CMS appears to close door on loan closets

Wednesday, September 30, 2009

BALTIMORE - Loan closet arrangements could become a thing of the past, under the terms of a memo issued by CMS on Aug. 7.

The memo, which adds a provision to the Medicare Program Integrity Manual, seeks to define and prohibit certain loan closet arrangements between HME providers and other practitioners, such as physicians or labs. Effective March 2, 2010, such arrangements, including consignment closets and stock-and-bill arrangements, must meet current quality standards. Most do not, it says.

"Under the new provisions, DME providers are essentially limited to the role of a vendor to the practitioner," said Jeff Baird, a healthcare attorney with Amarillo, Texas-based Brown & Fortunato.

Those provisions:

* The title to the DMEPOS shall be transferred to the enrolled practitioner at the time the DMEPOS is furnished to the beneficiary;

* The practitioner shall bill for the DMEPOS supplies and services using their own billing number;

* All services provided to a Medicare beneficiary concerning fitting or use of the DMEPOS shall be performed by individuals being paid by the practitioner, and not by any other DMEPOS supplier; and

* The beneficiary is advised that if he or she has a problem or question regarding the DMEPOS, then he or she should contact the practitioner.

Baird said the memo runs up against Stark provisions. Under Stark, a physician cannot refer Medicare patients to entities for the furnishing of "designated health services" (including DME) if the physician (or immediate family member) has an ownership or compensation arrangement with the entity.

There are several exceptions, one of which is "in-office ancillary services".  However, that exception is only applicable to limited items of DME. For example, under Stark, a physician can furnish O&P products because they don't fall within the definition of DME.