Moving the HME Industry Forward


Responding to Medicare Cuts – Part 4 of 4

August 22, 2016

AMARILLO, TX – The DME industry, as we know it today, has been around for about 40 years. It is a young industry. For the first 30 years of its existence, there was little government oversight on the DME industry. This has changed. Over the last 10 years, it feels like the government is making up for lost time. The DME industry is caught in a “perfect storm.”

• Competitive bidding
• Reimbursement cuts
• Stringent documentation requirements
• Aggressive auditors
• Proliferation of “whistleblowers”

Let’s look at competitive bidding. On 7/1/16, the CMS July Fee Schedule went into effect. The rates encompass the expansion of competitive bid rates to non-CBAs. The cuts range between 45% to 59% on common respiratory products, but reach 82% on TENS units and Enteral IV Poles. Said another way, the rates are ugly.

Competitive bidding (“CB”) has created a two-tier system. Those on the lower end of the socio-economic scale will likely have no choice but to accept whatever it is that Medicare pays for. Those on the higher end of the socio-economic scale will be more inclined to pay cash for “higher end” products (Cadillac vs. Cavalier).

Some DME suppliers will implement “economies of scale” that will allow the suppliers to succeed in the Medicare fee-for-service (“FFS”) arena. However, these suppliers will be the exception. Most DME suppliers can no longer build their business model on Medicare FFS. The successful supplier needs to go outside its comfort zone and look for new sources of business. Said another way, the supplier needs to lessen its dependence on Medicare FFS.

Let’s step back and look at the big picture. For the last four decades, suppliers have primarily provided DME on an assigned basis. Medicare paid the suppliers directly and the patients only had to pay their copayments and deductibles. Until the last several years, this worked out for DME suppliers.

Until the last several years, reimbursement was high enough and audits were not onerous … meaning that this “assignment model” worked well for suppliers. Under this “assignment model,” on the occasion when a supplier did bill non-assigned and Medicare was asked to reimburse the patient, such reimbursement was usually made. All of this is changing. It is becoming cost-prohibitive for many suppliers to continue with the “assignment model.” The reasons are obvious:

• Medicare reimbursement is not sustainable.
• It is time consuming to go through the Medicare claims submission process.
• If the DME supplier is hit with a prepayment review, then it will not get paid until it submits documentation satisfactory to the CMS contractor.
• Even if the supplier is paid, then it is subject to a “claw back” pursuant to a post-payment audit.

Up to now, DME suppliers have shouldered the burden of increasingly harsh Medicare policies. The suppliers have shielded their patients from the pain being inflicted by Medicare policies. Financially, it is difficult for DME suppliers to continue to do this. Out of necessity, suppliers are having to shift the burden (of complying with the increasingly harsh Medicare policies) to their patients. This is unpleasant … but it is the “new normal.”

What we are now witnessing are (i) DME suppliers are electing to be non-participating and (ii) DME suppliers are “billing non-assigned.” If a non-participating supplier provides a product on a non-assigned basis, this means that the supplier is not agreeing to accept the Medicare allowable as payment in full, can collect directly from the patient, and can charge more than the Medicare allowable in such cases. The supplier must file the claim with Medicare on behalf of the patient and any Medicare reimbursement will go directly to the patient. The bottom line is that the non-participating supplier (that is not a competitive bid contract supplier taking care of CB patients) can collect up-front from the patient (i.e., bill non-assigned). But as is often the case, the “devil is in the details.” And so let’s talk about the “details.”

Part 1 discussed participating vs. non-participating and Medicare’s anti-discrimination rule. Parts 2, 3 and 4 discuss how non-participating suppliers can properly bill on a non-assigned basis.

Selling Capped Rental Items
A supplier can sell a capped rental item on a non-assigned basis, and Medicare will not reimburse the customer. An ABN may be required, but in any event, should be obtained even if not required. Since Medicare will not pay anything for the sale of a capped rental item, the better approach is to also allow the beneficiary to rent on a non-assigned basis so that the supplier gets higher reimbursement, but the beneficiary still gets paid 80% of the Medicare allowable.

Commercial Insurance Requiring Assignment

If a supplier decides to offer certain product categories to Medicare patients as only non-assigned, does the supplier also have to bill non-assigned to all payers for those same products? Note that some commercial insurers dictate their own billing requirements. Billing non-assigned for Medicare does not preclude the supplier from billing assigned for other insurance, as long as it adopts a policy that a certain item is only available to the patient if a threshold amount of reimbursement is received.

Billing for Items on Same Day
A supplier cannot submit some items assigned and others non-assigned on the same claim. It is unclear if a supplier can have two separate claims, one assigned and one non-assigned, with the same date of service, or if different dates of service are required. Examples:

• Billing nutrition assigned, billing supply kits non-assigned.  
• Over the quantity of items and there is no support of medical necessity for the increase in quantity.

Changing from Assigned to Non-Assigned
If the supplier is non-Participating, then it can change to non-assigned during the rental period. The supplier should give the patient at least 30 days advance notice, so the patient can look for another supplier that will accept assignment if it wants to. Also, if the supplier changes to non-assigned for rental equipment, the supplier will probably have to obtain a beneficiary claim authorization signature each month.

Oxygen Contents
A non-participating supplier can bill oxygen contents non-assigned after the 36 month rental period.

Stationary and Portable
If an oxygen patient has both a concentrator and a portable that are being billed on two different anniversary dates, one claim can be assigned and the other claim can be non-assigned. It is unclear as to whether the claims can have the same date of service, or if different dates of service will be required.

Dropping Accreditation
If a supplier drops its accreditation on a product category (resulting in the supplier no longer being able to bill Medicare for that product category), this does not allow the supplier to collect cash up front. The supplier must be accredited for the products it provides because accreditation certifies that the supplier meets the specific standards for the products provided. Otherwise, the supplier may be in violation of the supplier standards and the requirements of the supplier’s accreditation agency. This is true for both Medicare and commercial patients.  

Oxygen Cylinders
It is B&F’s position that the supplier should be allowed to adopt a policy that its charge for portable oxygen contents is “x” dollars per tank, applicable to all payors. The challenge is that if the supplier believes a patient will need 10 tanks, it will be precluded from charging anything more if the patient ends up needing more tanks that month since the HCPCS code billed includes all oxygen contents for the month.

Contents Charge
It is B&F’s position that the contents charge should not be required to be the same total monthly amount for all patients.

Self-Fill Cylinders
A supplier can use conserving devices, portable oxygen concentrators, etc. A supplier can technically use a self-fill unit for the individual patients as long as each patient has his/her own equipment and self-fill cylinders. The supplier can have the patient, nurse, or other caregiver fill the cylinder for the patient. The supplier cannot have one self-fill unit with a number of cylinders to fill for unnamed individuals. That is not permitted.

Number of Cylinders
Unless it is a safety issue to have multiple cylinders in a residence, there is not a limit to what should be provided to meet that patient’s needs. The supplier is required to provide all contents that the patient needs during the month and cannot limit the number of cylinders.

Post-Payment Audits
As previously discussed, up to now most DME claims have been billed on an assigned basis. Because relatively few DME claims have historically been billed non-assigned, there is no significant track record of CMS pursuing recoupments of non-assigned claims. Having said this, non-assigned claims are equally as vulnerable to audits as assigned claims. If a non-assigned claims is audited, the supplier is not insulated from being assessed an overpayment unless (i) the item is a non-covered item under Medicare or (ii) the supplier has obtained an ABN.

Jeff Baird will be presenting the following webinars:
Webinar sponsored by Mediware Information Systems, Inc.
How the Losing Bidder Can Enter the DME Bid Arena
Presented by: Jeffrey S. Baird, Esq., Brown & Fortunato, P.C.
Wednesday, August 31, 2016
1:00-2:00 p.m. CENTRAL TIME
Far too often, a well-run DME supplier finds itself without a competitive bid contract.  If the losing bidder (“non-contract supplier”) is dependent on Medicare fee-for-service, then this will be financially challenging. However, there are legal ways that the non-contract DME supplier can enter the competitive bidding area after the fact. This webinar will outline those tactical strategies that can open doors for revenue growth while staying within the law.

This presentation will outline key strategies including:
• Purchasing 100% of a contract supplier’s assets
• Engaging in partial asset purchases
• Achieving 100% stock acquisition
• Establishing a 5% or more common ownership
• Examine the liability that may be imposed as a result of one of these transactions

Sign up now for “How the Losing Bidder Can Enter the DME Bid Arena” on Wednesday, August 31, 2016, 1:00-2:00 pm CT, with Jeffrey S. Baird, JD, of  Brown & Fortunato PC.

This webinar is free for attendees.

Joint Ventures and Other Arrangements with Referral Sources
Presented by: Jeffrey S. Baird, Esq., Brown & Fortunato, P.C.
Tuesday, September 6, 2016
2:30-4:00 p.m. EASTERN TIME
In the real world one business can enter into an arrangement with another business without worrying about pesky government regulations.  Unfortunately, DME suppliers are not in the real world……they are in an alternative universe known as “health care world.”  Unlike auto parts suppliers and widget manufacturers, DME suppliers must be careful in entering into arrangements with other providers.  This is because of federal and state anti-fraud statutes and regulations.  For example, the Medicare anti-kickback statute makes it a crime for a person/entity to receive compensation for referring (or arranging for the referral of) Medicare/Medicaid patients to a health care provider.  All states have anti-kickback statutes that are similar to the federal statute.  The federal Stark physician self-referral statute prohibits a physician from referring Medicare/Medicaid patients to a provider in which the physician has a compensation or ownership interest.  These are but two examples of the many anti-fraud laws that are on the books.  This program will discuss the relevant state and federal anti-fraud statutes and regulations that govern the types of arrangements that a DME supplier can enter into with another provider, such as a physician, home health agency or pharmacy.  The program will discuss the types of arrangements that are clearly legal, the types of arrangements that fall within the proverbial “gray area,” and the types of arrangements that must be clearly avoided.

Register for Joint Ventures and Other Arrangements with Referral Sources on Tuesday, September 6, 2016, 2:30-4:00 pm ET, with Jeffrey S. Baird, Esq., of  Brown & Fortunato, PC.

Contact Ika Sukh at if you experience any difficulties registering.
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. Baird is Board Certified in Health Law by the Texas Board of Legal Specialization, and can be reached at (806) 345-6320 or