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Home Health & Hospice Week

Fraud & Abuse:

BEWARE OF SHARED EMPLOYEES UNDER STARK II

Published on Thu Apr 08, 2004

Will your business practices pass Stark inspection?

Watch out, DME suppliers: Kickback violations could be lurking in your business arrangements, and heightened enforcement of Stark provisions will likely bring them to light.

The Centers for Medicare & Medicaid Services published the interim final rule on physicians' referrals for "designated health services" to health care entities with which they have financial relationships in the March 26 Federal Register (see "Stark II Fans Flames of Patient Stering Controversy").

With publication of the Stark II provisions, experts expect enforcement of the referral law to heat up. "The regs will finally be totally finalized after 15 years" when the interim final rule takes effect June 26, notes attorney Mark Langdon with Arent Fox Kintner Plotkin & Khan in Washington, DC. "Now that these regs are really final, we think enforcement will be stepped up."

Supply closets, where suppliers leave durable medical equipment items in a physician's office to be furnished for a patient's convenience, have been a hot-button issue with the HHS Office of Inspector General, notes Langdon. The OIG has issued several fraud alerts on the topic.

A commenter on the April 2001 Stark regs asked about this supply closet scenario: A DME supplier who leases a supply closet and the physician leased from "share a non-physician employee who measures braces and fits other supplies. If the physician does not see the patient, the DME supplier bills Medicare. If the physician does see the patient, the physician bills Medicare for a level 1 service. The DME supplier and the physician each pay for the employee's services for which each bills."

The scenario could initiate a number of financial relationships between the supplier and physician, implicating Stark requirements, CMS responds. Most significantly "if the salary paid by the DME supplier covers any portion of the employee's work that benefits the physician (for example, work for which the physician would otherwise have incurred costs), that portion of the employee's salary could be remuneration to the physician," CMS warns.

Other DME issues covered in the regs include:

  • In-office ancillary services exception. CMS declines to broaden its list of approved in-office ancillary services exception items beyond those used to assist patients in ambulating to depart the physician's office: crutches, canes, walkers and manual folding wheelchairs.

    Since the Stark law "expressly excludes DME" from the exception, "we think a specific and limited list of permitted items is appropriate," CMS says

    A DME trade association argued that allowing only a manual folding wheelchair might discourage the beneficiary from obtaining an appropriate wheelchair later, and urged CMS to allow physicians only to loan the wheelchairs. "It is unlikely that the provision of a folding wheelchair will deter a patient from receiving a more appropriate wheelchair on a long-term basis," CMS disagrees.

  • Physicians furnishing DME. CMS clarifies that physicians can directly furnish the DME they prescribe with no Stark violation, Langdon says. But they must have a supplier number in order to do so.

  • Pulse oximetry. Pulse oximetry (CPT 94762) is no longer a designated health service under Stark, points out attorney Tim Webster with Amarillo, TX-based Brown & Fortunato.

  • Drugs. In light of the new prescription drug bill, CMS will "'revisit' the definition of 'outpatient prescription drugs' in a future rulemaking," Webster adds.

  • Codes. CMS declines to furnish a list of codes to identify which items are considered DMEPOS for Stark purposes (versus ordinary supplies, which aren't DHS under Stark). Interested parties can look up the information themselves in the DMEPOS fee schedule, CMS says.

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