Even Wheelchairs Need Tune-Ups: CMS Releases Final Rule Revising DMEPOS Enrollment and Participation Standards

31 August 2010 Publication
Authors: Nathaniel M. Lacktman Judith A. Waltz

American Health Lawyers Association

On August 27, 2010, the Centers for Medicare & Medicaid Services (CMS) released a Final Rule imposing stricter program standards for suppliers of durable medical equipment, prosthetics, orthotics, and supplies (DMEPOS). The Final Rule introduces several new enrollment standards and expands existing standards and participation requirements that all DMEPOS suppliers (as defined in 42 C.F.R. § 424.57(a)) must meet to establish and maintain billing privileges in the Medicare program. The Final Rule, which implements many, but not all of the standards proposed by CMS in a proposed rule published two years ago in 73 Fed. Reg. 4503 (January 25, 2008), revises the existing standards set forth at 42 C.F.R. § 424.57(c).

DMEPOS suppliers should promptly review the Final Rule, as the provisions take effect in just one month (September 27, 2010), and CMS has stated that all DMEPOS suppliers must meet these new standards. Although many suppliers might already satisfy the majority of these standards, some of the new standards-for example, tightened restrictions on contacting beneficiaries-may require suppliers to review and revise their policies and procedures to comply.

In discussing the Final Rule, CMS Deputy Administrator for Program Integrity Peter Budetti stated in a press release that, "[w]e know the majority of medical equipment suppliers and health care providers want to improve the health of Medicare beneficiaries, but we also know there are those who look for any opportunity to take advantage of beneficiaries and Medicare, including sham operations who are not legitimate businesses . . . . The steps we are taking today provide us with additional tools to support our continuing efforts to reduce Medicare fraud by helping to ensure that only appropriately qualified suppliers are enrolled in the program."

The Final Rule includes the following clarifications, revisions, and changes:

Licensing Requirement and Prohibition on Outside Contracting

  • A DMEPOS supplier must be licensed to provide licensed service(s). This requirement puts the onus on the supplier to determine what licenses are required for the supplier's business, although licensed services are specifically stated to include supplying oxygen or a general DMEPOS license. One critical point: while a supplier may enroll using a single tax identification number (TIN) for multiple practice locations (rather than a separate TIN for each location), if a location with that TIN has its billing privileges revoked by the National Supplier Clearinghouse (NSC), CMS indicates that all locations associated with that TIN will also be revoked.
  • A supplier cannot contract with a third party to provide the licensed service(s). This requirement prevents entities from enrolling in Medicare, only to subcontract out the operations to suppliers that are not (or may not) participate in the Medicare program Suppliers may, of course, continue to contract with third parties for delivery of DMEPOS supplies to beneficiaries. Licensed professionals may be part-time or full-time employees.
  • For oxygen supplies, a DMEPOS supplier must obtain oxygen from a state-licensed oxygen supplier if the DMEPOS supplier is located in a state that requires licensure for oxygen suppliers. If the DMEPOS supplier is located in a state that requires licensure, but the DMEPOS supplier obtains its oxygen from an out-of-state oxygen supplier, that out-of-state oxygen supplier must be licensed. This standard does not apply to DMEPOS suppliers located in states that do not require licensure of oxygen suppliers.

Solicitation of Beneficiaries

  • DMEPOS suppliers are prohibited from initiating any unsolicited, direct contact with Medicare beneficiaries unless: (1) the supplier has received written permission from the beneficiary; (2) the supplier has furnished a covered item to the beneficiary and is contacting the beneficiary to schedule delivery of the item; or (3) if the contact concerns a covered item other than one already furnished to the beneficiary, the supplier has furnished at least one covered item to the beneficiary within the previous fifteen months. A DMEPOS supplier may not contact a beneficiary based solely on a physician order.
  • Of particular interest, CMS clarified that it considers the Telemarketing Statute (42 U.S.C. § 1395m(17)) to apply not only to solicitation by telephone, but also by "e-mail, instant messaging, or in-person contact [without the beneficiary's] consent for the purpose of marketing the DMEPOS supplier's health care products or services or both." 42 C.F.R. § 424.57(a). CMS did, however, eliminate the proposed prohibition on "coercive internet advertising" and noted that the revised standards do not restrict a supplier's ability to advertise products to the public or Medicare beneficiaries generally, nor do the revised standards impact television, radio or internet advertisements, or advertisements at health fairs, community events, or the supplier's own website. 75 Fed. Reg. at 52639.
  • Even if a supplier receives a verbal order from the beneficiary's treating physician, the supplier may not contact the beneficiary unless the physician contacts the supplier on behalf of the beneficiary and with the beneficiary's knowledge, and then the supplier contacts the beneficiary to confirm or gather information needed to provide that particular covered item. The physician need not specify to the beneficiary exactly which supplier the physician will contact, but the physician must make the beneficiary aware that a supplier will be contacted. Furthermore, the regulation states that the beneficiary must give the physician written permission to contact a supplier on the beneficiary's behalf. This requirement of written permission from the beneficiary to the ordering physician is even more restrictive than what was previously set forth in the Telemarketing Statute FAQ issued by CMS six months earlier (February 18, 2010), in response to the Updated Special Fraud Alert, titled "Telemarketing by Durable Medical Equipment Suppliers," issued by the U.S. Department of Health and Human Services, Office of the Inspector General in January 2010.
  • For physician orders issued through hospitals, CMS noted that so long as the beneficiary has completed a consent form giving the hospital staff member written permission to share the beneficiary's information with a DMEPOS supplier for the purpose of initiating service, the hospital staff member can order the service on the beneficiary's behalf.

Physical Location Requirements

  • Suppliers must maintain a physical location measuring at least 200 square feet in size, except for state-licensed orthotic and prosthetic personnel providing custom fabricated orthotics or prosthetics in private practice.
  • The supplier's location must be staffed during posted business hours and remain open and accessible to the public at least thirty hours per week (e.g., not in a gated community or area where access is restricted). There are limited exceptions to this standard for physicians or licensed non-physician practitioners furnishing services to their own patients as part of their professional services, as well as DMEPOS suppliers working with custom made orthotics and prosthetics. CMS also distinguished this "open and accessible" requirement from a storefront, noting that CMS does not require DMEPOS suppliers to maintain a storefront.
  • The supplier's name and business hours must be displayed on a permanent sign at the main entrance of the facility and posted in plain view that so beneficiaries and CMS personnel can readily locate the business.
  • The supplier's location must contain adequate space for storing business records, including the supplier's delivery, maintenance, and beneficiary communication records. However, CMS explained that records may be stored off site, and multi-state suppliers may maintain central record storage locations, so long as the supplier can readily access them as needed.
  • Suppliers may not share a physical practice location (i.e., where the supplier operates his or her business and meets with customers) with other Medicare providers and suppliers. CMS reasoned that legitimate suppliers would not share space with competitors and, in the event that it does occur, the practice often results in either poor service or fraud. CMS carved out some exceptions to this provision, allowing location sharing when the DMEPOS supplier is a separate unit located within a larger facility, or for physicians and non-physician practitioners, including physical and occupational therapists, operating as both DMEPOS suppliers and providers of professional services.

Operational Requirements

  • Suppliers may not use cell phones or pagers as a primary business telephone number. In addition, answering machines and answering services may not be used exclusively as a supplier's primary telephone number during posted business hours.
  • Suppliers must continue to maintain ordering and referring documentation received from physicians or non-physician practitioners for seven years after the service or supply has been provided to assure that coverage criterion for an item has been met.

On-Site Visits

  • The Final Rule allows CMS and the NSC to conduct routine, unscheduled site visits during the supplier's posted hours of operation. If CMS or the NSC is unable to perform a site visit during normal operating hours, the NSC will revoke the supplier's Medicare billing privileges. A supplier would be afforded appeal rights if its billing privileges are revoked.

DMEPOS suppliers should carefully review both the revised language of the regulations and the preamble to the Final Rule to confirm that they will comply with all new provisions. The Final Rule was published in the Federal Register at 75 Fed. Reg. 52629 (August 27, 2010). The Proposed Rule was published in the Federal Register at 73 Fed. Reg. 4503 (January 25, 2008).


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