Andrea Stark

They say the new year is a good time for change, well, Medicare has chosen 2006 to hit the DME industry with some hard-hitting changes. While not all the changes will be financial, they all involve a certain degree of transition and preparation. There are two main changes that must be discussed immediately: effects of the recently passed budget bill, and the impact of CMS’ Medicare Contractor Reform initiative.

The change with the most significant financial impact is the recent passing of the budget bill on February 1, 2006. This legislation included serious changes to reimbursement for DME providers. According to the bill, DME providers will be limited to 36 months of rental for oxygen services at which time the equipment will transfer to the patient. Second, the fee schedule category for capped rental items will be automatically set to select the purchase option for patients in the 13th month of service. There will be no option to select rental and allow providers to bill the final 2 months of rental or the semiannual fee for maintenance and service.

The good news is that any rental billed prior to January 2006 will not count toward the 36-month rental period, and therefore we will not begin to see the impact of this provision until January 2009. There is still time to change legislation over the next 3 years if the industry remains aggressive. As of this writing, the DMERCs have not issued any instruction with regard to the implementation of this change. However, it is expected that once the oxygen has been purchased, contents may be separately billable along with labor, parts, and accessories.

Another concern stems from the burden placed on patients that move or want to switch providers in the middle or toward the end of a rental cycle. Many providers will be unwilling or unable to transfer ownership of equipment that has been rented less than 36 months due to previous payments made to another provider. This will leave patients and providers in an undesirable position.

Another provision of the budget bill affects category 4 capped rental items. Any item that falls under this category, delivered after January 1, 2006, will automatically convert to the purchase option after 13 months of use. This provision does not affect services initiated prior to January 1 (which will remain grandfathered as standard capped rental products and allow for maintenance and service billing).

It is expected that providers will continue to use the capped rental modifiers as the 25% reduction beginning with the fourth-month claim. However, providers will no longer have to provide patients with a purchase option letter in the 10th month. The cost for replacement parts, labor, and loaner equipment will be separately billable once this cap is reached.

In an unrelated announcement, CMS declared that the bilevel positive airway pressure ventilator with backup rate feature (HCPCS E0471) will be converted from a continuous rental to a capped rental as of April 1, 2006, which means that this item will also convert to a purchase after 13 months of use. All of the above changes will probably require modifications to existing software programs that bill DME to track capped rentals and/or keep up with oxygen payments.

DMERCs to MACs
Beginning this March, the industry will begin to see a totally new dynamic unfold when CMS begins the transition from Durable Medical Equipment Regional Carriers (DMERCs) to Medicare Administrative Contractors (MACs), with a final transition date of July 1.

While the impact of this change is not so overtly financial, the financial implications are certainly present. The main structural adjustment will involve the relinquishing of several existing DMERC functions to new contractors. The MACs will retain the following predominant functions: claims processing, customer service, and reopenings/redeterminations (the first level of appeal).

The final four MACs have been named as follows:

• Region A will no longer be administered by HealthNow New York. The new contractor is National Heritage Insurance Company (NHIC) of Hingham, Mass. NHIC has contracted with three other insurance companies to perform the duties of this contract. AdminaStar Federal of Indiana will provide customer service and training support, Electronic Data Systems of Texas will provide information technology support, and Customer Value Partners of Virginia will provide quality assurance support.
• Region B remains with AdminaStar Federal of Indianapolis. Effective July 1, claims for beneficiaries residing in Washington, DC and Maryland will no longer be processed by Region B. These claims will be processed by the Region A MAC. Additionally, claims for beneficiaries residing in Virginia and West Virginia will be processed by the Region C MAC.
• Region C will remain with Palmetto GBA of Columbia, SC. Effective July 1, claims for beneficiaries residing in Kentucky will no longer be processed by Palmetto. These claims will be processed by the Region B MAC.
• Region D will no longer be handled by CIGNA; the new contractor is Noridian Administrative Services, Fargo, ND.

As a result of the reduction of duties for the MACs, several other new contracts will emerge to handle remaining DMERC responsibilities:

• The Program Safeguard Contractor (PSC) will handle all medical review and medical policy procedures along with the fraud and abuse/benefit integrity issues. The PSC will handle all future audits and probe reviews. Nationally, there will be three PSCs to handle the functions of medical review, benefit integrity, and fraud investigations for the DMERCs/MACs. Region A and B will be handled by TriCenturion, Region C will be handled by Trust Solutions, Region D will be assumed by EDS—with IntegriGuard as a subcontractor performing medical review functions, effective March 1, 2006.

• The Qualified Independent Contractor (QIC) has been allocated the task of conducting Medicare hearings for all DME providers nationally. Q2 Administrators will be the contractor to administer the second level of appeals to be called “Reconsiderations” (currently the Hearing level). With the new implementation, there will probably be no more in-person or telephone hearings, because the contractor will have to issue a decision within 60 days. The QIC will employ medical professionals such as physicians and nurses or personnel with legal backgrounds to issue decisions. One major change to this process will prevent suppliers from introducing any new evidence on denied claims after this appeal is conducted (such as to the Administrative Law Judge level or higher).

• The Medicare Electronic Data Interchange System (MEDIS) contractor has been awarded to Palmetto GBA/Region C MAC. Effective July 1, 2006, Palmetto will handle the receipts of all four MAC electronic claims transmissions, electronic claim acceptance/rejection reports, and electronic remittance notices (ERN). Therefore, all nationwide electronic claims will be sent to one destination, and all claims will be forwarded by Palmetto to the corresponding MAC per the patient address field on the electronic claim.

If you would like to continue with direct deposits from Medicare, you will have to sign a new EFT form (the CMS-588 form) and submit it to the new MEDIS contractor if you do not have one with Palmetto GBA. Additionally, you can ease the transition to this contractor by registering your existing submitter ID online at www.palmettogba.com, by signing the EDI and EFT agreements, and by registering for electronic remittance notices (ERNs/EOBs) and Claim Status Inquiry (CSI). Taking these steps now will help you to avoid a lot of hassle that will surface closer to transition time.

• The National Supplier Clearing-house (NSC) contract will remain with Palmetto GBA to process all supplier applications and reenrollments. The NSC will continue the tasks of verifying and enforcing compliance with the 21 standards.

• The Data Analysis and Coding Contractor will replace the existing SADMERC contract, but functions will essentially remain the same: to coordinate HCPCS codes, perform analysis of claims history, distribute drug pricing files, and perform analysis on regional and national totals.

• Beneficiary Customer Service will be handled by the current (800) MEDICARE contractor. This contract is currently held by Palmetto GBA. Specific written and telephone claims inquiries from beneficiaries will no longer be handled by the DMERC/MAC. These tasks will be handled by the (800) MEDICARE contractor.

There will be obvious address changes for mailing hard-copy claims, for processing reviews and hearings, and for reporting fraud and abuse. You may have to complete additional paperwork to ensure uninterrupted service and claims processing. Do not delay in taking appropriate actions. Consider contacting your software vendor to ensure your systems are configured to dial the number for claims submission to Palmetto GBA.

To survive these changes, and avoid having your business turned upside down, you must be proactive. And while there is still time, stay involved to ensure that your voice is heard. DP

Andrea Stark is a Medicare consultant and reimbursement expert specializing in Medicare consulting for medical equipment suppliers and pharmacies. Stark spent 5 years working for the Region C DMERC as both a claims processor and then later as an ombudsman for the Professional Relations/Supplier Education Department. She founded her company, MiraVista LLC, in 2003 in Columbia, SC, and now provides consulting and education services throughout the country. She can be reached via e-mail: andrea@miravistallc.com.