But AHP defaulted on a $226 million promissory note when it missed its Aug. 1, 2009, repayment date. Since then, the company has been operating under a series of short-term forbearance agreements with NexBank SSB, a Highland Capital affiliate, in which its lenders agreed not to take any action against the company while negotiating a resolution. The parties had been working under the 10th such agreement, which was due to expire May 16.

According to the release:

If the reincorporation in Nevada is not approved, the tender offer and subsequent debt restructuring will not occur. If the tender offer is completed, the Company’s senior secured debt will be restructured with a new four-year term. If the tender offer is not completed, the company will remain in default of its obligations to its senior lenders, the consensual long-term restructuring of the company’s debt will not occur, and American HomePatient may make a Chapter 11 bankruptcy filing. The outcome for existing stockholders in any bankruptcy would be highly uncertain.

AHP said stockholders would vote on the plan at its annual meeting June 21.

CBIC Requests More Round 1 Bid Info in Short Order
BALTIMORE—The Competitive Bidding Implementation Contractor appeared to step up requests last week for more information from home medical equipment providers who submitted bids for Round 1 of the DMEPOS competitive bidding project.

Waterloo, Iowa-based VGM Group and the Texas Alliance for Home Care Services, as well as individual providers, reported that the CBIC, via email and hard-copy letters to bidders, was asking for more data on issues ranging from mail-order diabetic supplies, oxygen transfilling and hospital beds to state licenses.

“They are continuing to seek out information,” said Alan Morris, regulatory analyst for VGM. “They are going category by category. We may see more to come in the next few weeks, and then they should be done with the process and ready to move forward to calculate the composite and pivotal bids.”

CMS is expected to announce pricing for Round 1 in June, followed by bid winners in September.

Barry Johnson, CRT, president of Texas Medical in Duncanville, Texas, and president of TAHCS, said he had fielded numerous phone calls from the association’s members asking about the CBIC requests. On Tuesday, he, too, received an email from the CBIC asking for proof of licensure to provide hospital beds in Dallas.

There were two problems with the request, Johnson said: Texas does not require licensure to sell hospital beds, but it does call for a germicidal bedding license—which Johnson provided when he submitted his bid last year.

“The bid process has been closed for months and here they are coming back and asking for more information,” he said. “They set the deadline for the bids to be in, and they even had a covered document review date to let you know if there was anything missing. They told us our bids were complete, and now they have decided out of the blue to ask for additional information.”

The requests to his company and others sent Johnson to the phone to talk to a CBIC representative. He talked with two, but said neither could answer his questions satisfactorily or assure him that the license he did submit would satisfy the CBIC request.

The requested information was due by the stroke of midnight ET on Thursday, April 29, or it could signal the death knell to participation in the Round 1 bid, Johnson said. “Two days is not sufficient for anyone who has a question,” he said about the deadline to submit the documentation.

He added that four of six hospital bed providers who are members of TAHCS had been asked by the CBIC for further data. “Why didn’t everyone get one of these [requests]?” he asked the CBIC representative. Her answer: They should have. She could not explain why they didn’t, Johnson said.

Meanwhile, the CBIC also requested extra information from providers bidding on any product category except oxygen in Pittsburgh, Pa., who are not located in that competitive bidding area and do not have representatives that cover that area. Such providers, the CBIC said, must “submit a statement signed by your company’s authorized official certifying that you do not have any sales representatives that go into Pennsylvania to promote, sell or provide samples of equipment.”

Bidders on oxygen in Pittsburgh who are not located in that CBA and who also do not have sales representatives promoting or selling there were also asked to submit a statement that “you do not transfill oxygen and do not have any sales representatives that go into Pennsylvania to promote, sell or provide samples of equipment.”

VGM’s Morris said from "everything I have seen to date—and some providers may argue this is over the top—but it is within their authority,” he said of the CBIC's requests, adding that providers just needed “to respond to their requests fast and assume that as long as they do and they have the proper documentation to back it up, there is really no issue.”

HHS is required to determine the level of screening according to the risk of fraud, waste and abuse with respect to each category of provider or supplier. All providers and suppliers will be subject to licensure checks and, if HHS so determines, additional screening measures such as criminal background checks, fingerprinting, database checks and unscheduled and unannounced site visits. In short, it will be more difficult for a new player to come into the industry and to successfully re-enroll. The owner of the HME company needs to be squeaky clean.

• Disclosure Requirements. Providers and suppliers enrolling or re-enrolling in Medicare, Medicaid or CHIP will be subject to new disclosure requirements. Applicants will be required to disclose current or previous affiliations, directly or indirectly, with any provider or supplier that has uncollected debt, been subject to payment suspension under a federal health care program, been excluded from participating in a federal health care program or had its billing privileges denied or revoked. HHS may deny enrollment or re-enrollment if such affiliations pose an undue risk of fraud, waste or abuse. Not only must the owner of the HME company be squeaky clean, but the owner must be careful about who he/she has affiliated with, or done business with, in the past.

• Offset payments from suppliers with same tax ID number. HHS may adjust payments to a provider or supplier that has the same tax ID number as a provider or supplier that owes past-due obligations under Medicare, Medicaid or CHIP, regardless of such providers’ or suppliers’ Medicare billing number or NPI.

• Temporary Moratorium. HHS may impose a temporary moratorium on the enrollment of new providers and suppliers if HHS determines that such action is necessary to prevent or combat fraud, waste or abuse. Those people who have had to deal with the MediCal moratorium know that this is a train wreck waiting to happen.

• Compliance Programs. Sometime in the future, certain providers and suppliers will be required to establish a compliance program that must contain core elements, which will be established by HHS in consultation with the OIG. Note that the OIG currently has compliance guidelines for various types of health care providers and suppliers, including DMEPOS suppliers. For a number of reasons, each HME supplier should have a compliance program now.

Question: Does the new legislation contain anti-fraud measures?
Answer: Yes. Sec. 6402 discusses overpayments, kickbacks, false claims and surety bonds. Specifically:

• Reporting and Returning Overpayments. Any provider or supplier that receives an overpayment must report the overpayment to HHS, carrier or other appropriate person and provide written notice of the reason for the overpayment. An overpayment must be reported and returned no later than 60 days after it is identified or the date of any corresponding cost report (if applicable). Failure to do so may result in civil money penalties. Think of the ramifications. It is common to pay back money to the DME MAC. These reporting requirements will be onerous.

• Anti-kickback Statute and False Claims Act. A claim that includes items or services resulting from a violation of the Medicare/Medicaid anti-kickback statute constitutes a false or fraudulent claim under the Civil False Claims Act (31 USC § 3729). This is nothing new. This has been the Department of Justice’s position for many years.

• Surety Bonds. HHS must take into account the volume of billing for an HME supplier or home health agency when determining the size of the surety bond. In other words, the surety bonds will not be limited to $50,000.

Question: What about physicians?
Answer: Under Sec. 6405, physicians who order items or services will be required to be Medicare enrolled physicians or eligible professionals. On or after July 1, 2010, DME or home health services must be ordered by a Medicare-enrolled physician or eligible professional. HHS may extend these requirements to other Medicare items and services to reduce fraud, waste and abuse. (Note that, as of this writing, the deadline for physicians and non-physician practitioners who order DMEPOS items or services, or refer Medicare beneficiaries to Medicare-enrolled DMEPOS suppliers, to enroll in the Medicare Provider Enrollment, Chain and Ownership System, or PECOS, is Jan. 3, 2011. It is uncertain what effect, if any, the July 1, 2010, deadline will have on the PECOS deadline. We await guidance from CMS on this issue.)

Question: In the past, the worst thing that would happen to a supplier that did not have all of the required documentation was the assessment of an overpayment. Has this changed?
Answer: Unfortunately, yes. Under Sec. 6406, DHHS may revoke enrollment of a physician or supplier for failure to maintain and, upon request, provide access to documentation relating to written orders or requests for payment for DME, certifications for home health services or referrals for other items or services written or ordered by such physician or supplier. Such revocation may be for no longer than one year per act.

This is scary. I hope that HHS/OIG does not take the position that an HME supplier’s number can be revoked if it does not have physicians’ progress notes in its files.

Question: For the past several years, we have had to comply with a “face-to-face” rule in the power mobility arena. Has this rule been expanded?
Answer: Yes. Sec. 6407 states that a face-to-face encounter with a patient is required before a physician may certify eligibility for home health services or DME under Medicare. As a condition of Medicare payment for DME, the physician must document that a physician, physician assistant, nurse practitioner or clinical nurse specialist has had a face-to-face encounter with the patient during the six months prior to the written order for the DME.

HHS may determine another reasonable time frame and may impose the requirement to other Medicare-covered items and services. There will be similar face-to-face requirements prior to physician certification for home health services.

Question: I have heard that the health reform legislation “speeds up” competitive bidding. Please tell me this is not true.
Answer: I wish I could tell you that, but I cannot. Under Sec. 6410, the competitive bidding program will be expanded in round two from 79 of the largest metropolitan statistical areas to 100 of the largest MSAs (i.e., Round 2 will consist of the nine MSAs from the Round 1 rebid plus 91 additional MSAs). HHS will be required either to competitively bid areas or use competitive bid prices by 2016.

Question: … and RACs are not going away, are they?
Answer: No. States must establish contracts with one or more RACs for the purpose of identifying underpayments and overpayments and recouping overpayments under the state Medicaid plan or any waiver of the state plan. The RAC program will be expanded to Medicare Parts C and D no later than Dec. 31, 2010.

Question: I understand that the health reform act hits manufacturers in the pocketbook. Correct?
Answer: Yes. Sec. 9009 imposed an annual fee on medical device manufacturers and importers. (Note: this provision was replaced with an excise tax under the Health Care and Education Reconciliation Act of 2010.)

Question: OK. So what is the Health Care and Education Reconciliation Act of 2010 (“Reconciliation Act”)?
Answer: The Reconciliation Act was signed into law on March 30, 2010. It amends the PPACA. The following is a summary of provisions that are relevant to HME suppliers:

• Sec. 1302. Repeal of Prepayment Review Limits. Previously, a Medicare Administrative Contractor could conduct a prepayment review only under certain circumstances. Those limits have been removed.

• Sec. 1304. 90-Day Enhanced Oversight for Initial DME Claims. After Jan. 1, 2011, if HHS determines that there is a significant risk of fraudulent activity among HME suppliers, then HHS will withhold Medicare payment of any claims submitted by a supplier that is initially enrolling in Medicare. HHS will withhold such payment during the 90-day period beginning on the date of the first submission of a claim for DME by the “new” supplier. In other words, the new supplier is placed on 90-day “probation.”

• Sec. 1405. Excise Tax on Medical Device Manufacturers. This section replaced the annual fee on device manufacturers under the PPACA with an excise tax. A tax of 2.3 percent of the sales price will be imposed on the sale of any taxable medical device by the manufacturer, producer or importer. The tax will apply to sales after Dec. 31, 2012. Any device defined by the Federal Food, Drug and Cosmetic Act that is intended for humans is subject to the tax, except the following items: eyeglasses, contact lenses, hearing aids and any other medical device determined by HHS to be of a type that is purchased by the general public at retail for individual use.

Jeffrey S. Baird, Esq., is chairman of the Health Care Group at Brown & Fortunato, P.C., a law firm based in Amarillo, Texas. He represents pharmacies, infusion companies, home medical equipment companies and other health care providers throughout the United States. 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.

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