Posted by: Robert Markette
November 08, 2006

Continuing to clarify its long held position that free stuff to beneficiaries is bad, OIG issued an opinion today regarding a DME company’s practice of providing free interim oxygen to Medicare beneficiaries. The opinion letter also addressed the DME company’s proposal to provide free overnight oximetry testing to Medicare beneficiaries.  If you would like to read the opinion, it is attached to this article.

According to the requestor, they would provide patients with free oxygen while waiting for Medicare to approve the home oxygen.  Even though the patient’s physician orders home oxygen, Medicare will not reimburse for the home oxygen until the need for it is confirmed by an independently provided oximetry test.  The test cannot be provided by the DME company.  According to the requestor, there is often a delay between the receipt of the doctor’s order and the completion of the required test.  The requestor stated that DME companies routinely provide the home oxygen for free while awaiting the oximetry test result.

The DME company stated that it did not advertise the free home oxygen to potential patients or to physicians.  The company said that it does truthfully respond to inquiries about the free home oxygen.  The company also stated that beneficiaries likely learn about the free home oxygen “offer” from their physicians.

In addition to the free home-oxygen, the DME company proposed to provide beneficiaries with a free overnight oximetry test.  The DME company acknowledged that the test could not be used to obtain approval for home oxygen, but stated a great deal of useful information could be gained from the test.  The DME company estimated the value of the test at $22, based upon the Medicare Physician Fee Schedule.

Needless to say, OIG found both proposals to violate the Civil Monetary Penalties statute.  OIG stated, without discussion or argument, that interim oxygen has a “clear and substantial value” to the beneficiary.  That is not a surprising position for them to take.

However, OIG also found that the overnight oximetry test, valued at $22, was of more than minimal value.  Although this is more than $10, $22 still seems like a pretty minimal value, especially given the dollar amounts defined as nominal under Stark II.  OIG went on to describe how the test would be  “deliver[ed] … to beneficiaries in a manner that would lead a reasonable beneficiary to believe that he or she is receiving a valuable
service that may expedite access to covered oxygen supplies and contribute to a successful clinical outcome.”  Much like in the free home safety assessment opinion, the OIG points out that the beneficiary will view this as valuable.  Because a reasonable beneficiary would view this as a valuable service, OIG opined that it is remuneration.

This should reinforce for all Medicare home health and DME providers that if you are providing a service to the patient for free, it will most likely be viewed by OIG as having value, no matter how minimal your costs are in providing it or how trivial a service you think it is.  

Having determined that these items amounted to remuneration the OIG then discussed whether this remuneration would lead to referrals.  Again, as in the free home safety assessment opinion, OIG pointed out that the free home oxygen gave the provider an opportunity to initiate a relationship with the patient.  OIG also stated that a beneficiary was likely to obtain other needed services from a provider with whom the beneficiary was already familiar.  

OIG then offered its opinion that the offers were calculated to influence the beneficiaries selection of services in the future.  The OIG felt that the structure of the arrangement, referral by physician, getting the foot in the door with free services, etc. would influence the beneficiary and the DME company should be reasonably aware of this.

Finally the OIG noted that it felt the provision of free oximetry testing appeared to OIG to be a “thinly veiled scheme to evade the barrier interposed between beneficiaries and oxygen suppliers by the Medicare rule that bars DME suppliers (except hospitals) from performing the oximetry test necessary to qualify a beneficiary for covered oxygen.”  In reality, the DME company could not avoid the need for the test and OIG may be a little off base with this comment.  It appears that the real purpose of the oximetry test may have been was to give the DME advance confirmation that the home oxygen would ultimately be reimbursable, thus saving the DME from providing free home oxygen for a week or two only to then learn the patient would not qualify.

Once again, this opinion letter should cause any provider or supplier to pause and think carefully and consult with legal counsel, before engaging in any plan to provide items or services to patients for free.

Attachments:
AdvOpn06-20A.pdf

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