Although most suppliers are familiar with Medicare supplier standards, it is prudent to review these standards in case of a possible site inspection by the National Supplier Clearinghouse (NSC) Supplier Audit and Compliance Unit (SACU). Since the middle of 2003, the SACU has increased the frequency and intensity of site inspections for DME suppliers. Site inspections have recently focused on several items that suppliers should be aware of, and be prepared to respond to, while an inspector is on-site.
Clay Stribling, JD
First, the NSC has taken an aggressive approach concerning compliance with supplier standard number four. This standard requires that a supplier fill orders and fabricate or fit items from its own inventory, or by contracting with other companies for the purchase of items necessary to fill the order. If it does, it must provide, upon request, copies of contracts or other documentation showing compliance with this standard.
This standard requires only that a supplier provide items to beneficiaries from its own inventory. However, the SACU has increasingly been citing suppliers for failure to have adequate inventory to meet the needs of their beneficiaries. No clear standard has yet been offered that would assist suppliers in determining what inventory level is required. This ambiguity has resulted in supplier standard number four being cited by the SACU more frequently as the reason for revocation of a supplier’s Medicare number.
Since a supplier cannot be certain what constitutes sufficient inventory, it is prudent for all suppliers to enter into a written agreement with distributors stating that the supplier is authorized to purchase equipment from the distributor. The agreement should state the credit limit available to the supplier and indicate the terms on which the supplier may purchase and receive items from the distributor. In addition, the agreement should contain an effective date and a term, and list the type of product being purchased. Finally, the agreement should be signed by both parties.
Earlier this year, CMS released draft guidance concerning compliance with the supplier standards. In its guidance concerning compliance with supplier standard number four, the draft suggests that suppliers must be able to show at least $25,000 worth of inventory, and this inventory must be of the same type the supplier indicated on its 855S enrollment application. If the supplier is unable to show $25,000 worth of inventory, then it must rely on contracts with its vendors containing credit limits that total at least $25,000. Although these criteria have not been officially adopted by CMS, several suppliers have reported that recent site inspectors informed them that they should maintain an inventory of $25,000.
Insurance Verification
In addition to inventory requirements, suppliers are facing increased scrutiny regarding the status and adequacy of their insurance policies. Quite frequently, the SACU will attempt to contact the insurance underwriter to verify that the supplier’s insurance coverage is current and in effect. If the SACU is told that the insurance is not in effect, or if it cannot receive confirmation either way, this is a reason for revocation of the supplier number for violation of supplier standards. To avoid this situation, suppliers should request that their local agent call to verify coverage with the underwriter on a routine basis and verify that it is the underwriter’s policy to provide information to governmental agencies verifying coverage. Also, effective August 2004, all suppliers are required to list the NSC as a “Certificate Holder” on their insurance policies.
Supplier Standard Number One
Finally, the SACU is increasingly using supplier standard number one as a basis for revocation of a supplier number. This standard requires that a supplier “operates its business and furnishes Medicare covered items in compliance with all applicable federal and state licensure and regulatory requirements.” The SACU has begun routinely revoking supplier numbers for violation of this standard if the supplier has failed to maintain or adequately document its compliance with a state’s regulatory requirements. These would include any state requirement requiring licensure or certification for individuals who fit diabetic shoes, or a bedding license to provide hospital bedding to its beneficiaries.
Complaint resolution
The complaint resolution protocol form must include: the name, address, telephone number, and health insurance claim number of the beneficiary; a summary of the complaint; and any actions taken to resolve the complaint.
In addition to these documents, a supplier should be prepared to provide evidence that the physical location is handicapped accessible. And as a general rule, two or more Medicare suppliers cannot be located in the same physical location. Inspectors may quiz the supplier about any similar businesses in the same location that have a Medicare supplier number.
• Suppliers must post reasonable business hours and be available for inspection by CMS during these hours.
• Suppliers must maintain a primary business telephone number, which must be listed in a local or toll-free directory under its business name; and
• Suppliers must have sufficient inventory on hand. If inventory is off-site at a warehouse, advise the inspector of this and offer the inspector the opportunity to view the warehouse.
There is no question that a site inspection from an SACU inspector can be a stressful process. However, if suppliers are prepared and have the necessary information to show they are in compliance with the 21 supplier standards, alleged violations can be dealt with in a prompt and efficient manner.
NSC notebook
Given the increased scrutiny from the SACU, it is a good idea to maintain an NSC notebook that contains necessary information to verify compliance with the standards. At a minimum, the notebook should contain:
• copies of all state and federal licenses and certificates required to conduct business (licenses should accurately reflect location’s address);
• a copy of the supplier’s original 855S and its most recent reenrollment;
• a sample of the purchase option letter provided to patients who are renting capped rental equipment;
• a copy of the warranty information for any items supplied to beneficiaries upon delivery of their equipment or supplies;
• a copy of the supplier’s entire liability insurance policy;
• a sample copy of forms maintained by the supplier that show proof of delivery of items supplied;
• a copy of any service contracts that the supplier has with any third party to provide service on Medicare-covered items rented to beneficiaries;
• a sample copy of the supplier standards given to beneficiaries to whom the supplier provides Medicare-covered items;
• a copy of the supplier’s complaint resolution protocol used to address beneficiary complaints.
• A copy of the supplier’s contracts with its wholesalers, signed by both parties, which provide (at a minimum): that the supplier is entitled to purchase products from the wholesaler; a valid effective date and termination clause; the payment terms; that the supplier’s account is in good standing; and that states the credit limit established between the supplier and wholesaler. |
Clay Stribling, JD, is an attorney with the Health Care Group of Brown & Fortunato, PC, an Amarillo, Tex-based law firm. Stribling represents durable medical equipment companies, pharmacies, and other health care providers throughout the United States and Puerto Rico. He can be reached at (806) 345-6346 or via email: cstribling@bf-law.com.
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