Vendors monitor Medicare rule that could ban reimbursement

Exclusion rule would bar companies from Medicare

Medical device manufacturers are keeping an eye on how the U.S. government enforces a new rule on Medicare reimbursement that could have a big impact on equipment purchasing. While the rule is designed to combat fraud, some vendors believe that it goes too far by banning Medicare payments for procedures conducted on equipment manufactured by companies convicted of fraud charges.

The rule in question is part of provisions set forth in the Health Insurance Portability and Accountability Act of 1996 that give the Department of Health and Human Service's Office of Inspector General the power to exclude certain parties from receiving Medicare payments. The rule expands the OIG's authority to exclude from Medicare payment not only direct providers of service-those who submit bills to Medicare-but also indirect providers, such as those who supply physicians and hospitals with goods.

In a final rule published in the Federal Register last fall, the OIG established its authority to exclude from Medicare reimbursement those healthcare practitioners, providers, or suppliers that have been convicted of felony charges under federal, state, or local law relating to healthcare fraud. These parties can be banned from Medicare for a minimum of five years and can be barred even if the violations did not involve government programs.

By excluding them from the Medicare program, the new rule could make it difficult for manufacturers convicted of fraud and abuse to sell their medical equipment. Violations covered range from misdemeanor criminal healthcare fraud offenses, fraud in non-healthcare federal or state programs, obstruction of investigation of healthcare fraud, and misdemeanor offenses relating to controlled substances.

If physicians choose to buy equipment from an excluded company, they will not be reimbursed for the technical component of a Medicare charge. Physicians will continue to be reimbursed for tests done on inventory they purchased prior to the manufacturer's exclusion, however. The rule affects only equipment purchases from manufacturers that were excluded from Medicare at the time of the purchase.

A coalition of representatives from the National Electrical Manufacturers Association, the Health Industry Manufacturers Association, the American Medical Association, as well as individual manufacturers and healthcare providers, filed comments opposing the rule last summer. NEMA opposes the rule, saying that it encourages the OIG to exceed its authority under HIPAA to enforce Medicare and Medicaid. Industry lobbyists question how it will be enforced administratively.

"Among the many comments that (HIMA) made is that the administrative viability of this is going to be unbelievably difficult. The people who are going to be penalized are the providers and indirectly the beneficiaries," said a HIMA spokesperson who requested anonymity. "Being able to keep track of which manufacturers and which products (are excluded), particularly when manufacturers have subsidiaries and company names that may not be immediately apparent to the public, will be difficult."

The timing of the rule's enforcement is another concern. The rule states that the use of equipment purchased before a manufacturer was excluded from Medicare will not be affected. The OIG has also stated in the rule that reimbursements will be made for items ordered from a manufacturer before the exclusion date and delivered up to 30 days after the effective date. It remains unclear, however, whether hospitals or physician groups will be prevented from buying add-ons or upgrades to equipment they purchased prior to a manufacturer's exclusion.

The OIG plans to evaluate each case individually, assessing the products and services being distributed and providing guidance to direct providers who would be affected by an exclusion, the rule says.

Imaging vendors contacted by SCAN say they have yet to see the exclusion rule enforced by the OIG. To avoid a potential conflict, however, some vendors are educating their staff about the rule and are issuing ethics notifications that outline violations that would endanger the company.