On August 7, 2009, the Centers for Medicare and Medicaid Services (CMS) issued Change Request 6528, Transmittal 297, which adds a section to the Medicare Program Integrity Manual (PIM) addressing consignment closets and stock and bill arrangements. The stated purpose of the Transmittal is to “define and prohibit certain arrangements where an enrolled supplier of …. (DMEPOS) maintains inventory at a practice location which is … owned by a physician, non-physician practitioner or other health professional for the purpose of distribution.” Additionally, the Transmittal “will instruct physician, non-physician practitioners or other health care professionals’ practices that use of consignment closets and/or stock and bill arrangements must be in compliance with current standards.”
The Transmittal is also intended to define “specific compliance standards for NSC-MAC [National Supplier Clearinghouse-Medicare Administrative Contractor] validation” of consignment closets. The changes outlined in the Transmittal were originally scheduled to be effective September 8, 2009. However, CMS recently delayed the effective date to March 1, 2010.
The new PIM provisions state that “most consignment closets or stock and bill arrangements do not satisfy the DMEPOS supplier standards” and allow a supplier to maintain inventory at a practice location owned by a physician or non-physician practitioner only when certain conditions are met. For this article, the term “practitioner” will refer to both physicians and non-physician practitioners.
The foregoing consignment arrangement must meet all the following conditions:
1. Title to the DMEPOS item is transferred to the practitioner at the time the item is furnished to the patient;
2. The practitioner bills Medicare for furnishing the item under his, her, or its own DMEPOS billing number;
3. All services concerning fitting or use of the item are performed by individuals being paid by the practitioner (and not by any other DMEPOS supplier); and
4. The patient is advised to contact the practitioner concerning problems or questions regarding the DMEPOS item.
We note that under such an arrangement, the supplier is limited to the role of a vendor to the practitioner. In addition to the above, the NSC-MAC will also verify that two or more Medicare-enrolled DMEPOS suppliers are not enrolled or located at the same practice location. A practice location must have a separate entrance and United States Post Service post office address. The new 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 NSC-MAC. This suggests that CMS may require DMEPOS suppliers to report any consignment arrangements entered into by suppliers.
The consignment arrangement permitted under the new PIM provisions is of limited value for the provision of DME at a physician’s office, due to the requirements of the Stark law. 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).
Under Stark, a physician may furnish prosthetics and orthotics under the in-office ancillary exception, because prosthetics and orthotics are not DME.
The new PIM provisions state that “most consignment closets or stock and bill arrangements do not satisfy the DMEPOS supplier standards,” but the Transmittal fails to identify which standards are not being met or why. The Transmittal instructions to the NSC reference consignment arrangements with a physician, non-physician practitioner or other health care professional. However, the new PIM provisions reference arrangements only with physicians and non-physician practitioners, with no inclusion of “other health care professional,” which is not a defined term.
The new PIM provisions state that “most consignment closets or stock and bill arrangements do not satisfy the DMEPOS supplier standards” and allow a supplier to maintain inventory at a practice location owned by a physician or non-physician practitioner only when certain conditions are met. A non-physician practitioner includes:
P physician assistants
P nurse practitioners
P clinical nurse specialists
P certified registered nurse anesthetists
P certified nurse-midwives
P clinical social workers
P clinical psychologists
P registered dietitians or nutrition professionals
If the location is not owned by a physician or non-physician practitioner (e.g., hospital, PT clinic owned by a health system, physician practice owned by a hospital, etc.), then the conditions do not apply. The term “owned by” will likely be interpreted to include premises leased by a physician or non-physician practitioner. If the location is not a practice location of a physician or non-physician practitioner, then the conditions do not apply (e.g., IDTF sleep lab). If the supplier does not maintain inventory at the practice location, then the conditions do not apply (e.g., supplier delivers to physician’s office and fits patient while there).
The Program Integrity Manual on CMS’s website contains the following in the Table of Contents:
- 21.8 – Consignment Closets and Stock and Bill Arrangements
- 21.9 – Compliance Standards for Enrollment of Mail Order Pharmacies and Suppliers of Durable Medical Equipment, Prosthetics, Orthotics and Supplies (DMEPOS) Delivered Through Other Than the Supplier’s Location or Beneficiary Address
No Transmittal has been issued yet for the new Section 21.9. For this reason, even though the new consignment closet PIM provisions appear not to apply to consignment arrangements with hospitals, sleep labs, or other Medicare non-practitioner providers, entities involved in consignment arrangements should not assume further CMS action will not impact these arrangements.
Questions and Answers
Q: Does the Transmittal apply to consignment closet arrangements for non-Medicare patients?
A: No. The Transmittal only applies to consignment closet items provided to a Medicare patient.
Q: Does the Transmittal apply to a PT clinic owned by a physical therapist?
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.
Q: Will exceptions be allowed for consignment arrangements with physicians/non-physician practitioners located in rural areas?
A: Currently, the PIM provisions do not provide for such exception.
Q: Can a supplier deliver a product to a patient while the patient is at a physician’s office?
A: We believe that the Transmittal does not apply if the supplier is not maintaining inventory at the
physician location, and we see this as being analogous to delivering to a patient at a hospital prior to discharge.
Q: Does the Transmittal apply to surgery centers?
A: Not if the surgery center is owned by someone other than physicians or non-physician practitioners. If the surgery center is owned by physicians, it will be covered since it will be a physician practice location.
Q: Does the Transmittal apply to emergency clinics or urgent care clinics?
A: Not if the location is owned by someone other than physicians or non-physician practitioners. If it is owned by physicians or non-physician practitioners, it will be covered since it will be a practice location of a physician or non-physician practitioner.
Q: If the physician does not have a DMEPOS supplier number, can the supplier choose to just eat the charges for consignment closet items provided to a Medicare patient?
A: No. The Program Integrity Manual provision at issue says that a supplier can maintain inventory at the practice location ONLY IF the requirements are met. Therefore, if consignment inventory is given to a Medicare beneficiary and not billed for by the physician, it doesn’t meet the requirements. Also, CMS or the OIG could take the position that, because title to the DMEPOS item is required to be transferred from the supplier to the physician/non-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 to be provided to his Medicare patients for free.a
Jeffrey S. Baird, Esq. is Chairman of the Health Care Group at Brown & Fortunato, P.C., a law firm based in Amarillo, Texas. Mr. Baird is Board Certified in Health Law by the Texas Board of Legal Specialization. He can be reached at (806) 345-6320 or jbaird@bf-law.com.