Moving the HME Industry Forward

General Healthcare

Competitive Bidding – Refusal to Serve Patients

October 17, 2016

AMARILLO, TX – When a DME supplier signs a competitive bid (“CB”) contract, the supplier becomes a “contract supplier.” The contract supplier obligates itself to serve Medicare patients who reside in (or travel to) a CBA covered by the contract and who ask for products covered by the CB contract. Notwithstanding this obligation, what happens when the contract supplier determines that (i) it wishes to terminate (“get out of”) the CB contract or (ii) desires to refuse to provide certain products covered by the CB contract?

Termination of Contract
Let’s say that the contract supplier (“Company A”) has multiple lines of business, including the line of business covered by Company A’s CB contract. Assume that Company A does not want to continue to sell those products covered by the CB contract. Assume that another contract supplier (“Company B”) desires to purchase the line of business covered by Company A’s CB contract. However, because Company B already has a CB contract covering that line of business, Company B does not need Company A’s contract. After the sale of its line of business to Company B, Company A will no longer have the assets/personnel to serve the patients covered by Company A’s CB contract. Company A is caught in the proverbial “no man’s land.” In this scenario, Company A can ask the CBIC to voluntarily terminate Company A’s contract. The CBIC has the discretion to agree, or not to agree, to terminate the contract. If the CBIC does agree to terminate Company A’s contract, then there is a risk that the CBIC will not allow Company A to submit bids for future rounds. This is discretionary with the CBIC. In our example, a credible argument can be made that Company A should be allowed to submit bids for future rounds because (i) there is a legitimate reason to request the termination of the contract and (ii) Company A’s CB patients will not be orphaned……they will have a “soft landing” with Company B. Termination of the contract should not result in a revocation of Company A’s PTAN because not fulfilling the terms of the CB contract does not constitute a violation of the supplier standards.

Refusal to Provide Products
Assume that the contract supplier desires to refuse to provide certain products covered by the contract supplier’s CB contract. This desire may be motivated by several factors: (i) the demand for the products is too great for the supplier to meet and/or (ii) after taking into consideration the cost of the products, overhead and the low reimbursement, the contract supplier concludes that it is losing money on the products. Unfortunately for the contract supplier, its CB contract and the CB regulations do not allow the contract supplier to unilaterally refuse to serve CB patients. While the contract supplier has some options (see below), if the contract supplier simply refuses to fulfill its obligations under the CB contract, then the CBIC will likely (i) terminate the contract and (ii) refuse to allow the supplier to submit bids in future rounds.

Obligation to Serve Patients
As discussed above, a contract supplier is required to furnish items to any Medicare patient who (i) resides in a CBA covered by the contract supplier’s CB contract and (ii) requests an item covered by the CB contract. Refusing to service patients, or notifying patients that the contract supplier is not accepting new CB patients, puts the contract supplier at risk. If the CBIC finds out (e.g., through a patient complaint) that the contact supplier is not providing the required products to patients, then the CBIC may terminate the contract supplier’s CB contract.

Referral of Patients to the Added Location of a Commonly-Owned Supplier
If a contract supplier (competitive bid winner) purchases 5% or more of a non-contract supplier, or vice versa, the non-contract supplier’s location can be added to the contract supplier’s contract. This addition can be limited to a specific CBA/product category combination. The non-contract supplier’s location is then treated as an additional location on the CB contract issued to the contract supplier. This additional location can take orders, fill orders, and bill Medicare for CB items provided under the contract.

The contract supplier may refer a patient to the commonly-owned entity’s location because the commonly-owned entity’s location is part of the contract supplier’s CB contract.

Referral of Patients to Other Contract Suppliers
As a general rule, a contract supplier may not turn away CB patients, even if the supplier is overloaded or does not have enough inventory to serve the patients in a timely manner. In that situation, the contract supplier can may offer to order the item and, in so doing, (i) inform the patient of the anticipated delay in furnishing the item and (ii) give the patient the choice of waiting for the item or going to another contract supplier. If the ordered item is a brand-name product, the contract supplier has three options: (i) contact the physician to see if an alternative brand is acceptable; (ii) order the prescribed brand and deliver it to the patient; or (iii) assist the patient in finding another contract supplier who has the particular brand in stock. Note that if the contract supplier has multiple locations listed on the CB contract, then the supplier may refer the patient to another location that does have the prescribed brand……assuming, of course, that the other location is licensed and accredited for the prescribed product.

Jeff Baird will be presenting the following webinars:

Webinar sponsored by Mediware Information Systems, Inc.
Home Sleep Testing and the CPAP Supplier: What Kind of Relationship Can There Be?

Presented by: Jeffrey S. Baird, Esq., Brown & Fortunato, P.C.
Wednesday, October 26, 2016
1:00-2:00 p.m. CENTRAL TIME
Recent data suggests that nearly 20 million Americans are affected by obstructive sleep apnea. While testing for this disorder has primarily taken place in sleep labs, where patients stay overnight, new home sleep tests have proven more cost effective and patient friendly. Obviously, providing both home sleep tests and CPAP devices is a natural fit for DME suppliers. However, Medicare restrictions may prevent suppliers from doing both. Join Jeffrey S. Baird, Esq., Chairman of the Health Care Group of Brown & Fortunato, P.C., to learn how your DME business can expand coverage to CPAP patients while remaining compliant with CPAP payment prohibition regulations.

This presentation will help attendees:
• Understand the restrictions that CMS has placed on DME suppliers
• Analyze the consequences of failing to adhere to the federal regulations
• Understand the relationship that DME suppliers can have with home sleep testing entities
• Learn what restrictions apply to DME suppliers owned by hospitals that also conduct home sleep testing

Register for “Home Sleep Testing and the CPAP Supplier: What Kind of Relationship Can There Be?” on Wednesday, October 26, 2016, 1:00-2:00 pm CT, with Jeffrey S. Baird, Esq., of  Brown & Fortunato, PC.

Contact Kolby Wegener at Kolby.Wegener@mediware.com if you experience any difficulties registering.
This webinar is free for attendees.

AAHOMECARE’S EDUCATIONAL WEBINAR
Value-Added Services vs. Prohibited Beneficiary Inducement: When is the Line Crossed?
Presented by: Jeffrey S. Baird, Esq., Brown & Fortunato, P.C.
Tuesday, November 8, 2016
2:30-4:00 p.m. EASTERN TIME
It is perfectly acceptable for the DME supplier to provide services to its patients that the supplier’s competitors do not provide. This is good business. These are classified as “value-added services.” On the other hand, when a supplier offers “something of value” to induce a prospective customer (a Medicare beneficiary) to buy something from the supplier (as opposed to buying something from the supplier’s competitor), then this may result in a prohibited inducement in violation of the beneficiary inducement statute and the Medicare anti-kickback statute. The line between a value-added service and a prohibited inducement can be unclear. This program will discuss the difference between “value-added services” and “prohibited inducements” and how the supplier can be aggressive in providing great services without “crossing the line.”

Register for “Value-Added Services vs. Prohibited Beneficiary Inducement: When is the Line Crossed?” on Tuesday, November 8, 2016, 2:30-4:00 pm ET, with Jeffrey S. Baird, Esq., of  Brown & Fortunato, PC.
Contact Ika Sukh at ikas@aahomecare.org 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 jbaird@bf-law.com.