Legal Speak

Compliance Housekeeping in 2007

As the New Year begins, it is worthwhile to review your operations to incorporate new compliance requirements into your business and to anticipate changes that lie ahead. The new requirements include new supplier standards and the accreditation requirement, and changes to oxygen and capped rental equipment reimbursement under the Deficit Reduction Act of 2005 (DRA). The Office of Inspector General (OIG) also issued several Advisory Opinions in 2006 that are directly applicable to suppliers. Finally, of course, all suppliers are waiting with some consternation for the final rule on competitive bidding, which remained unpublished as of press time.

Quality Standards, Accreditation and Competitive Bidding
After great anticipation, the Centers for Medicare and Medicaid Services (CMS) published final quality standards for DMEPOS suppliers. Eventually, all suppliers who bill Medicare for medical equipment or supplies will have to demonstrate that they meet the quality standards via accreditation. In the immediate term, however, accreditation needs to be a priority for unaccredited suppliers who do business in any of the metropolitan statistical areas (MSAs) that could be designated as one of the first 10 competitive bidding areas later this year. Suppliers must be accredited to participate in competitive bidding.

Once the final rule is published, CMS will identify the products and MSAs that will be a part of the first 10 competitive bidding sites. Suppliers furnishing those products in the selected MSAs will need to work hard on their strategies because CMS continues to forecast that competitive bidding will commence in 2007.

DRA Compliance Issues for Oxygen and Capped Rental Equipment
Suppliers need to pay attention to several new compliance issues that became effective Jan. 1. Before initiating service, suppliers must inform beneficiaries of their intentions with respect to accepting assignment for the entire equipment rental period — 36 months for oxygen equipment and 13 months for capped rental DME. Although suppliers are required to provide this information to beneficiaries, they are not required to agree to accept assignment for the entire rental period.

Another new requirement is that at least two months before the end of the rental period, suppliers must notify beneficiaries of whether they intend to continue furnishing services once the beneficiary owns the equipment.

Generally, CMS expects that equipment delivered to the beneficiary on the first day of service will be the same equipment that the beneficiary owns at the conclusion of the rental period. Likewise, the supplier who services the beneficiary initially is expected to service the beneficiary for the entire rental period. There are a few exceptions to these requirements, but those exceptions are limited. However, suppliers may continue the current practice of exchanging equipment that is broken or in need of servicing with similar equipment that is in good working order as long as the beneficiary receives title to equipment that is of equal or better quality than the equipment that was furnished on the first day of service.

Finally, everyone should be aware that ownership of oxygen equipment will transfer to the beneficiary even if the beneficiary has an outstanding balance with the supplier. Consequently, suppliers will have to pay more attention to collecting co-pay and deductible amounts before the rental period ends because they may be more difficult to collect once the beneficiary owns the equipment.

OIG Advisory Opinions
The OIG issued two important statements — 06-01 and 06-20 — which highlight compliance issues created by providing courtesy or complimentary services to beneficiaries.

Advisory opinion 06-01 discussed a program through which a home health agency provided complimentary home safety assessments to Medicare beneficiaries about to undergo orthopedic surgery. Beneficiaries were referred to the agency’s program by their surgeons, and they were under no obligation to use the home health agency in the event they required home health services following surgery. The assessments occurred either in person or over the phone and typically were brief, focusing on common sense recommendations such as rearranging furniture in order to avoid trip hazards.

The OIG concluded that the complimentary home safety assessment was a valuable service provided at no cost to the beneficiary. Consequently, the service could be an inducement to the beneficiary who might need home health services reimbursed by Medicare following surgery.

In advisory opinion 06-20, the OIG reviewed the practice of providing beneficiaries with complimentary “interim” oxygen until the beneficiary qualified for oxygen under Medicare guidelines. Specifically, a supplier of oxygen and oxygen equipment had a program through which it would furnish oxygen to Medicare beneficiaries on a complimentary basis until the beneficiary had been tested for and qualified for reimbursement under Medicare. Although the complimentary service typically was furnished for only a few days, some beneficiaries might receive unreimbursed services for a week or more. The same supplier also proposed a new program to provide complimentary overnight oximetries to certain beneficiaries.

Consistent with its earlier decision on home safety assessments, the OIG concluded that providing valuable services to a beneficiary such as complimentary oxygen or overnight oximetry at no cost to the beneficiary could be an inducement intended to secure the beneficiary’s subsequent choice of Medicare reimbursed services furnished by the supplier.

Although the programs considered by the OIG in these two advisory opinions appear benign and primarily intended to help beneficiaries, they create similar concerns from the OIG’s perspective. The OIG’s view is that complimentary services to beneficiaries are undertaken with an expectation that they will generate Medicare business for the supplier and in fact may be chosen based on the likelihood that they will achieve that result. Even though there may be good policy reasons to support these types of programs, suppliers would be well served to at least review their operations for compliance issues surrounding complimentary services to beneficiaries.

The New Year will no doubt bring its own new challenges. While the year is still fresh, suppliers should move forward with compliance housekeeping based on the new requirements established in 2006. Assuring compliance in each of the above areas would make a good beginning for 2007.

This article originally appeared in the Respiratory Management Jan/Feb 2007 issue of HME Business.

About the Author

Asela M. Cuervo, Esq., specializes in legal/regulatory cases and issues concerning the HME industry, and is a member of CMS' Program Advisory and Oversite Committee regarding national competitive bidding. The Law Office of Asela M. Cuervo, located in Washington, D.C., can be reached at (202) 496-1281 or

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