<img class="" style="float: right;" src="https:\/\/opedge.com\/Content\/OldArticles\/images\/2006-02_02\/fea2-1.gif" width="271" height="153" hspace="4" vspace="4" \/>\r\n\r\n<b><i>Supply closets--also known as "stock-and-bill" and "consignment closets"--are out of the closet.<\/i><\/b>\r\n\r\nThe issue, which has been smoldering underground for some time and periodically heating up the OANDP-L listserve and discussions among O&P practitioners, was debated at a crowded session during the 2005 National Assembly of the American Orthotic & Prosthetic Association (AOPA).\r\n\r\nTaking the "pro" side was Joe Sansone, CEO, TMC\r\nOrth\u00adopedic, Houston, Texas. Representing the "con" was\r\nJonathan Naft, CPO, of Geauga Rehabilitation Engineering Inc.,\r\nChardon, Ohio. Discussing legal aspects of stock-and-bill\r\narrangements was healthcare attorney John Latsko of Schottenstein\r\nZox & Dunn, Columbus, Ohio.\r\n<h4>Point: Why Stock-and-Bill?<\/h4>\r\nSince to many credentialed O&P professionals, the words\r\n"stock-and-bill" are akin to waving the proverbial red flag in\r\nfront of a bull, Sansone may deserve a gold star for bravery as he\r\ntackled the subject head-on. His company, TMC Orthopedic,\r\nunabashedly offers stock-and-bill programs along with patient care\r\nby credentialed and licensed providers and other services.\r\n\r\nSansone described stock-and-bill programs: <b>1)<\/b>\r\nthe phys\u00adician's office is stocked with products at the\r\nvendor's expense; <b>2)<\/b> the vendor's employees handle\r\nmany of the aspects of maintaining products in the physician's\r\nclinic; and <b>3)<\/b> the vendor bills third-party payers\r\nunder its tax ID number.\r\n\r\nWhy would some physicians prefer stock-and-bill programs to\r\nreferring to O&P facilities? Sansone listed these reasons:\r\n<ul>\r\n \t<li>The physician's office is forced to seek an in-network\r\nprovider;<\/li>\r\n \t<li>The patient is inconvenienced with an extra trip to another\r\nmedical office;<\/li>\r\n \t<li>Incorrect products may be dispensed at the O&P\r\nfacilities;<\/li>\r\n \t<li>Patients may be subject to aggressive financial policies at\r\nO&P facilities; and<\/li>\r\n \t<li>O&P facilities may not be open during clinic hours.<\/li>\r\n<\/ul>\r\nHowever, Sansone held out a carrot to stock-and-bill's\r\ntraditional opposition, as he gave reasons why O&P facilities\r\nmight consider adding stock-and-bill programs to their\r\nrep\u00adertoire:\r\n<ul>\r\n \t<li>Your physicians want it;<\/li>\r\n \t<li>It can be profitable;<\/li>\r\n \t<li>It can bring you new customers;<\/li>\r\n \t<li>It can prevent you from losing business to competitors;\r\nand<\/li>\r\n \t<li>It can bring you custom-bracing clients.<\/li>\r\n<\/ul>\r\n"In a nutshell," Sansone stated, "Your competitors are taking\r\nyour business by providing stock-and-bill programs. You can either\r\nsave your business and offer these services, or let the larger\r\nnational companies take your market share."\r\n\r\nSansone injected his presen\u00adtation with humor as he\r\ndiscussed some legal considerations of stock-and-bill. Sansone\r\nwarned of the intricacies of paying phys\u00adicians remuneration\r\nof any type and strongly advised against ever pay\u00ading rent for\r\na consignment closet arrangement.\r\n\r\nHe gave the disclaimer, "I am not a lawyer!" as his PowerPoint\r\nphoto changed into a cartoon monkey giving onlookers the raspberry;\r\nand as he discussed ramifications of the Anti-Kickback Statute, the\r\nscreen showed a photo of him in a prison uniform.\r\n\r\nHe posed the question, "Are stock-and-bills legal?" and\r\nanswered, "Absolutely!" Then he asked, "Are stock-and-bills\r\nextremely difficult to manage legally?" Again, his answer:\r\n"Absolutely!"\r\n<h4>Counterpoint<\/h4>\r\nNaft began by asking, "How did we [credentialed O&P\r\npractitioners] get here [to the stock-and-bill issue]?" He\r\nidentified three main reasons: <b>1)<\/b> Availability of\r\nquality off-the-shelf products; <b>2)<\/b> electronic\r\nbilling; and <b>3)<\/b> consignment items from\r\nsuppliers.\r\n\r\nStock-and-bill has risks, Naft pointed out, as he noted several\r\nareas of concern:\r\n<ul>\r\n \t<li>Liability issues;<\/li>\r\n \t<li>Gray area with Medicare;<\/li>\r\n \t<li>Insurance validation and financial concerns;<\/li>\r\n \t<li>Financial concerns relative to non-insured and co-pay; and<\/li>\r\n \t<li>Professional issues.<\/li>\r\n<\/ul>\r\nRegarding liability, Naft noted that if someone from the\r\nphysician's office fits your product, you now may share some\r\nliability in case of a lawsuit. For instance, was the patient\r\nadequately instructed in the use of the product? Unlike the\r\nsituation in treating patients in your own facility, you lack\r\ndocumentation regarding the patient's care and instruction. Naft\r\nalso pointed out potential reimbursement problems with insurance\r\ncompanies. For instance, will the physician's office verify\r\ninsur\u00adance? What about non-insured patients and discrimination\r\npolicies? What about items that require pre-certification and\r\nclaims that require documentation?\r\n\r\nInsurance issues can be a concern also from the physician's\r\npoint of view and be a factor in the physician's decision regarding\r\na stock-and-bill program. For instance, an online search by this\r\nreporter turned up an article in the June 2005 issue of <i>The\r\nPhysician and Sports Medicine<\/i> on sports medicine practice\r\neconomics by Chris Madden, MD; James G. Macintyre, MD, MPE; and\r\nElizabeth Joy, MD. "Distribution of DME is a lucrative business,"\r\nthe article pointed out, and then sounded this caveat: "Physicians\r\nneed to strike a balance between not violating insurance contracts\r\nif they charge patients and being reimbursed appropriately if they\r\ncharge insurance companies. DME reimbursement is highly variable\r\namong insurance com\u00adpanies, and benefits frequently change.\r\nThus, it can be challenging to keep up with specific coverage, and\r\ncharging for DME may be difficult for physicians. Furthermore,\r\nindividual insurance companies may shake hands' with specific DME\r\nsuppliers, and physicians who supply DME to patients insured by\r\nthese companies may unwittingly breach contracts. Finally, DME is\r\noften subject to high co-pays (which creates more billing and\r\ncollection work and fees), so even if physicians are able to\r\nlegitimately supply their patients with equipment, they are lucky\r\nto break even financially.\r\n\r\n"To sidestep these problems, many sports medicine physicians\r\nrent space (e.g., closet, cabinet) to DME suppliers who stock\r\noffices with requested items and bill patients separately from the\r\nphysician office," the article continued. "Even with this setup,\r\nphysicians should be aware of individual insurance contracts so\r\nthat patients are not surprised by a large bill from a DME supplier\r\nthat is not contracted with their insurance company. Physicians may\r\nwant to develop waivers that clarify patients' insurance and\r\nrelated options. Many patients may opt to avoid hassles and further\r\nappointments with the DME supplier by signing the waiver and\r\npurchasing DME at their initial visit. Physicians should check with\r\nindividual insurance companies before using waivers to ensure that\r\ndoing so does not violate insurance contracts."\r\n\r\nNaft pointed out that stock-and-bills also are a gray area with\r\nMedicare, since the Centers for Medicare & Medicaid Services\r\n(CMS) considers L-Codes to inherently include the time for fitting\r\nand adjustments, which may not have been performed by the billing\r\ncompany.\r\n\r\nProduct returns could add to the supplier's expenses. For\r\ninstance, a patient may return a device that only needs a simple\r\nadjustment, yet the physician's office exchanges it for an entirely\r\nnew one--or the patient may return the device because he\/she simply\r\ndoesn't want it. Any substantial number of returns could present a\r\ncostly nuisance.\r\n\r\nProfessional issues are another major consideration. Said Naft,\r\n"Our role is being practitioners and members of the clinical team.\r\nWe are not DME reps!" Many, if not most, highly educated and\r\ncredentialed practitioners are likely to agree, since the O&P\r\nprofession has struggled long and hard to get O&P separated\r\nfrom DME in the eyes of Congress, government payers, private\r\ninsurers, and the medical community.\r\n<h4>Legal Issues<\/h4>\r\nAll this being said, what about the legal issues? <b>First\r\nof all, the legal information discussed in this article is for\r\ngeneral reader information only. Any provider considering offering\r\na stock-and-bill program should consult a healthcare attorney for\r\nadvice relative to his\/her individual situation<\/b>.\r\n\r\nLike Sansone, Latsko first defined stock-and-bill:\r\n<ul>\r\n \t<li>Supplier consigns DMEPOS inventory owned by supplier in or near\r\nspace owned or leased by a medical group practice;<\/li>\r\n \t<li>Consigned inventory available to medical group to prescribe and\r\nuse on patients requiring DMEPOS; Supplier replaces used DMEPOS on\r\na scheduled basis to maintain inventory;<\/li>\r\n \t<li>Supplier files claims for the DMEPOS with payers, including\r\nMedicare and Medicaid, from information obtained from patient in\r\naccordance with payer requirements and supplier standards;<\/li>\r\n \t<li>Supplier may or may not pay rental for the consignment close\r\nspace where the inventory is maintained;<\/li>\r\n \t<li>Either the supplier (using its own employee) or an independent\r\ncontractor (which may be the physician or the physician's employee)\r\nmay deliver, fit, and instruct;<\/li>\r\n \t<li>If the physician or physician's employee delivers, fits, and\r\ninstructs, the supplier may or may not pay the physician for that\r\nservice.<\/li>\r\n<\/ul>\r\nLatsko then considered four basic areas of legal issues to\r\nconsider: <b>1)<\/b> Anti-Kickback Statute;\r\n<b>2)<\/b> Stark Law; <b>3)<\/b> Medicare\r\nSupplier Standards; and <b>4)<\/b>\r\nLicensure\/qualifications.\r\n<h4>Anti-Kickback Statute<\/h4>\r\nLatsko pointed out that the Anti-Kickback Statute makes it a\r\ncriminal offense knowingly and willfully to offer, pay, solicit, or\r\nreceive any remuneration to induce referrals of items or services\r\nreimbursed by a federal healthcare program. The statute ascribes\r\nliability to parties on both sides of an impermissible "kickback"\r\ntransaction. Remuneration includes the transfer of anything of\r\nvalue, in cash or-in-kind, directly or indirectly, covertly or\r\novertly.\r\n<h4>Stark Law<\/h4>\r\nThe Stark Law prohibits a physician from referring patients to\r\nentities with which he\/she has a financial relationship for the\r\nprovision of designated health services. DME and\r\northotics\/prosthetics are designated health services. A financial\r\nrelationship can consist of a compensation arrangement, an\r\nownership interest, or an investment interest.\r\n\r\nWhat are the possible penalties for violation of the\r\nAnti-Kickback Statute, the Stark Law, and licensure requirements?\r\nLatsko reviewed them. Anti-Kickback violations could snag criminal\r\npenalties of triple repayment, fine and penalties up to $25,000 per\r\nviolation, exclusion, interest, and\/or jail time up to five years\r\nper violation. Civil penalties for Stark violations can include a\r\nrefund plus $15,000 penalty per service plus minimum five-year\r\nexclusion from serving Medicare patients. Also vio\u00adlation of\r\nthese laws could trigger qui tam (whistleblower) actions under the\r\nFalse Claims Act. Licensure violations could end up requiring the\r\nsupplier to return reimbursement, plus facing state law sanctions\r\nfor practicing without a license, along with possible criminal\r\nfraud charges.\r\n<h4>Medicare Supplier Standards<\/h4>\r\nLatsko reviewed Medicare Supplier Standards:\r\n<ul>\r\n \t<li><b>Supplier Standard No. 4<\/b>: A supplier must fill\r\norders from its own inventory, or must contract with other\r\ncompanies for the purchase of items necessary to fill the order. A\r\ncontract to purchase inventory must contain at a minimum the\r\nsignature of both parties; establish a credit limit (C.O.D. not\r\nacceptable); credit terms (net due); identification of both\r\nparties; and dates contract is effective.<\/li>\r\n \t<li><b>Supplier Standard No. 12<\/b>: A supplier must be\r\nresponsible for the delivery of Medicare-covered items to\r\nbeneficiaries and maintain proof of delivery. The supplier must\r\ndocument that it or <i>another qualified party<\/i> has at an\r\nappropriate time, provided beneficiaries with necessary information\r\nand instructions on how to use Medicare-covered items safely and\r\neffectively.<\/li>\r\n<\/ul>\r\nAlso:\r\n<ul>\r\n \t<li>A supplier may contract delivery and instruction of use of\r\nitems to someone;<\/li>\r\n \t<li>A supplier remains fully responsible for delivery and\r\ninstruction;<\/li>\r\n \t<li>The inventory must be owned by the supplier, but delivery may\r\nbe made by someone else out of the supplier's inventory;<\/li>\r\n \t<li>If the delivery is made by someone not <i>qualified<\/i> in\r\nthe use of the product, that person may not be the one instructing\r\nin the use of the product.<\/li>\r\n<\/ul>\r\n<h4>Rental Space: Under the Microscope<\/h4>\r\nIn reference to possible violation of the Anti-Kickback\r\nStatutes, the Office of Inspector General (OIG) of the US\r\nDepartment of Health & Human Services (HHS) issued a Special\r\nFraud Alert in February 2004 regarding rental of space in\r\nphysicians' offices by persons or entities to which physicians\r\nrefer. This document, which was referenced by Sansone, can be read\r\nin its entirety at <a href="https:\/\/opedge.com\/2913">http:\/\/oig.hhs.gov\/authorities\/docs\/fraudalert.pdf<\/a>\r\n\r\n"Consignment closets" set up by DMEPOS suppliers in physicians'\r\noffices were included in the alert. Stated the OIG, "The OIG is\r\nconcerned that in such arrangements, the rental payments may be\r\ndisguised kickbacks to the physician-landlords to induce referrals.\r\nWe have received numerous credible reports that in many cases,\r\nsuppliers, whose businesses depend on physicians' referrals, offer\r\nand pay rents'--either voluntarily or in response to physician's\r\nrequests--that are either unnecessary or in excess of the fair\r\nmarket value for the space to access the physicians' potential\r\nreferrals."\r\n\r\nThe OIG gave the rationale for the Anti-Kickback Law: "Kickbacks\r\ncan distort medical decision-making, cause over\u00adutilization,\r\nincrease costs, and result in unfair competition by freezing out\r\ncompetitors who are unwilling to pay kickbacks. Kickbacks also can\r\nadversely affect the quality of patient care by encouraging\r\nphysicians to order services or recommend supplies based on profit\r\nrather than the patients' best medical interests."\r\n\r\nThe OIG outlines three areas of questionable rental\r\nar\u00adrange\u00ad\u00adments:\r\n<ul>\r\n \t<li>The appropriateness of rental agreements;<\/li>\r\n \t<li>The rental amounts; and<\/li>\r\n \t<li>Time and space considerations.<\/li>\r\n<\/ul>\r\n"The threshold inquiry when examining rental payments is whether\r\npayment for rent is appropriate at all," said the OIG. "Payments of\r\nrent' for space that traditionally has been provided for free or\r\nfor a nominal charge as an accommodation between the parties for\r\nthe benefit of the physicians' patients, such as consignment\r\nclosets for DMEPOS, may be disguised kickbacks."\r\n\r\n<b>The statement continued, "Rental amounts should be at\r\nfair market value, be fixed in advance, and not take into account,\r\ndirectly or indirectly, the volume or value of referrals or other\r\nbusiness generated between the parties."<\/b>\r\n\r\nRegarding time and space considerations, the OIG said,\r\n"Suppliers should only rent premises of a size and for a time that\r\nis reasonable and necessary for a commercially reasonable business\r\npurpose of the supplier. Rental of space that is in excess of\r\nsuppliers' needs creates a presumption that the payments may be a\r\npretext for giving money to physicians for their referrals."\r\n\r\nThe fraud alert noted that it does not address the\r\nappro\u00adpriateness of consignment closet arrangements under\r\nHCFA's [Health Care Financing Administration, the former name for\r\nthe Centers for Medicare & Medicaid Services (CMS)] DMEPOS\r\nsupplier standards, and added "The interpretation of the DMEPOS\r\nsupplier standards is a matter under HCFA's jurisdiction."\r\n\r\nSansone referenced a document from CMS' National Sup\u00adplier\r\nClearinghouse Supplier Audit and Compliance Unit: "Medicare\r\nhas&recently been notified that some suppliers [of DMEPOS] are\r\nleaving these items in physicians' offices and asking doctors to\r\ndispense them to their patients. This practice is not\r\npermissible.\r\n\r\n"DMEPOS suppliers receive their provider numbers from the\r\nNational Supplier Clearinghouse (NSC). The NSC requires all\r\nsuppliers to abide by a set of standards. One of these standards\r\nclearly states that "the supplier&is responsible for delivery\r\nof Medicare-covered items to Medicare beneficiaries&" When a\r\nphysician dispenses DMEPOS directly to a Medicare beneficiary,\r\nhe\/she is acting as a de facto DMEPOS supplier without the\r\nappropriate provider numbers. The supplier also is not living up to\r\nhis\/her commitment under the NSC's supplier standards."\r\n\r\nOf course, one way to avoid this problem is for the supplier to\r\nsimply not have a rental arrangement with the physician.\r\n\r\nRegarding consignment closets, Sansone noted a statement from\r\nhealthcare attorney Jeff Baird, Brown & Fortunato, Amarillo,\r\nTexas, quoted in an article by Mike Moran in the June 2002 issue of\r\n<i>HME News<\/i>. Baird provided three guiding principles to aid\r\nsuppliers in avoiding problems with the Anti-Kickback Law:\r\n<b>1)<\/b> Don't pay rent for the consignment closet;\r\n<b>2)<\/b> Referral sources cannot make money off a\r\nconsignment closet arrangement; and <b>3)<\/b> The DME\r\nsupplier informs the doctor in writing or verbally that patient\r\nchoice must be maintained.\r\n\r\nShould <i>you<\/i> as an O&P facility owner, consider\r\nadding stock-and-bill to your services?\r\n\r\nSansone presented several reasons why stock-and-bill\r\nar\u00adrange\u00adments could be good for O&P, but\r\nacknowledged the legal complexities involved.\r\n\r\nIn concluding his presentation, Naft summed up\r\nsuc\u00adcinctly:\r\n\r\n"Avoid the program."\r\n\r\nHe then added, "[If you do decide to utilize stock-and-bill\r\nprograms,] clearly understand the risks."\r\n\r\nOnly you, as a facility owner and O&P professional, can\r\ndecide.