Moving the HME Industry Forward


Contesting Sole Source Contracting and Reimbursement Cuts by Medicaid Managed Care Plans – Part 2

Jeffrey S. Baird, JD and Pam F. Colbert, JD • March 3, 2018

AMARILLO, TX – On February 5, 2018, Medtrade Monday published an article we prepared entitled “Contesting Sole Source Contracting and Reimbursement Cuts by Medicaid Managed Care Plan.” This is a follow-up to that article.

Centene is a large Managed Care Company. Centene is in approximately 29 states and has approximately 14 million members. Centene’s Medicaid Managed Care Companies are given local names such as (i) Texas-SuperiorHealth; (ii) Ohio-Buckeye Community Health Plan; and (iii) Illinois-IlliniCare.

In 2017, Centene’s Texas MCO, Superior HealthPlan, announced it had entered into a Sole Source Contract with Medline for the exclusive rights to four Texas Medicaid Plans, to the exclusion of other Texas DME suppliers:  STAR, STAR Health, STAR+PLUS and CHIP. Superior HealthPlan’s Sole Source Contract with Medline excluded other Texas DME suppliers from providing 244 unique items.

On July 20, 2017, Alliance Medical Supply filed a Complaint against Superior HealthPlan with Texas HHSC. The Complaint alleged that the awarding of the Sole Source Contract to Medline denied the beneficiary’s right to choose a DME supplier. The Complaint alleged:

  • Suppliers with a long standing relationship with beneficiaries were excluded.
  • Suppliers that are conveniently located were excluded.
  • Suppliers that personally handle DME needs (i.e., Hurricane Harvey) were excluded.

The Complaint alleged that the Sole Source Contract gave benefits only to Medline.

  • Eliminated prior authorization requirement for Medline.
  • Gave Medline the authority to “pre-populate” physician order forms and send the form to the ordering physician for approval and signature

The Complaint further alleged that the Sole Source Contract (i) removed verification, compliance with coverage, and medical necessity documentation … that all other DME suppliers must provide, (ii) removed competition and (iii) increased risk of violation of the federal anti-kickback statute (physicians encouraged to refer to Medline vs. other suppliers) and fraud, waste and abuse (removed audit for billing for services not provided, upcoding and proof of medical necessity).

Texas HHSC responded by ruling:

  • There will be no exclusive supplier contracts; however, there may be a “preferred provider/supplier.”
  • Superior HealthPlan must provide a written “opt-out” for the patient for any reason … or for no reason.
  • Superior HealthPlan must provide 30 day notice of the Medline contract to beneficiaries.

In late January 2018, Superior HealthPlan sent letters to Texas DME suppliers (i) announcing a new fee schedule and (ii) attaching an Amendment to the Participating Provider Agreement. According to the letter, the new rates were based on market analysis of Superior HealthPlan’s network. The letter and Amendment pertained to items previously set out in the initial Sole Source Contract between Superior HeathPlan and Medline. The Amendment reduced reimbursement from 85% of Medicaid reimbursement to 60% of Medicaid reimbursement for the majority of DME suppliers … with a few suppliers receiving a reduction to 65% – 70% of Medicaid reimbursement.

The Texas DME suppliers were given 30 days to accept or reject the Amendment. The Amendment would “automatically become effective” if the supplier did not decline within the 30 days. If the supplier chose to decline, it would be required to contact Superior HealthPlan via certified mail within 30 days of receipt of the letter … at which time the Participating Provider Agreement with Superior HealthPlan would be terminated on May 1, 2018. Superior HealthPlan subsequently clarified that a rejection would terminate all services under the Participating Provider Agreement … not just the items listed on the Amendment.

The Texas Association of Medical Equipment Providers (“TexMEP”) responded by gathering information from Texas DME suppliers. A number of suppliers expressed a concern that the reduced rates would force many suppliers to drop off the Superior HealthPlan panel … resulting in Medline effectively becoming the “sole source supplier.”

In addition, a number of Texas DME suppliers stated that they were informed by their Superior HealthPlan member patients (“SHP patients”) that Medline was drop shipping supplies to them with a “Welcome to Medline” letter. According to the Texas DME suppliers, they were informed by SHP patients that at least a portion of the drop ships were to SHP patients who (i) had opted out of Medline in 2017 and (ii) were currently being served by their Texas DME suppliers. According to a number of Texas DME suppliers, (i) SHP patients began to call them to find out how Medline had obtained the SHP patients’ names, addresses, and other information and (ii) a number of SHP patients pointed out that the Medline shipments were exactly what they had been receiving from their Texas DME suppliers.

In coordination with TexMEP, Brown & Fortunato (i) filed a formal Complaint with Texas HHSC on behalf of BritKare (an Amarillo, TX based DME supplier) and (ii) supplemented the Complaint with Superior HealthPlan’s letter, Amendment showing the reduced reimbursement, a comparison of the items covered by the previous Sole Source Contract with the items in the Amendment, and the information from Texas DME suppliers regarding the drop shipments

After Texas HHSC reviewed the information, the Amendment was suspended.

The foregoing discussion is an example of how a state DME association can work with DME suppliers to (i) gather information and (ii) present such information to the state Medicaid program. Texas HHSC is committed to serving the vulnerable group of patients who are covered by the Texas Medicaid program. As such, Texas HHSC seriously considers information brought to its attention that affect Medicaid beneficiaries.

Jeff Baird will be presenting the following webinars:

HME News Webinar

2018 Look Ahead for DME Suppliers

Presented by: Jeffrey S. Baird, Esq., Brown & Fortunato, P.C. and Andrea Stark, MiraVista, LLC

Moderated by: Liz Beaulieu, HME News

Thursday, March 8, 2018

1:00 p.m. – 2:30 p.m. Eastern Time

2018 is the eighth year in a row Andrea Stark, Jeff Baird, and moderator Liz Beaulieu have teamed up for the annual outlook event to blueprint the legal and DME reimbursement challenges facing DME suppliers. And while most sequels seem to lose steam, Look Ahead continues to deliver a well-rounded, usable strategy that connects with attendees. A few of the hot topics for this year include:

  • Dramatic changes for high-liter-flow oxygen patients
  • Best practices to capitalize on Medicare’s Targeted Probe and Educate program
  • Continued audit scrutiny for non-invasive ventilators
  • Preparing for changing patient Medicare IDs to avoid cash flow disruptions
  • State Medicaid cuts and sole source contracting
  • Outsourcing overseas
  • The latest from Capitol Hill on DME reimbursement reprieve

Register for 2018 Look Ahead for DME Suppliers.

Fee: $149


Collaborative Arrangements With Physicians

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

Tuesday, March 13, 2018

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

There are a number of terms that have recently entered the DME industry’s vocabulary: “data analytics,” “quality outcomes,” “performance measurements,” and “collaborative care.” Collectively, these stand for the proposition that third party payors no longer intend to pay for health care services that are provided in “silos.” Said another way, payors expect health care providers (physicians, hospitals, SNFs, pharmacies, DME suppliers and home health agencies) to work together to keep patients healthy…and keep them from being readmitted to the hospital time and time again. Payors expect providers to know what other providers are doing in treating a particular patient. This program will examine the ways that DME suppliers can legally collaborate with physicians. Particular areas of focus are (i) preferred provider agreements; (ii) employee liaison arrangements; (iii) consignment (“loan closet”) arrangements; (iv) medical director agreements; (v) sponsoring education programs; and (vi) agreement with the physician to collect and share patient data so as to measure outcomes.

Register for Collaborative Arrangements With Physicians on Tuesday, March 13, 2018, 2:30-3:30 pm 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

Pam F. Colbert, JD, is an attorney with the Health Care Group at Brown & Fortunato, PC, a law firm based in Amarillo, Tex. She represents pharmacies, HME companies, and other health care providers throughout the United States. Ms. Colbert can be reached at (806) 345-6378 or