“Hopefully the CBIC will be able to resolve it, but if not, I'm not sure if we're going to have some form of litigation,” he said.

PAMS Urges Caution in Accepting Round One Contracts
MECHANICSBURG, Pa.--In a notice sent Friday following CMS' announcement of round one bid pricing, the Pennsylvania Association of Medical Suppliers warned bid winners to “proceed with caution” before accepting a contract.

“PAMS is strongly urging all round one companies to exercise great caution and to use as much time as necessary to fully understand the implications and multi-year commitments that attach to these agreements,” the notice said. “Companies should view these contract offers soberly, with great skepticism and in the clear light of day.”

According to John Shirvinsky, executive director of the state association, “We just want to make sure that everyone takes all the important considerations into account. A lot has changed since the bids were submitted, and a lot of the small companies that bid may not have understood their cost structure or what it would take to service a contract.

“The place you're starting at is that you have to have profit margins in excess of these reductions,” he continued, “and I find it hard to believe that some [of the smaller companies] can do that.”

Here's why, according to the PAMS notice:

--A 26 percent average cut in pricing presupposes an existing average profit margin in excess of 26 percent. Make sure that you fully understand your profit margins and ask yourself if it is large enough to sustain profitability for three years at this greatly reduced fee schedule. While reductions may vary by product category, the principle behind the question does not.

--You will have 60 days to grow your business from very small to very large. This will likely include the hiring of new employees, expanding your vehicle fleet, the need to secure larger warehouse space and/or a distribution center depending on the product category involved, and a larger inventory.

--In light of additional expenses that will need to be incurred, will increased volume in sales make up for the large loss in profit margin?

--If you “win” one or two product categories, how many product categories have you lost? Will higher volume at a reduced rate make up for Medicare sales volumes at higher margins that are lost completely?

--If you plan on using subcontractors, what are the terms for reimbursing your subcontractors? If you plan to operate on a normal business-to-business basis and you will pay for equipment as it is delivered, how will that affect your cash flow?

--Things have changed since the September 2007 bid submissions:

• Gasoline prices have increased by 25 percent and are projected to exceed $4 per gallon by the July 4 holiday;
• CMS has proposed and will implement new quality standards that will increase operating costs and limit your ability to realize possible savings by reducing expenses such as 24/7 service;
• The shrinking value of the U.S. dollar will impact the cost of many of the items that are now imported from overseas; and
• Rising gasoline prices will impact the costs of other goods and services purchased.

In other words, he concluded, “If the reimbursement rates offered are inadequate to cover your expenses for the next three years, then the contract before you is of no real value.”

14,575 Jobs Lost Under Competitive Bidding, Weeks Predicts
MELBOURNE, Fla.--Industry consultant Wallace Weeks of Weeks Group has estimated the implementation of competitive bidding will cost the HME sector a total of 14,575 jobs.

In what he calls a “best-case scenario,” Weeks predicts a loss of 2,662 full-time equivalent jobs from DMEPOS companies in nine of the 10 MSAs in the program's first round (San Juan was excluded from the forecast), and another 11,913 jobs lost in 69 of the 70 MSAs in round two. New Orleans was also excluded from the report for lack of credible data, Weeks said.

According to Weeks, it appears that approximately 44 percent of providers bid in round one vs. 56 percent who did not. But the failure rate of the companies that bid and did not win may actually be greater than the failure rate of those that did not bid at all, he said.

“Since the industry is made of small companies, and some of their owners have indicated the requirements of participating in the bidding process is an untenable burden--and some of those companies derive large portions of their revenue from Medicare--there will be a significant failure rate among that segment of non-bidders,” Weeks noted.

But on the flip side, he explained companies that did bid--theoretically those dependant on Medicare for a large chunk of revenue and that need to protect it--could be in trouble if they don't win their bid. “The bidding providers are more likely to be those with 20 percent or more of their revenue at risk. Not bidding is not a practical choice, and not being awarded a contract is, at best, a major setback,” he said.

As to which companies will be left standing, Weeks said, it could be a toss-up. However, he pointed out, “When it comes to employment numbers that's immaterial; the relevance is to individual employers that are having to let employees go, and to those employees and their families.”

What's more, he said, the number of contracts that will be awarded is “not the whole story. We have an entirely different set of problems with the pricing.”

Weeks analyzed the employment data to help the American Association for Homecare generate media awareness about the effects of rounds one and two. On Thursday, shortly before CMS' announcement of round one pricing, the association sent a press release to national media summarizing recent congressional letters, economic studies and data from Weeks that “all raise grave questions and concerns about the bidding program,” AAHomecare said.

Experts Say Round Two Deadlines Possible, but Start Accreditation Now
ATLANTA--Accrediting organizations are temporarily changing some procedures, ramping up training workshops and posting volumes of information on their Web sites in an attempt to help HME providers meet an Oct. 31 accreditation deadline for for round two of competitive bidding.

Earlier this month, CMS announced that suppliers who want to bid in round two must be accredited or have applied for accreditation by May 14. They must be accredited by Oct. 31 in order to be awarded a contract, the agency said.

“Oct. 31 is great. It’s reasonable for anyone who wants to bid,” said accreditation expert Mary Ellen Conway, president of Capital Healthcare Group in Bethesda, Md. “But they have to get started right now and plan to have their survey in July so they have August and September to make changes if needed.”

Accreditors echoed that advice.

“Sixty days is plenty of time to submit applications,” said Bob Floro, MSL, RRT, director of the home care accreditation program for the Joint Commission in Washington, D.C. “If folks take this seriously and start this accreditation process yesterday, then yes, the October deadline is realistic.”

But providers have to meet the May deadline before they can proceed, accreditors cautioned.

“If they don’t make the May 14 deadline, they are going to miss the boat,” said Tom Caesar, president of the Raleigh, N.C.-based Accreditation Commission for Health Care. “Because a week after that deadline, we [accreditors] have to give CMS reports on who has applied.”

Conway said meeting that May deadline could be tricky for some providers, depending on the accrediting body they choose. “Some of the organizations want your application only when you are ready to be accredited. With some, you just apply; with others, when you send in your application, it means that you are ready to be surveyed.”

That latter is the procedure at ACHC, Caesar said. “When you come to us with the application, you’re saying we can come to [survey] you next week,” he said.

Because of the tight deadline, however, ACHS has temporarily modified its policy to give providers more time. Those who apply by May 14 will have until June 30 to get themselves in shape for a survey.

“Then we have to get the surveys done five weeks before Oct. 31,” Caesar said.

At the American Board for Certification in Orthotics & Prosthetics in Alexandria, Va., time is also of the essence.

“We require that a complete and final application be submitted to ABC prior to reporting that [providers] have applied to CMS. The application must be complete and the patient care business ready for survey when we notify CMS of their application,” said Tom Derrick, director of public relations.

“Right now,” he added, “the average time from application to survey is three months. In some isolated rural areas, it is up to four months.”

It may take another three months for a provider to hear whether or not it is accredited, he said.

The Joint Commission is currently scheduling May and June surveys, Floro said, and gives providers 45 days to fix whatever is not in compliance.

“When an organization applies for Joint Commission accreditation, they actually tell us which month they will be ready for a survey,” he said. “So the organization predicts when they are going to be ready. Of course, the survey is unannounced, so we are not going to promise we are going to conduct it that month, but we are not going to do it before that month.”

All the accrediting bodies are gearing up for an influx of providers seeking to become accredited in the 70 MSAs targeted for round two.

“We have been planning for quite a while to take a lot of companies in a short period of time. We can handle a large volume,” said Caesar, noting that ACHC has more than 40 dedicated DME surveyors. “We did about 400 surveys in about a three-month period last year. We don’t know [what to expect] this time. You could have a number of companies coming through a narrow funnel in a short period of time.”

Floro said the Joint Commission’s market research shows that “there appear to be 34,000 plus or minus Medicare provider numbers that are doing business in the 70 MSAs. According to our market research, [there are] 2.48 Medicare provider numbers per organization. So you’re actually dealing with 13,000 organizations.”

While Floro said he doesn’t know how many will come the Joint Commission’s way, “we can deal with any number. There’s a rumor that the Joint Commission is not accepting applications … It is just not true. We can meet any demands that come our way. We have the flexibility and the resources to do it.”

Derrick, too, said his organization has ramped up both staffing and technical capabilities. “We have a cadre of surveyors in the field and others standing by,” he said.

To further help providers, most of the accrediting bodies are posting their standards, offering checklists and providing critical information, including about training workshops, on their Web sites, they said.

ACHC also has increased the number of workshops it offers, Caesar said. “If you go through one of the workshops, they’re going to hand-hold you and get you through the process,” he said.

Derrick encouraged providers to study the Web sites of all 10 of CMS’ approved accrediting bodies to determine which accreditor is best suited to their company.

Conway also said providers should “look at the standards online and download them now. You need to find out who you want to be accredited with and find out what their program is and get going on it,” she said.

For a list of CMS' deemed accreditation organizations, click here.

Tornadoes Won't Stop Medtrade 2008
ATLANTA- -The 130-mile-per-hour winds from a tornado that ripped across downtown Atlanta earlier this month caused millions in damage, shattering skyscraper windows and leaving gaping holes in the Georgia Dome and the World Congress Center, the site of Medtrade 2008.

The storm tore open the roof of an exhibition hall at the convention building, leaving metal, glass and debris littered throughout the facility and forcing the venue to cancel its immediate bookings, including a dental convention and much of the Southeastern Conference basketball tournament.

But Kevin Bird, group show director for Nielsen Business Media's Medtrade, said repairs to the World Congress Center would be completed in plenty of time for the venerable trade show.

“Fortunately for us, the weather damage will not change the plans or preparations for Medtrade in the least,” Bird said of the conference, which will be held Oct. 28-30.

A series of tornadoes tore through Atlanta and surrounding areas March 14 and 15, leaving a trail of destruction in their wake. At least two people were killed in the storms, which devastated the city's Cabbagetown district, collapsed parts of the Fulton Cotton Mill Lofts and toppled headstones at historic Oakland Cemetery.

The aftermath saw 10,000 homes and businesses without power, the cancellation of the city's St. Patrick's Day and SEC parades, and streets in desperate need of clean-up. Debris flew from windows blown out at landmarks including the CNN Center and Omni Hotel. As of Friday, some traffic lights were still out and streets leading to the Congress Center remained closed as high winds continued to blow glass shards from surrounding buildings to the ground.

Centennial Olympic Park, a popular site for Medtrade visitors, was also damaged--two of the Olympic torch towers fell, and a performance pavilion was destroyed.

Gov. Sonny Perdue has estimated the damage at more than $200 million.

But Bird said Medtrade, in its 29th year, ”will continue as planned,” featuring a 240,000 square foot show floor and over 725 exhibitors showing the latest products and services now available in the HME industry. The show will also include 100 educational sessions on topics ranging from accreditation and competitive bidding to oxygen/respiratory issues and sleep-disordered breathing.

Medtrade Spring is slated for Long Beach, Calif., May 7-8. For more information about either show, visit www.medtrade.com.

New Standards 27, 31 and 57: What the Changes Could Mean for You
By all accounts, the effects of CMS' proposed revision and expansion of supplier standards for DMEPOS will be far-reaching. In a special series for HomeCare Monday, health care attorney Neil B. Caesar, president of the Health Law Center, Greenville, S.C., will help provide clarification and insight on several provisions of the draft rule. This week, Caesar's comments are directed to proposed new Standards 27, 31 and 57.

Proposed Standard 21 would require suppliers that provide oxygen to obtain their supplies from a state-licensed oxygen supplier. CMS believes that, in those states where a license is required to supply oxygen, suppliers who obtain the oxygen from another supplier must utilize someone licensed by that state. This is designed to prevent suppliers from purchasing oxygen from an outside vendor in a state where a license is required. If the state does not require a license, then this standard would not apply.

This standard is similar to the new attitude in revised Standard 1. Again, CMS is requiring a tight nexus between the supplier and licensed personnel or entities. Nonetheless, this new standard raises some questions as to its interaction with Standard 1.

That standard requires suppliers to employ directly licensed individuals instead of contracting with them on an independent basis. Yet new Standard 27 clearly implies that the oxygen would be allowed to come from another supplier. The only reconciliation of these two standards would appear to be that Standard 27 applies to the purchasing of the oxygen itself and not the subcontracting for therapy, delivery, equipment or other ancillary services.

In other words, if you are purchasing the gas or liquid, Standard 27 would apply. If you seek to utilize any other services, Standard 1 would apply. Clarification of this uncertainty would be welcome.

Proposed Standard 31 would require a supplier to resolve any tax delinquency it might have with the Internal Revenue Service or state taxing authority. CMS believes it important to “ensure that Medicare payments are only being made to organizations and individuals who have satisfied existing tax debts.” Consequently, CMS wants the basis to revoke the billing privileges of any DMEPOS supplier (“including physicians and non-physician practitioners who are also enrolled as a DMEPOS supplier [sic]”) that has failed to resolve its tax problems.

CMS' justification for tying together tax delinquencies and the ongoing right to remain a supplier is nowhere articulated in its commentary to Standard 31. I expect that CMS would argue it only wants suppliers to participate in the Medicare program if their hearts are pure, and tax delinquencies suggest a fiscal irresponsibility that could present problems with the supplier's compliance with supplier standards.

Indeed, CMS cites a Government Accountability Office report that found over 21,000 individuals and companies paid under Medicare Part B during the first nine months of 2005 had tax debts totaling over $1 billion. But CMS' decision to act as Big Brother and eradicate tax debt is a dangerous precedent. First, this attitude could lead next to CMS issuing edicts about other aspects of a supplier's fiscal behavior, such as how quickly the company pays its bills or how well it collects receivables.

Second, individuals and entities are allowed under the tax laws to challenge the imposition of taxes they believe are improper. Often, they are allowed to refuse to pay the tax until the fight is concluded, knowing that, if they lose, they will also have to pay interest and perhaps penalties. But the choice of whether to accept that risk or to pay the tax and then fight for a refund should be a business decision for the individual or company. Proposed Standard 31 would remove that choice.

Finally, proposed Standard 57 is technically not a new supplier standard, but rather an expansion of the existing language, which discusses the consequences of failing to meet the supplier standards. Currently that portion of the law only discusses CMS' ability to revoke billing privileges if the standards are not satisfied. A new section would establish that all monies received by a supplier that failed to report an adverse legal action or felony conviction that precludes payment would constitute an overpayment to the supplier, which then must be repaid.

CMS is doing two things with this new language. First, the agency is clarifying its existing position that, because a supplier is not allowed to participate in the program when certain adverse legal actions have occurred and further is not allowed to utilize the services of individuals who have been convicted of a felony or certain other violations of the law for a specific period of time, any monies received by the supplier during a period when either of these circumstances apply should be deemed overpayments that must be refunded to the government.

It also clarifies and emphasizes the requirement that the supplier report adverse legal actions and felony convictions to the National Supplier Clearinghouse within 30 days of the event.

Second, the new rule would assess the period within which overpayments are calculated as going back to the date of the conviction or adverse legal action.

This new rule emphasizes that CMS wants suppliers to crack down on internal monitoring of hiring practices to ensure that the supplier is not hiring ineligible persons. It also emphasizes that CMS is taking very seriously the supplier's obligation to report adverse legal events promptly.

Practically speaking, the consequence of 100 percent refund of all Medicare reimbursement for services rendered after the date of a felony conviction or adverse legal event (including, presumably, the date the supplier hired an ineligible person) are quite severe. This penalty would likely bankrupt many suppliers.

Until the fairness of this position is sorted out over time, the lesson for suppliers is clear: Be very careful to screen new hires thoroughly to ensure that they are allowed to participate in providing Medicare-reimbursed services, and also report adverse court actions to the NSC promptly. Better yet, avoid adverse court actions that trigger the reporting requirement.

Finally, in my opinion, CMS would love nothing more than to be able to license DMEPOS suppliers at the federal level and micromanage most aspects of their operations. Because the agency does not have that ability, CMS has to be content with its ever-increasing quantity of rules, including rules that focus on day-to-day operational details. The trend towards increased and increasingly burdensome supplier standards may continue, at least until Congress can be persuaded that this volume of rules is unfair.

Wouldn't it be interesting if CMS, the DME MACs or the NSC were held to the same standard of near perfection to which DMEPOS suppliers are being held?

To view the proposed standards, click here.

Comments are due by Tuesday, March 25 (tomorrow). Electronic comments can be submitted at http://www.regulations.gov. Follow the instructions under the “Comment or Submission” tab and enter the file code CMS-6036-P.

In Brief
In its Wednesday newsletter, AAHomecare noted some of its members have received “documentation request” forms from the HHS Office of Inspector General asking for information on complex rehab and K0823 power mobility codes. If providers receive these forms, they should be thorough in completing them, AAHomecare said. “With these forms, DME providers can explain to the OIG the service-intensive nature of providing power wheelchairs, including complex rehab, and thereby begin to quantify the service-related costs of providing the full range of power wheelchairs to Medicare beneficiaries,” the association said. The deadline for returning the forms is March 28.

The Messe Düsseldorf Group, global organizer of medical trade fairs since 1954, will now market its international medical care events under the name Medical Fair, the organization said. Werner M. Dornscheidt, president and CEO of Messe Düsseldorf, explained, “With the new name Medical Fair we are now creating a common framework for all our medical trade fairs held outside of Düsseldorf in order to raise recognition levels.” The group's next events include: Medical Fair Austraila in Sydney, May 13-15; Medical Fair Asia in Singapore, Sept. 17-19; Medical Fair Brno in the Czech Republic, Oct. 21-24; and Medical Fair Thailand in Bangkok, Sept. 16-18, 2009.

Recovery audit contractors in three states have recovered more than $371 million in overpayments made to Medicare providers, CMS said in a progress report released Feb. 28. Underpayments totaling more than $14 million also have been identified in the first three states of the RAC demonstration project in California, New York and Florida. A majority of overpayments and nearly all underpayments collected by RACs in the three states since 2005 involved inpatient hospitals, CMS said. Congress mandated the RAC demo in the Medicare Modernization Act of 2003. The pilot program was expanded in 2007 to Massachusetts, South Carolina and Arizona, and will gradually be expanded nationwide, with 19 states being monitored by spring.

A Florida medical supply company may have overbilled Medicare more than $8.2 million for diabetes testing supplies in 2002 and 2003, according to recent audit findings by the HHS Office of Inspector General. In a sampling of 100 claims submitted to Medicare by iCare Medical Supply for home blood-glucose testing strips and lancet supplies, auditors found that none met Medicare requirements, the OIG said. When audit results are projected to the entire population of claims submitted by iCare for diabetes testing supplies, iCare likely overbilled the federal government at least $8.2 million of the $8.6 million it claimed in calendar years 2002 and 2003, according to the report. To view the report, click here.

Results of a study examining the credentials of 9,597 physicians, nurses and ancillary personnel in 24 health care organizations including hospitals, surgery centers and health plans show nearly 9 percent were practicing with one or more of 52 questionable issues regarding their credentials. The tested facilities, part of Medversant Technologies' “Adverse Actions” report, were located in California, Texas, Louisiana, Tennessee, Kentucky and Illinois. Medversant CEO Matthew Haddad said the study shows there are potentially millions of medical professionals operating without valid licensure or with questionable credentials.

To revisit this news any time during the week, go to www.homecaremonday.com.

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