George Clooney's movie, The Perfect Storm, is playing itself out again, this time in the HME industry. Instead of weather patterns coming together, legislative and regulatory changes are converging. This is particularly true in the oxygen and sleep arenas.

A final regulation changing Medicare's payment rules for home oxygen and capped rental items (including CPAP) was published on November 9, 2006. Under the rule, for items furnished on or after January 1, 2006, title is transferred to the beneficiary after Medicare pays for 36 months of continuous use for oxygen equipment, or after 13 months of continuous use for capped rental items. A period of continuous use begins with the first month of medical need and lasts until the beneficiary's medical need for the item of DME ends.

The term "continuous use" allows for temporary interruptions in the use of the equipment of up to 60 consecutive days, plus the days remaining in the rental month in which the use ceases. Neither a move by the beneficiary, nor a change in supplier, will begin a new rental period.

During the Rental Term

For rentals beginning January 1, 2007, the provider must furnish the equipment until medical necessity ends, or the 13-month/36-month period of continuous use ends, whichever is earlier, unless the equipment becomes subject to competitive bidding; the beneficiary relocates to an area outside the provider's service area; the beneficiary elects to obtain equipment from a different company; or CMS or the carrier determines that an exception should apply in an individual case.

Additionally, the equipment may not be replaced before the expiration of the 13-month/36-month term unless the provider replaces an item with equivalent equipment because the item was lost, stolen, or irreparably damaged, is being repaired, or no longer functions; the physician orders different equipment; the beneficiary chooses to obtain a newer technology item or upgraded item and signs an ABN; or CMS or the carrier determines that a change in equipment is warranted.

At the beginning of the rental term, providers must advise beneficiaries whether they intend to take assignment for all or a portion of the rental period. This is not binding on the provider. No later than 2 months before title will be transferred, providers must disclose to beneficiaries whether they can continue to service the equipment after the transfer, and whether they can continue to deliver oxygen contents to the beneficiary after the transfer. Title to back-up equipment will not be transferred.

After Title Transfers

A manufacturer's warranty will transfer to the beneficiary at the end of the applicable 13-month/36-month period if the warranty is still in effect and is transferable. Title to oxygen tanks located in the beneficiary's home at the end of 36 months will be transferred to the beneficiary. Medicare will continue to pay for oxygen contents after title transfers. Beneficiaries may switch tanks out for refills.

Jeffrey S. Baird

For capped rental items, Medicare will no longer pay a maintenance and service fee every 6 months. Rather, Medicare will pay for reasonable and necessary repairs and service actually performed. For oxygen, Medicare will continue to pay for routine maintenance and service every 6 months, but payment will be limited to reimbursement for labor, not to exceed 30 minutes. If the carrier determines that the equipment will not last for its useful life, then the provider must replace the equipment at no charge. When the beneficiary no longer needs the oxygen equipment, the provider may bill Medicare for picking up and storing or disposing of tanks, but not concentrators.

In the past, suppliers would often provide travel oxygen services to their patients at no charge. With the recent regulatory changes, suppliers can no longer afford to provide their patients with this service free of charge. The following question is being asked: "What can the HME company legally charge a Medicare beneficiary for travel oxygen?"

Recent information from CMS has provided some clarification. If a claim for oxygen-generating portable equipment (OGPE) is submitted as a rental for a patient who has other oxygen equipment, it will be denied as not reasonable and necessary (as a duplicate service). If the claim is submitted as a rental and on assignment, the supplier must provide the beneficiary with an ABN to charge the beneficiary for the service.

If the patient chooses to purchase the OGPE, no ABN is required, and the supplier may collect the entire purchase price up front since Medicare will pay only for rental of oxygen equipment. Although no ABN is needed where the oxygen is being purchased, the supplier may wish to provide one to the beneficiary lest there be any question that the beneficiary chose a purchase instead of a rental.

Overnight Oxygen Qualification Tests

In August 2005, CMS issued Transmittal 173 making it easier for HME companies to obtain qualifying overnight tests on their oxygen patients by allowing the company to deliver a sealed, tamper-proof oximeter to the patient's home on behalf of the independent diagnostic testing facility (IDTF). In the morning, the provider can pick the unit up from the patient and transmit the test results via the Internet or other software to the IDTF.

In the summer of 2006, the Medicare Administrative Contractors (MACs) published a follow-up in their Advisory Bulletins to address some of the questions concerning Transmittal 173. The Advisory Bulletins stated that the activity permitted by Transmittal 173 is limited to overnight oximetry tests, and also contained additional restrictions not included in Transmittal 173. The first stated that the IDTF could send the test results only to the physician, and not to the HME company. The second restriction cautioned that it is inappropriate for a supplier or IDTF to initiate a contact with the physician, either directly or through the beneficiary, to request, suggest, or otherwise seek an order for home oximetry testing.

One of the MAC's medical directors provided some clarification to the Advisory Bulletins, saying that the IDTF should initially provide the test results solely to the physician, but that the IDTF would be allowed to provide copies of the test results to the HME company after the physician ordered the oxygen. Regarding initiating contact with the physician, a document entitled Oximetry Testing FAQ, dated December 1, 2006, posted on MAC and Program Safeguard Contractor (PSC) Web sites, addressed the question concerning when an HME company is permitted to contact a physician about the need for an oximetry test.

Suppliers are reminded that only a physician may order an oximetry test. However, a supplier would be permitted to contact the physician or the beneficiary about the need to obtain an oximetry test under certain circumstances.

• A supplier furnishing oxygen to a beneficiary may contact the beneficiary or the physician as a reminder if a recertification oximetry test is needed, or if testing is required for other reasons such as a change in insurance.
• A supplier with an initial order for oxygen, where no oximetry test has been performed or where the tests results are expired or invalid (such as the test was performed 3 days before discharge instead of 2), may contact the physician or the beneficiary to inform them that a new test is required.
• As part of a clinical evaluation for patients receiving respiratory services from a supplier, the supplier may communicate the beneficiary's symptoms to the physician. The physician may use this information to determine what further assessment should be performed to further evaluate the beneficiary's condition.

Oxygen Qualification Tests Performed During Exercise

Another area of confusion and potential pitfall to the HME company concerns oxygen qualification tests performed during exercise. "During exercise" is not defined. The primary issue is not the extent or type of exercise performed, but whether the patient is also tested during exercise with oxygen. The Oxygen Medical Policy states:

When oxygen is covered based on an oxygen study obtained during exercise, there must be documentation of three (3) oxygen studies in the patient's medical record—testing at rest without oxygen, testing during exercise without oxygen, and testing during exercise with oxygen applied (to demonstrate the improvement of the hypoxemia). Only the qualifying test value (i.e., testing during exercise without oxygen) is reported on the CMN. The other results do not have to be routinely submitted but must be available to the DMERC on request.

Therefore, for the qualifying test at exercise to constitute a valid qualifying test, the patient must also be tested at exercise while on oxygen.

OIG Restrictions on Provision of Home Oxygen Prior to Qualification and on Conducting PreScreens

On November 8, 2006, the Office of Inspector General (OIG) posted Advisory Opinion No. 06-20 that sets out a restrictive OIG view toward two business practices pertaining to home oxygen. Pursuant to the first practice, the HME company would provide Medicare beneficiaries with free home oxygen until the beneficiaries qualify for Medicare coverage for oxygen. Under the second practice, the HME company would prescreen beneficiaries by running overnight pulse oximetry tests on them, and then reporting the test results to the physicians.

The OIG stated that the practices would implicate both the Civil Monetary Penalties (CMP) statute and the Medicare/Medicaid anti-kickback statute. In making this statement, the OIG offered its opinion that (i) both programs would constitute remuneration to the beneficiaries who receive them; (ii) the remuneration provided under the practices would be likely to influence beneficiaries to select the HME company (providing the free services) as their supplier of oxygen or other Medicare-payable goods and services; and (iii) the HME company would know, or should know, that the provision of items and services under the two practices would be likely to influence beneficiaries' selection of the company for oxygen or other Medicare-payable supplies. In reviewing the Advisory Opinion, the following observations can be made:

• The Advisory Opinion is not intended to prevent the HME company from providing care (ordered by the treating physician) for existing patients of the HME company who are enrolled in disease management programs, COPD pathways, or similar types of programs.
• Other than as discussed above, an HME company may not provide a free oximetry screening. In other words, the HME company cannot provide free services that would potentially result in the beneficiary choosing the HME company as their supplier.
• An HME company may not set up free oxygen while waiting for a qualifying test. If a physician tells the HME company that an emergency exists and that the patient must immediately be set up on oxygen, then the best case scenario would be for the patient to go to an IDTF for testing. Keep in mind that an emergency department is not a good choice for testing, as Medicare would view that as emergent care; thus, the patient would not be in a "chronic stable state."

An alternative is for the HME company to complete an ABN and have the patient sign it in advance of setting the patient up on oxygen. The ABN would advise the patient that Medicare will not pay for oxygen until the patient has a qualifying oxygen test, and inform the patient that they will be financially responsible for the oxygen until the patient qualifies. Should the patient later qualify under the appropriate testing standards, the HME company may, at that point, accept assignment.

• The HME company is not prohibited from advising the physician of the need for recertification testing, or testing needed due to a change in insurance carrier.

Home Sleep Testing

On December 14, 2007, CMS proposed to approve home sleep testing (HST) in a Proposed Decision Memo (PDM). [Note: CMS came out with another HST summary on March 13. See Mickey Letson's article on page 14 for more analysis on that decision.] The PDM states, in part:

1. We are proposing that, due to the evidence demonstrating that no combination of diagnostic procedures adequately identifies all of those beneficiaries who will benefit from CPAP, the coverage of CPAP is initially limited to a 12-week period to identify beneficiaries diagnosed with OSA as subsequently described who benefit from CPAP. CPAP is subsequently covered for those beneficiaries diagnosed with OSA who benefit from CPAP during this 12-week period.
2. The use of CPAP will be covered when diagnosed using a clinical evaluation and PSG performed in a sleep laboratory. In addition, CMS proposed to expand coverage of CPAP to include those beneficiaries with a diagnosis of CPAP made using a combination of a clinical evaluation and unattended home sleep monitoring using a Type II, III, or IV device.
3. Modify the criteria for a positive sleep study to remove the requirement for a minimum 2 hours of continuous recorded sleep, and instead recognize shorter periods of continuous recorded sleep if the total number of recorded events during that shorter period is at least the number of events that would have been required in a 2-hour period.

HST will be limited to the utilization of Type II through Type IV portable monitors. Diagnostic tests for OSA have historically been classified into four types. The most comprehensive is designated Type I: attended, or in-facility PSG, which is considered the reference standard for diagnosing OSA.

Types II, III, and IV are portable monitors developed for the diagnosis of OSA. Type II monitors have a minimum of seven channels (EEG, EOG, EMG, ECG-heart rate, airflow, respiratory effort, oxygen saturation). Type III monitors have a minimum of four monitored channels including ventilation or airflow (at least two channels of respiratory movement or respiratory movement and airflow), heart rate or ECG, and oxygen saturation. Type IV devices measure one or two parameters.

CMS has not addressed who will be able to conduct HST on Medicare beneficiaries. In fact, the PDM says, "In addition, we are proposing to extend coverage of CPAP to include those beneficiaries with a diagnosis of CPAP made using a combination of a clinical evaluation and unattended home sleep monitoring using a Type II, III, or IV device." Many of the studies cited in the PDM refer to self-administered and unattended HST. Therefore, it is logical to conclude that HST will include self-administration by the patient.

Jeffrey S. Baird, JD, is chairman of the Health Care Group at Brown & Fortunato PC, Amarillo, Tex. He represents HME companies, pharmacies, and other health care providers throughout the United States. Baird is Board Certified in Health Law by the Texas Board of Legal Specialization, and can be reached through the HME Today editor via e-mail: .