Moving the HME Industry Forward

Billing/Reimbursement

Bankruptcy: Restarting the 36 Months

Jeffrey S. Baird, JD • June 30, 2018

AMARILLO, TX – Unfortunately, in today’s climate it is not uncommon for DME suppliers to file bankruptcy: Chapter 7 liquidation or Chapter 11 reorganization. A bankruptcy case is filed in the U. S, Bankruptcy Court. In a Chapter 7, a Bankruptcy Trustee is appointed. Under the direction of the Bankruptcy Judge, the Trustee takes control of the bankrupt supplier’s assets, sells (“liquidates”) them, and distributes the proceeds to the bankrupt supplier’s creditors.

In a Chapter 11, the bankrupt supplier retains control of its assets and operations and, under the direction of the Bankruptcy Judge, seeks to “reorganize” its debts. It attempts to do so by seeking a Court order approving a Plan of Reorganization. In a Chapter 11, the bankrupt supplier is known as the “Debtor-in-Possession” (or “DIP”). If the DIP determines that reorganization is not feasible, then it may ask the Bankruptcy Court to approve a Liquidating Plan of Reorganization. This is where the DIP liquidates its assets and distributes the proceeds to the creditors. In this scenario, the liquidating Chapter 11 resembles a Chapter 7.

Another DME supplier may decide to purchase the bankrupt supplier’s assets “out of the bankruptcy estate.” The purchasing supplier will be able to do this only with the permission of the Bankruptcy Judge. When the purchasing supplier purchases the bankrupt supplier’s assets, then it is permissible for the purchasing supplier to start a new 36 month rental payment episode for oxygen patients; in doing so, however, there are some specific rules to be aware of. The Medicare Claims Processing Manual (“CPM”) states the following in Chapter 20, Section 50.4:

When a supplier files for Chapter 7 or 11 bankruptcy under Title 11 of the United States Code and cannot continue to furnish oxygen to its Medicare beneficiaries, the oxygen equipment is considered lost in these situations and payment may be made for replacement equipment. For replacement oxygen equipment, a new reasonable useful lifetime period and a new 36 month rental payment period begins on the date of delivery of the replacement oxygen equipment.

So this makes clear that a new rental payment period for oxygen equipment can be permissible when replacement equipment is delivered.

The Manual goes on to state that a DME MAC will require documentation verifying that the outgoing supplier actually declared bankruptcy. If the outgoing supplier filed a Chapter 7 bankruptcy, the “supporting documentation must include court records documenting that the previous supplier filed a petition for a Chapter 7 bankruptcy in a United States Bankruptcy Court . . . .” If the outgoing supplier filed a Chapter 11 bankruptcy, the “supporting documentation must include Court records documenting that the previous supplier filed a petition for a Chapter 11 bankruptcy in a United States Bankruptcy Court; and documents filed in the bankruptcy case confirming that the equipment was sold or is scheduled to be sold as evidenced by one of the following: The Court order authorizing and/or approving the sale; or supporting documentation that the sale is scheduled to occur or has occurred, e.g., a bill of sale, or an asset purchase agreement signed by the seller and the buyer; or a Court order authorizing abandonment of the equipment.” If the outgoing supplier divests business and equipment outside of the Bankruptcy Court process, however, CMS will not pay for the replacement equipment.

The following must be included with the claim for the replacement equipment: (i) blood gas testing results; (ii) Oxygen CMN; (iii) HCPCS code for the replacement oxygen equipment; (iv) HCPCS modifier RA Replacement of a DME Item; and (v) a narrative note explaining why the equipment was replaced.

As noted above, the CPM says that a new RUL and 36 month rental payment period will begin “on the date of delivery of the replacement oxygen equipment.” This discussion of delivering “replacement” equipment indicates that the purchasing supplier must provide patients with equipment other than the equipment that Medicare considers to have been lost by virtue of the bankruptcy. The MLN Matters Article, that CMS issued on this topic back in 2010, states that the RUL and 36 month rental payment period “may begin on the date that the new, replacement equipment is furnished.” While it is unlikely that CMS’s use of the word “new” in the MLN Matters Article means that the replacement equipment must be brand new, “out-of-the-box” equipment, it is an indication that the replacement equipment, for which the purchasing supplier is restarting the 36 month rental payment period, should be different equipment from that furnished by the bankrupt supplier.

When the DME MAC evaluates the documentation verifying that the outgoing supplier filed for bankruptcy and that the outgoing supplier’s oxygen equipment was an asset liquidated in the bankruptcy, it is unlikely that the DME MAC will consider the equipment to have been lost if the new supplier is the party that purchased the equipment, and the patient is not receiving replacement equipment. Because this is not explicitly stated in the published guidance, it is possible that an argument can be made that it is sufficient for the purchaser of the liquidated equipment (in a bankruptcy proceeding) to step in as the new supplier and qualify for a new 36 month rental payment period by way of sending someone to inspect the equipment, repair it as necessary, and generate a new delivery ticket. However, there is risk that the DME MAC will reject such an argument.

Jeff Baird will present the following webinars:

AAHOMECARE’S EDUCATIONAL WEBINAR

Proper vs Improper Marketing Practices

Presented by: Jeffrey S. Baird, Esq., Brown & Fortunato, P.C.

Tuesday, July 10, 2018

2:30-3:30 p.m. EASTERN TIME

The DME supplier is caught in the “Perfect Storm” of competitive bidding, low reimbursement, and aggressive audits. The result is that it is a challenge for the supplier to handle the increasing demand while generating a profit. The successful supplier needs to set itself apart from its competition. One important way to do this is to implement an innovative marketing program and enter into strategic arrangements with physicians, hospitals, and other referral sources. In so doing, it is important that the supplier not run afoul of federal and state anti-fraud laws. This program will discuss anti-fraud laws that govern marketing programs and arrangements with referral sources. Examples include the federal anti-kickback statute, the Stark physician self-referral statute, and the beneficiary inducement statute. Equally important, this program will discuss the types of marketing programs and arrangements with referral sources that are legally acceptable, that fall within the proverbial “gray area,” and that are downright prohibited.

Register for Proper vs Improper Marketing Practices on Tuesday, July 10, 2018, 2:30-3:30 p.m. ET, with Jeffrey S. Baird, Esq., of Brown & Fortunato, PC.

FEES: Member: $99.00; Non-Member: $129.00

Webinar Sponsored By: HME Business

Avoiding Fraud Landmines, Relationships With Physicians & Building a Referral Network

Presented by: Jeffrey S. Baird, Esq., Brown & Fortunato, P.C.

Thursday, July 12, 2018

11 a.m. Pacific / 1 p.m. Central / 2 p.m. Eastern

With 78 million Baby Boomers retiring at the rate of 10,000 per day, we know the demand for DME is increasing exponentially, but that demand is butting up against limited funding from government programs and third-party payers. At the same time, providers must face down the “perfect storm” of competitive bidding; low reimbursement; stringent documentation requirements; and aggressive audits. How can they come out on top?

To survive and succeed in such a market, HME providers must implement innovative marketing programs and enter into heavily tailored arrangements with physicians and other referral sources. In so doing, it is essential that the supplier not step onto any fraud landmines.

This webinar will discuss the federal and state anti-fraud laws that DME suppliers must adhere to, including the federal anti-kickback statute; the federal Stark physician self-referral statute; the federal beneficiary inducement statute; the federal telephone solicitation statute; and examples of their state counterparts.

We will cover the types of marketing programs and relationships with physicians/other referral sources that are legally acceptable, including paying commissions to W2 employee marketing reps; paying fixed annual compensation to marketing companies; entering into Medical Director Agreements with physicians; sponsoring educational talks by physicians; providing meals and related items to physicians and their staffs; entering into “preferred provider” arrangements; and purchasing leads. This webinar will discuss those programs/arrangements that are legally unacceptable.

Equally as important, this webinar will set out concrete steps that the DME supplier can take to avoid fraud landmines in the first place, and take remedial steps if the supplier discovers that it may have engaged in fraudulent actions. Attend so you will:

  • Know the federal anti-fraud laws that the provider must follow, and potential legal pitfalls.
  • Understand what marketing programs/arrangements with referral sources are legally acceptable, and which arrangements to avoid.
  • Know the steps the provider should take to avoid problems under federal and state anti-fraud laws.

Register for Avoiding Fraud Landmines, Relationships With Physicians, & Building a Referral Network on Thursday, July 12, 2018, with Jeffrey S. Baird, Esq., of Brown & Fortunato, PC.

Registration: $99.00

AAHOMECARE’S EDUCATIONAL WEBINAR

Proper vs Improper Telehealth Arrangements

Presented by: Jeffrey S. Baird, Esq., Brown & Fortunato, P.C.

Tuesday, July 24, 2018

2:30-3:30 p.m. EASTERN TIME

As the 78 million Baby Boomers continue to age and retire, the demand for health care will increase exponentially. The challenge is that this demand will run up against the fact that there is limited money to pay for health care. As a result, third party payers and health care providers are searching for ways to provide health care more cost effectively. One of these ways is telehealth. Utilization of remote patient monitoring and video conferencing can allow the DME supplier to maintain real time communication with its patients and their caregivers…thereby eliminating the need for the supplier to send an employee to the patient’s residence. When a physician has a telehealth encounter with a patient, and if the encounter results in an order being transmitted to the DME supplier, then this is a faster way for the supplier to receive and process orders. All of this is the “wave of the future.” However, as is often the case, the “devil is in the details.” This webinar will discuss the legal parameters within which the DME supplier can use telehealth/video conferencing to monitor patients and communicate with their caregivers. The webinar will also focus on when, in the eyes of CMS, a physician order received by a DME supplier (resulting from a telehealth encounter between the patient and the physician) is valid…and when it will be rejected by CMS.

Register for Proper vs Improper Telehealth Arrangements on Tuesday, July 24, 2018, 2:30-3:30 p.m. ET, with Jeffrey S. Baird, Esq., of Brown & Fortunato, PC.

FEES: Member: $99.00; Non-Member: $129.00

Jeffrey S. Baird, JD, is Chairman of the Health Care Group at Brown & Fortunato, PC, a law firm based in Amarillo, Tex. He represents pharmacies, infusion companies, HME companies and other health care providers throughout the United States. Mr. 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.