Business already is plenty complicated for durable medical equipment (DME) suppliers; the federal government has just made it more so.
Already a target of government agencies investigating false claims against Medicare and Medicaid, DME suppliers now face a new maze of proposed rules regulating Medicare reimbursement of their industry. The proposed rules were published Jan. 20 by the U.S. Health Care Financing Administration, (HCFA). Medicare Program; additional Supplier Standards, 63 Fed. Reg. 2926 (1998)(proposed to be codified at 42 C.F.R. § 424.57).
HCFA's new proposed rules, which rewrite the brief section of the Code of Federal Regulations governing payments to DME suppliers, promise significant changes for many, though not all, suppliers. Essentially, the regulations create a new set of trip wires for suppliers to be excluded from Medicare. None of the proposed regulations, however, appear likely to have a significant impact on ongoing government investigations of DME suppliers for previous violations. The major proposed rules include:
Provision of Information to HCFA – Proposed 42 C.F.R. § 424.57(c)(5) gives HCFA wide-ranging authority to demand, without resort to subpoena, that DME suppliers provide:
- All documentation used in processing or adjudicating Medicare claims.
- Copies of contracts with third parties for furnishing Medicare-covered items to Medicare beneficiaries.
- Documentation of notices to consumers concerning product warranties and equipment rental/purchase options.
- Documentation of equipment delivery to Medicare beneficiaries.
- Documentation of purported equipment repairs, including contracts with third parties.
- Proof of liability insurance.
- Any other information required of any Medicare provider.
Information submitted in response to the first and last items would likely form the basis of an Office of Inspector General (OIG) audit.
Surety Bonds – Section 4312(a) of the Balanced Budget Act of 1997, Pub. L. 105-33, requires DME suppliers to post an annual surety bond against debts to the Medicare program. HCFA's proposed rule, promulgated pursuant to § 4312 of the Balanced Budget Act, limits the scope of these surety bonds to overpayments, interest and civil money penalties and assessments and not, as yet, penalties imposed as a result of investigations by the OIG.
HCFA specifically sought comments on the advisability of including unpaid OIG fines and assessments within the scope of the supplier's surety bond. Under the proposed rule, the face amount of the bond would equal 15% of the supplier's Medicare billings for the previous fiscal year, with a minimum of $50,000 and a maximum of $3 million.
Prescription Drugs – New 42 C.F.R. § 424.57(c)(20) would prohibit DME suppliers from charging Medicare for prescription drugs dispensed along with their medical devices, unless the DME suppliers also has an applicable state license to dispense drugs. Further, the DME supplier must bill and receive payment for any drugs it dispenses in its own name. If a supplier fails to abide by these requirements, its billing number will be revoked. Proposed 42 C.F.R. § 424.57(d).
Compliance with All Medicare Statutes and Rules – On its face, this proposed rule would appear to bring the related-party prohibition, 42 C.F.R. § 413.17, within the scope of DME supplier regulation. However, 42 C.F.R. § 413.1(a)(2) states that the chapter of regulations, including the related-party rules, does not apply to DME suppliers. Hence, it remains unclear whether DME suppliers are subject to related-party transaction prohibitions.
Other proposed HCFA rules would require DME suppliers to:
- Comply with all applicable federal and state licensure requirements.
- Make no misrepresentations on Medicare supplier number applications. Criminal penalties for violations.
- Designate an individual with authority to bind the supplier to sign the firm's supplier number application.
- Provide consumers information related to costs of equipment, operating instructions and purchase/rental options.
- Avoid contracting with entities or persons already excluded from Medicare.
- Avoid charging Medicare for repairs of equipment still under warranty.
Three new rules aim at keeping fly-by-night operations out of the DME business. Under the proposed rules, DME suppliers must:
- Refrain from conveying or reassigning a supplier number.
- Operate their businesses from a physical facility suitable for business operations with a dedicated business phone line.
- Carry liability insurance.
The proposed rules make no mention of retroactive effect. Absent evidence of clear Congressional intent to the contrary, however, courts regard statutes and regulations as not retroactive. Landgraf v. USI Film Products, 511 U.S. 244, 114 S. Ct. 1483, 128 L. Ed. 2d 229 (1994).