Backing Up the Wheelchair: CMS Proposed Rule Withdraws, Relaxes DMEPOS Supplier Standards

On April 4, 2011, CMS released a Proposed Rule revising and relaxing four of the 30 Medicare supplier standards applicable to suppliers of durable medical equipment, prosthetics, orthotics, and supplies (DMEPOS). The Proposed Rule is particularly notable because it reverses some of the expansive prohibitions on DMEPOS telemarketing and beneficiary solicitation CMS implemented last year.

On August 27, 2010, CMS released a Final Rule imposing stricter program standards for DMEPOS, which became effective September 27, 2010. The Final Rule introduced several new enrollment standards and expanded 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. Foley attorneys covered these changes in an August 31, 2010 article available at http://www.foley.com/publications/pub_detail.aspx?pubid=7481.

The Proposed Rule includes the following revisions:

Contractual Arrangement Issues

• Under the current supplier standard No. 1, a DMEPOS supplier cannot contract with a third party to provide the licensed service(s). 42 C.F.R. § 424.57(c)(1)(ii). This requirement is designed to prevent entities from enrolling in Medicare, only to subcontract out the operations to DMEPOS suppliers that are do not (or may not) participate in the Medicare program.
• Under the Proposed Rule, a DMEPOS supplier may contract with an individual or entity to provide the licensed service(s) unless such a contractual arrangement is expressly prohibited by state law.

Local Zoning Requirements

• Current supplier standard No. 1 requires a DMEPOS supplier to comply with all local zoning requirements under state and municipal laws. 42 C.F.R. § 424.57(c)(1)(iii). This requirement is intended to provide an additional level of protection to the Medicare program by helping to prevent waste, fraud, and abuse.
• The Proposed Rule eliminates this requirement. Although CMS expects DMEPOS suppliers to comply with all local zoning requirements, CMS determined that enforcement of those requirements is best left to local authorities and should not be included among the supplier standards.

Minimum Square Footage Requirement

• Current supplier standard No. 7 requires DMEPOS suppliers to 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. 42 C.F.R. § 424.57(c)(7)(i)(A).
• The Proposed Rule expands the exception such that the minimum square footage rule does not apply if a state does not offer licensure for orthotic and prosthetic personnel providing custom fabricated orthotics or prosthetics in private practice.

Open and Accessible Requirement

• Current supplier standard No. 30 requires that a DMEPOS supplier’s location be staffed during posted business hours and remain open and accessible to the public at least 30 hours a week (e.g., not in a gated community or area where access is restricted). 42 C.F.R. § 424.57(c)(30)(i). There are limited exceptions, including for licensed non-physician practitioners furnishing services to their own patients as part of their professional services.
• The Proposed Rule deletes the “non-physician practitioners” language and, for clarity and simplicity, directly references the statute (Section 1861 (p) and (g) of the Social Security Act) for a list of the services qualifying for the exception.

Direct Solicitation of Beneficiaries

• Suppler standard No. 11 governs telemarketing and beneficiary contact. The current supplier standard contains a broad prohibition on direct solicitation of beneficiaries, prohibiting email, 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. In addition, the current supplier standard requires that a referring physician obtain written permission before the supplier may contact the beneficiary.
• CMS acknowledged that its expanded interpretation had been criticized as overly broad and as prohibiting marketing activities in a manner that would not be feasible for DMEPOS suppliers to implement. CMS indicated it will further investigate how to address its concerns regarding abusive DMEPOS marketing practices. In the interim, CMS will instruct its contractors to apply the restrictions on telephone solicitation that were in effect prior to the August 2010 regulations.
• The Proposed Rule deletes references to “direct solicitation” and instead focuses on telemarketing, tracking the exceptions under the Telemarketing Statute (42 U.S.C. § 1395m(17)) applicable to DMEPOS suppliers. Under the Proposed Rule, DMEPOS suppliers are prohibited from contacting a beneficiary by telephone when supplying a Medicare-covered item unless: 1) the supplier has received written permission from the beneficiary to contact them by telephone concerning the furnishing of a covered item; 2) the supplier has furnished a covered item to the beneficiary and is contacting the beneficiary to coordinate the delivery of the item; or 3) the contact concerns a covered item other than one already furnished to the beneficiary and the supplier has furnished at least one covered item to the beneficiary within the previous 15 months.

In light of the significant restrictions and increased oversight DMEPOS suppliers have recently experienced, DMEPOS suppliers will likely welcome the relaxed standards contained in the Proposed Rule. DMEPOS suppliers should carefully review the existing regulations and the Proposed Rule to confirm they are in compliance with the supplier standards. The 60-day comment period for the Proposed Rule remains open until June 3, 2011.

Access a copy of the Proposed Rule at http://www.gpo.gov/fdsys/pkg/FR-2011-04-04/pdf/2011-7885.pdf.

Access a copy of the 2010 Final Rule at http://www.gpo.gov/fdsys/pkg/FR-2010-08-27/pdf/2010-21354.pdf.

Legal News Alert is part of our ongoing commitment to providing up-to-the-minute information about pressing concerns or industry issues affecting our health care clients and colleagues. If you have any questions about this alert or would like to discuss this topic further, please contact your Foley attorney or any of the following individuals:

Nathaniel M. Lacktman
Tampa. Florida
813.225.4127
[email protected]

Heidi A. Sorensen
Washington, D.C.
202.672.5596
[email protected]

Lawrence W. Vernaglia
Boston, Massachusetts
617.342.4079
[email protected]

Judith A. Waltz
San Francisco, California
415.438.6412
[email protected]