Provider Strategy

DME Compliance Guide in a Nutshell

Here's a rundown of the compliance requirements providers must remember to keep at the top of their minds.

DME suppliers are highly regulated. This article discusses important compliance issues that DME suppliers face as they grow their business.

Arrangements with referring physicians. If a DME supplier enters into an arrangement with a referring physician that results in the supplier providing anything of value to the physician, the arrangement must comply with the federal anti-kickback statute (AKS) and the federal physician self-referral statute (Stark).

If a DME supplier provides anything of value to a referring physician, the arrangement will violate the AKS unless the arrangement complies with (or substantially complies with) a Safe Harbor.

Likewise, if a DME supplier provides anything of value to a referring physician, the arrangement violates Stark unless it complies with an exception. For example, under the Stark Non-Monetary Compensation exception, the DME supplier can spend up to $452 in 2022 on non-monetary or equivalent gifts for a physician (e.g., meals, entertainment).

The physician’s staff do not fall under Stark, meaning that the Stark Non-Monetary Compensation exception does not apply to the staff. Meals, etc. to the staff must be examined under the AKS. There is no safe harbor that applies to meals, etc. for the staff. From a practical standpoint, if meals, etc. provided to the staff are modest in price and infrequent in nature, the risk is low that a government enforcement action will be brought against the arrangement under the AKS.

Arrangements with non-physician referral sources. If a DME supplier enters into an arrangement with a non-physician referral source that results in the supplier providing anything of value to the non-physician referral source, the arrangement must comply with the AKS. See the preceding discussion.

Cooperative marketing with a manufacturer. A DME supplier and a manufacturer can cooperatively market on the condition that the arrangement does not violate the AKS. In implementing a cooperative marketing program with a manufacturer, the supplier must ensure that both parties contribute their pro-rata share of the program’s expenses.

Marketing to prospective customers. In marketing to prospective customers, the DME supplier cannot offer anything of value to the prospective customers unless what is offered falls into an exception to the federal beneficiary inducement statute. This statute states that a supplier cannot offer anything of value to a prospective customer to persuade the prospective customer to purchase a federal healthcare program-covered product from the supplier—unless an exception is met.

The nominal value exception allows the DME supplier to offer a gift to a prospective customer if the gift (i) has a retail value of $15 or less and (ii) is not cash or cash equivalent. The DME supplier can offer multiple gifts to a prospective customer on the condition that the retail value of the gifts, in the aggregate, do not exceed $75 over 12-months.

Cooperative marketing with an affiliated entity. As a “covered entity” under HIPAA, a DME supplier cannot disclose or use PHI unless it meets HIPAA requirements. If the DME communicates with its patients about services offered by an affiliated entity, such communications will violate HIPAA unless the supplier complies with HIPAA guidelines.

Discounts and rebates from manufacturers. Discounts and rebates provided by a manufacturer to the DME supplier must comply with the Discount Safe Harbor to the AKS. If the discounts and rebates provided by the manufacturer are not based solely on the volume of purchases by the supplier but, rather, are also based on other actions by the supplier (e.g., converting patients from one manufacturer to another), the AKS is implicated.

Waiver of co-payments. A DME supplier is required to exert a reasonable effort to collect co-payments from patients. If a DME supplier routinely waives co-payments or advertises that it has a financial hardship waiver program or advertises that if the patient meets certain requirements, his or her co-payment will be waived or reduced, the supplier is potentially liable under the AKS, federal beneficiary inducement statute, and Federal False Claims Act.

Offshore subcontractors. In using offshore subcontractors, a DME supplier must (i) ensure the protection of HIPAA-protected health information (PHI) and (ii) determine if there are restrictions or prohibitions (on the use of such subcontractors) by third-party payors. For example, (i) some state Medicaid programs prohibit the use of offshore subcontractors and (ii) some commercial insurers require the DME supplier to obtain prior approval by the insurers of the offshore subcontractors.

State DME licensure. Most states require a DME supplier to have a license to sell products to residents of the state. Such licenses are product specific. If a DME supplier fails to secure a required DME license, the supplier will be in violation of the DME Supplier Standards.

Sales Tax. All states impose sales taxes on certain products. A DME supplier must adhere to the sales tax requirements of the states into which the supplier sells products.

About the Author

Jeffrey S. Baird, Esq., is Chairman of the Health Care Group at Brown & Fortunato, a law firm with a national health care practice based in Texas. He represents pharmacies, infusion companies, HME companies, manufacturers and other health care providers throughout the United States. Baird is Board Certified in Health Law by the Texas Board of Legal Specialization and can be reached at (806) 345-6320 or jbaird@bf-law.com.

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