiser a fee for each call or contact from the website that lasted over thirty seconds, regardless of whether the contact resulted in a prospect becoming a patient.  This scenario is as close as the OIG has come to opining on a typical DME lead generation.

The OIG found that the chiropractors’ advertising service was not a prohibited kickback, and cited four factors as convincing: (i) the advertising company is not a health care provider or supplier, and is only affiliated with the health care industry through the arrangement at issue; (ii) the advertising program did not target Federal health care program beneficiaries; (iii) the fees paid by the health care practitioners did not depend upon whether the prospect actually became a patient; and (iv) the advertising program did not steer patients to a particular chiropractor.

When applied to the DME context, the OIG opinion and the anti-kickback statutes suggest that leads can be sold for a per-lead fee as long as the leads are not priced, and do not contain information so detailed, such that the purchaser can cherry-pick those leads it wants to purchase based on the likelihood that the lead will result in an actual sale of covered DME.  For example, a “raw” lead comprised simply of a prospect’s name, contact information, and interest in speaking with a DME supplier is probably the sort of lead that could be sold for a per-lead fee without running afoul of the anti-kickback prohibitions.  As more and more information is added to the lead, such as the type of DME products of interest to the prospect, information regarding the prospect’s insurer and plan coverage, the purchaser will be better able to determine whether the lead is likely to result in a sale of DME (a “qualified” lead).  At a certain level of detail, a lead morphs from lead that can be sold on a per-lead basis, to a referral that cannot.

A lead generation company can sell highly detailed qualified leads if that sales relationship fits within the safe harbor for “Personal Services and Management Contracts.”[3]  That safe harbor requires that: (a) the aggregate compensation to be paid under the contract must be fixed in advance; (b) the compensation must be consistent with fair market value in an arm’s-length transaction; and (c) the compensation must not be determined in a manner that takes into account the volume or value of any referrals or business otherwise generated between the parties for which payment may be made by a Federal health care program.  The requirement that the compensation be fixed in advance does not tolerate a per-lead fee.   Fixed in advance would be a weekly, hourly, annual fee.

So, if you are in the lead generation business, your liability for buying or selling health care referrals probably depends upon how detailed and “qualified” the lead is at the time of your transaction.  The safe tack is to structure your transactions so that they fit within the safe harbor for Personal Services and Management Contracts so that just in case your leads are qualified enough to constitute “referrals.”

This article focuses on anti-kickback liability associated with DME leads, but there is also liability attached to how the lead is originated, and how the prospect is contacted.  Lead generation companies are often well-served by committing their relationships to written agreements with advice from appropriate counsel.

[1] 42 U.S.C. §1320a-7b(b)

[2] FL Statutes §456.054 and §817.505

[3] 42 C.F.R. §1001.952(d)