Moving the HME Industry Forward


Can a DME Supplier Lease Space to a Non-Provider?

January 13, 2014

AMARILLO, TX – The DME industry is a young industry. In its present form, it has been around since the 1970s. We grew up unregulated. CMS and Congress now appear to be “making up for lost time.”

The industry is feeling the effect of a confluence of competitive bidding, audits, reimbursement cuts and stringent documentation requirements. The end result is that the old Medicare fee-for-service model is dead. The successful DME supplier must go so far out of its comfort zone that it forgets what a comfort zone even looks like.

Medicare grew up serving 23 million of the Greatest Generation (the World War II generation) and another 20 million of the Korean War generation. Now we have 78 million Baby Boomers who are retiring at the rate of 10,000 per day.

Boomers are going live a long time and the demand for DME will go through the roof. The challenge for the DME supplier is to figure out how to meet this increasing demand within the constraints of competitive bidding and the other factors.

This is where the supplier must “think outside the box.” What kind of innovative products and services can the supplier provide to the Boomers? Boomers expect to be running triathlons and going to Rolling Stones concerts until they die. By “they,” I mean the Boomers…the Stones will never die.

Being a “medical equipment store” is kind of boring; it has no aesthetic appeal. On the other hand, being some type of “lifestyle store” does have aesthetic appeal. And so, what can the supplier do to make itself attractive enough to bring people through the door?

One idea is for the DME supplier to lease out some of its retail showroom space to a “lifestyle” company, that is not a health care provider, in which the lifestyle company offers products and services that will help the Boomer enjoy the active lifestyle that he or she is accustomed to having. The legal question is whether the DME supplier can do this. The short answer is “yes,” but as is often the case, the “devil is in the details.”

Assume that ABC Medical Equipment, Inc. desires to lease a portion of its showroom to XYZ Senior Lifestyle, Inc. XYZ is not a Part B supplier; it sells items for cash. It will be important for ABC to retain at least 200 square feet and continue business operations in accordance with the Supplier Standards. When the NSC inspector comes on-site to inspect ABC, it will be important that ABC’s and XYZ’s spaces be configured so as to avoid any confusion on the inspector’s part.

For example, the two stores can be separated by seven-foot high grid walls, and each store can have its own cash register, telephone line, and sales representatives. On the front of the building, the logo and hours of operation for each store will be displayed. The logo of each store will be displayed in the area of the showroom that is occupied by the applicable store.

In addition to the Supplier Standard that prohibits an enrolled supplier “from sharing a practice location with any other Medicare supplier or provider,” it is important for ABC to comply with the remainder of the Supplier Standards. For example: (i) ABC needs to maintain a practice location that is at least 200 square feet; (ii) ABC needs to be in a location that is accessible to the public, Medicare beneficiaries, CMS, the NSC and its agents; (iii) ABC needs to be accessible and staffed during posted hours of operation; (iv) ABC needs to maintain a permanent visible sign in plain view and post hours of operation; (v) if ABC’s place of business is located within a building complex, the sign must be visible at the main entrance of the building; (vi) ABC needs to be in a location that contains space for retaining the necessary ordering and referring documentation; and (vii) ABC needs to maintain a primary business telephone that is operating at the appropriate site.

The Supplier Standards also require ABC to comply with the DMEPOS Quality Standards. Under the Quality Standards, “[t]he supplier shall have a physical location and display all licenses, certificates, and permits to operate. The licenses, certificates and permits must be displayed in an area accessible to customers and patients. The supplier shall provide copies, upon request, to government officials or their authorized agents.”

In the example set out above, because XYZ is not a Medicare provider or supplier, the arrangement will not violate the Supplier Standard that prohibits “sharing a practice location with any other Medicare supplier or provider.”

The description of the physical arrangement for the shared showroom is consistent with the Supplier Standards because ABC will have (i) a practice space that is at least 200 square feet, (ii) a sign identifying the store and hours of operation, (iii) staff working strictly for ABC during the posted business hours, (iv) a telephone line assigned to ABC, and (v) an area that is reserved solely for ABC’s business operations. As long as XYZ does not enroll in Medicare and ABC continues operations in accordance with its accreditation requirements and the Supplier and Quality Standards, then the arrangement will not violate the Supplier Standards.

Baird will be presenting at Medtrade Spring 2014 in Las Vegas, where he will share his expertise, advice, and ideas. CLICK HERE to register for Medtrade Spring, held from March 10-12, 2014, at the Mandalay Bay Convention Center, Las Vegas.

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