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Avoid running afoul of the new provisions

On August 7, 2009 The Center for Medicare & Medicaid (CMS) made some big changes to the rules for consignment closet arrangements (stock-and -bill).(l) Medical equipment providers supplying physicians and non-physician practitioners (2) with durable medical equipment (DME) items and services could easily run afoul of new CMS provisions, if they don’t closely analyze their consignment closet arrangements.

Established for the convenience of patients, the closets allow the physicians immediate access to needed equipment, for example, a CPAP, a wheelchair, etc. The new conditions substantially narrow a provider’s participation in such arrangements by limiting billing for items only to the physician or non-physician practitioner. Under the new rules (3):

  • The title to the DME shall be transferred to the enrolled physician or non-physician practitioners practice at the time the DME is furnished to the beneficiary.
  • The physician or non-physician practitioners practice shall bill for the DME supplies and services using their own enrolled DME provider billing number.
  • All services provided to a Medicare beneficiary concerning fitting or use of the DME shall be performed by individuals being paid by the physician or non-physician practitioner’s practice, not by any other DME supplier.
  • The beneficiary shall be advised that, if they have a problem or questions with the DME, they should contact the physician or non-physician practitioner’s practice, not the DME supplier who placed the DME at the physician or non-physician practitioner’s practice.

Under such an arrangement, the DME supplier is limited to the role of a vendor to the practitioner. A practice location must have a separate entrance and United States Postal Service post office address.

The consignment arrangement permitted under the new Program Integrity Manual (4) may contrast with Stark requirements. Briefly, Start prohibits a physician from referring patients to entities for the furnishing of designated health services (which includes DME), if the physician (or an immediate family member of the physician) has a financial relationship with the entity, unless a Stark exception applies.

There is an exception to Stark for “in-office ancillary services,” but that exception is only applicable to limited items of DME (i.e., canes, crutches, walkers, folding manual wheelchairs, blood glucose monitors, and infusion pumps). Prosthetics and orthotics are not DME under Stark.

The new provisions reference arrangements only with physicians and non-physician practitioners. Therefore it is unclear if the new provisions apply to entities such as hospitals, sleep labs or other Medicare non-practitioner providers.

To summarize, physicians that want to have a consignment closet for their patients will need to get a DME billing number and bill for the DME themselves. In addition, the physician’s own staff will be required to provide fitting services for the patient. The DME vendor will not be permitted to provide billing or fitting services.

The new Program Integrity Manual (PIM) provisions state that the parties to a consignment arrangement will be held responsible for compliance with the new section of the manual. Also, the conditions that the consignment arrangement must meet are subject to verification by the Medicare fiscal intermediary. This may suggest that CMS may require DME suppliers to report to them any consignment arrangements entered into by the suppliers.

While it may sound as if providers should just shut up their consignment closets, it is still possible to operate under these types of arrangements. If the entities want to maintain a consignment arrangement for Medicare patients, then the physician will need to bill for the product under his or her own Part B supplier number. An alternative may be for the physician’s office to call the supplier when the physician orders an item for a Medicare patient, and the supplier delivers the item to the Medicare patient at the physician’s office, or to the Medicare patient at the patient’s home.

Providers with consignment closets have three choices: 1) change the relationship, which may mean stopping it; 2) continue the relationship and, if necessary, be willing to fight; and 3) mount a fight to insist the new rules go through the normal public notice/comment process.

Be ready because there is also a chance that CMS will ultimately close down consignment closets.

Some frequently asked Q&A on this topic:

Q: If the physician chose not to have a medical equipment supplier number, can the supplier choose to just eat the charges for consignment closet items provided to a Medicare patient?
A: No. The PIM provision at issue says that a supplier can maintain inventory at the practice location only if the requirements are met. Therefore, IT consignment inventory is given to a Medicare beneficiary and not billed for by the physician, it does not meet the requirements. Also, CMS or the OIG could take the position that because title to the DME item is required to be transferred from the supplier to the physician/practitioner at the time the consigned goods are furnished to the beneficiary, the supplier is providing remuneration to the physician in the form of goods at no cost to the physician.

Q: What if the physician is not given access to the equipment in the consignment closet and the supplier staff has sole access to the equipment and provides it to patients when they go to the physician’s office for fittings/clinics?
A: This arrangement still seems to fall within the language used in the PIM wherein a DME supplier maintains inventory at a practice location owned by a physician that is dispensed to a Medicare patient.

Q: Can a supplier deliver a product to a patient while the patient is at a physician’s office?
A: We believe that these provisions do not apply if the supplier is not maintaining inventory at the physician location. We see this as no different than delivering to a patient at a hospital prior to discharge.

Q: Do these new provisions apply to a physical therapy dink owned by a PT?
A: No. A physical therapist is not included in the definition of a non-physician practitioner. If the PT clinic is owned by a physician or other non-physician practitioner, the answer will hinge on whether it is also a practice location of a physician or non-physician practitioner. Any entity involved in an arrangement where a DME provider has supplies in a physician’s office or another practitioner’s office needs to take a long, hard look at these provisions.

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