Current Trends in Washington: A Survey of O&P Government Relations Issues

A lot happens in Washington that can impact the field of orthotics and prosthetics, and the recent past has been no exception. This article provides a summary of pending policy and government relations issues affecting the O&P community. Issues relating to Medicare, the new DMEPOS supplier standards and quality standards issued by the Centers for Medicare and Medicaid Services (CMS), as well as developments in the area of fraud and abuse are highlighted.


Medicare Budget

First, the big picture: the federal budget process. On February 4, President George W. Bush released his final federal budget for fiscal year 2009, which begins on October 1, 2008. On the Medicare front, President Bush proposes to cut more than $12 billion from that program alone in fiscal year 2009, largely through freezes to a host of health care providers. The total amount of proposed Medicare cuts over a 5-year period comes to more than $180 billion.

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The budget does not contain sufficient detail to assess whether the O&P fee schedule suffers the same fate as virtually all other providers under the Medicare program, but there is nothing to suggest that the annual update is preserved for the O&P fee schedule, while all other providers take a cut. As Congress works toward passage of another Medicare bill by the end of June 2008, largely to continue to push off an expected 10% decrease in the physician fee schedule, this new proposal to cut hundreds of billions of dollars from Medicare certainly did not help build consensus in Congress for a long-term solution to the Medicare physician payment fix, nor did it move Congress any closer to considering a wide range of policy issues under Medicare.

In addition, with 2008 being an election year and with President Bush’s political capital on the decline, very few in Washington give the Bush budget much credibility. In fact, Pete Stark (D-CA), Chairman of the House Ways and Means Committee, announced last week even before the budget was publicly released that it was “dead on arrival.” To make matters worse, the President was actually required under law to propose significant cuts to Medicare in response to a provision included in the Medicare Modernization Act several years ago that stated that if the government spends too much on Medicare from general revenues (rather than from the Medicare Trust Fund), the President must offer ways to cut Medicare costs. These proposals are referred to as the Medicare “trigger” legislation and they were met with similar skepticism by Congressional Democrats.

Medicare O&P fee schedule

Members of Congress returned in mid-January to begin the second session of the 110th Congress and quickly began discussions on major policy issues, including Medicare physician and provider payments. Scheduled cuts to Medicare physician payments as a result of the sustainable growth rate (SGR) formula have driven annual Medicare legislation for several years.

Last year, to prevent a scheduled 10% physician payment cut in 2008, Congressional leaders had intended to pass a 1- or 2-year physician payment fix to be paid for with cuts to Medicare managed care plans (Medicare Advantage, or MA) and other Medicare providers, which could have included O&P provider payments.

However, Presidential veto threats on any legislation that would have broadly cut MA plans forced Congressional leaders to pass a short-term, less expensive bill to delay the payment cut and provide doctors with a 0.5% payment increase through June 2008. The final Medicare bill included no cuts to the O&P fee schedule and, therefore, the O&P field received a full CPI update on January 1, worth approximately 2.7% over 2007 fees.

However, because of last year’s short-term fix, Congress must tackle the physician payment issue early this year to prevent a 10% cut in July and a cumulative 16% cut in January 2009. Democratic leaders have already begun behind-the-scenes Medicare negotiations and it appears that such legislation will originate in the Senate, rather than in the House, as House leaders continue to promote last year’s Children’s Health and Medicare Protection (CHAMP) Act as their Medicare offering. The large, House-passed CHAMP Act would provide physicians with a 0.5% update for two years and includes no cuts to the O&P fee schedule.

As in the past, this year’s legislation will likely include an SGR “patch,” rather than attempt to solve the broader SGR formula problem – an expensive and controversial endeavor.

Some are speculating that the Senate’s proposal could include an 18-month patch with a price tag of $12 to $15 billion. Because Congress is currently operating under pay-as-you-go rules, lawmakers must consider ways to pay for the physician fee fix. These “pay-fors” will likely come from cuts to other providers, possibly including O&P, especially if major cuts to the MA plans remain off the table. Other possible pay-fors could include cuts to oxygen, home health, skilled nursing facilities, and hospitals.

There is little doubt that a Medicare physician payment fix will again be a priority for Congressional leaders this year. Those running for reelection cannot afford to have Medicare beneficiaries facing physician access problems, as doctors predict will be the case if the cuts go into effect.

However, the upcoming elections could also make it more difficult to enact a physician payment bill, as both political parties will not want to give any legislative victories to the other. Some stakeholders are beginning to speculate that, despite a robust debate on a large Medicare bill, a scenario similar to 2007 could play out, where only a simple “extenders” package is ultimately passed and the major policy reforms are pushed off until after the elections, with a new President and a new Congress.

Medicare DMEPOS quality standards

Because of last year's short-term fix, Congress must tackle the physician payment issue early this year to prevent a 10% cut in July and a cumulative 16% cut in January 2009.On February 13, CMS issued a revised draft of the Durable Medical Equipment, Prosthetics, Orthotics, and Supplies (DMEPOS) Accreditation Quality Standards, and invited comments on the changes made, since the first version was published more than a year ago. Regarding Appendix C, the portion of the quality standards that addresses the provision of orthotics and prosthetics, CMS revised a number of important requirements. This was welcome news to NAAOP and its partners in the O&P Alliance as these organizations actively pursued CMS to issue a large number of the revisions. While significant improvements in the quality standards still need to be made, this most recent version of the quality standards is a vast improvement from the earlier version.

Of significant interest to the O&P community, there is now a requirement that “individuals supplying the item(s) set out in this appendix must possess specialized education, training, and experience in fitting these types of prostheses and, when appropriate, certification and or licensing.” Whether this language also applies to orthotics is a subject for public comments.

Paradoxically, the title of Appendix C omits the term “Limb Prosthetics” and only appears to apply to “Custom Fabricated and Custom Fitted Orthoses, External Breast Prostheses, Therapeutic Shoes and Inserts, and their Accessories and Supplies; Custom-Made Somatic, Ocular and Facial Prostheses.” We assume this is an oversight as there are significant portions of the quality standards that clearly apply to limb prostheses.

Also, some definitions have been revised, and new definitions have been added:

  • CMS deleted the definition of the term “prefabricated.” In its place, CMS inserted a definition for “custom fitted” that reads “[a] prefabricated device, which is manufactured in quantity without a specific patient in mind. The device may be supplied as a kit that require [sic] some assembly and/or fitting and adjustment, or a device that must be trimmed, bent, molded (with or without heat), or otherwise modified for use by a specific patient.”
  • Additional language has been added to the definition of “prosthetic devices.” The definition states in part that prosthetic devices are “devices (other than dental) which…replace all or part of the function of a permanently inoperative or malfunctioning internal body organ.” This definition applies more to internal prostheses than external limb prostheses. As such, the definition must be amended in the final version of the quality standards and should include recognition of the service and clinical components of care.
  • Also with respect to the definition of “prosthetic devices,” the new language clarifies that the test of whether someone permanently needs a prosthesis is considered met “[i]f the medical record, including the judgment of the attending physician, indicates the condition is of long and indefinite duration,” and does not require a determination that there is no possibility that a patient’s condition may improve sometime in the future.
  • Ocular prostheses, facial prostheses, and somatic prostheses are now considered “custom fabricated” devices rather than “custom made.”
  • CMS added definitions for “external breast prostheses,” “off-the-shelf orthoses,” and “therapeutic shoes and inserts.” The definition for “off-the-shelf orthoses” states “[o]rthoses which require minimal self adjustment for appropriate use and do not require expertise in trimming, bending, molding, assembling, or customizing to fit the beneficiary. Appendix C does not apply to off-the-shelf orthotics. (Refer to 42 CFR, section § 414.402).” This definition is consistent with the statutory definition established in federal law several years ago. CMS also gave the term “molded-to-patient-model” a definition, rather than leaving it as part of the definition of “custom fabricated.”

CMS also added sections for assessment of the patient and development of the treatment plan for O&P patients. These sections underscore the clinical component of O&P care and serve to further separate DME suppliers and others with DMEPOS supplier numbers from O&P practitioners. Although separate, additional Medicare payment for accomplishment of these requirements will not be provided; most, if not all, of the clinical procedures listed in these sections are routinely performed by high quality orthotic and prosthetic practices.

The new standards further underscore the separation of DME and O&P by eliminating the preparation section of Appendix C, which discussed the intake of patients and establishment of the beneficiary record in terminology that was reflective of the DME experience and not sensitive to the difference between DME and O&P. These sections do not appear to apply to therapeutic shoes and inserts, and, of course, should. This is one of the opportunities for public comment.

One of the major improvements to Appendix C of the quality standards is the requirement that O&P suppliers “have access to a facility with the equipment necessary to provide follow-up treatment and fabrication/modification of the specific orthoses/prostheses.” This provision will help ensure that O&P suppliers accredited by deemed authorities under Appendix C will have to have proper facilities on premises to provide appropriate and timely follow-up care to patients. Public comments to make this clear are expected to be submitted by both NAAOP and the O&P Alliance. This is a very significant and positive addition to these quality standards.

New DMEPOS supplier standards

Some stakeholders are beginning to speculate that a scenario similar to 2007 could play out, where only a simple In addition to the new version of the quality standards, CMS issued on January 25 a proposed rule that clarifies and expands existing DMEPOS supplier enrollment safeguards and establishes five new safeguards, only some of which apply to the O&P field.

CMS proposes to revise seven existing standards. One of these standards currently requires that a supplier “[o]perates its business and furnishes Medicare-covered items in compliance with all applicable Federal and State licensure and regulatory requirements.” CMS proposes to clarify that, among other requirements, a DMEPOS supplier must be licensed in order to provide services if required by state law, and cannot contract with an individual or entity to provide these services. This is a significant change from the current standards.

Another proposed revised standard addresses the physical facility of the DMEPOS business. The existing standard requires suppliers to:

  • Maintain a physical facility on an appropriate site. The physical facility must contain space for storing business records including the supplier’s delivery, maintenance, and beneficiary communication records. For purposes of this standard, a post office box or commercial mailbox is not considered a physical facility. In the case of a multi-site supplier, records may be maintained at a centralized location.

CMS proposes to revise this standard to require DMEPOS suppliers to maintain business records for 7 years after a claim has been paid. It also clarifies the meaning of “appropriate site” to include, but not be limited to, the following:

  • A location that is accessible to the public, Medicare beneficiaries, CMS, the National Supplier Clearinghouse (NSC), and its agents
  • A site that is accessible and staffed during posted hours of operation
  • The supplier must maintain a permanent visible sign in plain view and post hours of operation. If the supplier’s place of business is located within a building complex, the sign must be visible at the main entrance of the building.

If a site is a “closed door’’ business, such as a supplier that provides services only to beneficiaries residing in a nursing home, it still must comply with all the requirements of this standard. CMS is also soliciting comments on whether it should establish a minimum square footage requirement to the definition of an “appropriate site” and what, if any, appropriate exceptions would apply to such a requirement.

CMS proposes revisions to the standard that currently requires that a provider “[p]ermit CMS, or its agents to conduct on-site inspections to ascertain supplier compliance with the requirements of this section. The supplier location must be accessible during reasonable business hours to beneficiaries and to CMS, and must maintain a visible sign and posted hours of operation.” CMS proposes to limit this provision to just on-site inspections, thereby deleting the second sentence of this standard.

CMS also proposes to revise the current standard that requires that a supplier:

  • Maintain a primary business telephone listed under the name of the business locally or toll-free for beneficiaries. The supplier must furnish information to beneficiaries at the time of delivery of items on how the beneficiary can contact the supplier by telephone. The exclusive use of a beeper number, answering service, pager, facsimile machine, car phone, or an answering machine may not be used as the primary business telephone for purposes of this regulation.

Instead, CMS proposes to totally exclude the use of cell phones, beepers, or pagers as a way to receive calls from the public or a beneficiary. CMS would also prohibit the use of “call forwarding” to forward calls from a cell phone, beeper, or pager from the public or a beneficiary during the supplier’s posted hours of operation.

Currently, the supplier standards require that a supplier:

  • Has a comprehensive liability insurance policy in the amount of at least $300,000 that covers both the supplier’s place of business and all customers and employees of the supplier. In the case of a supplier that manufactures its own items, this insurance must also cover product liability and completed operations. Failure to maintain required insurance at all times will result in revocation of the supplier’s billing privileges retroactive to the date the insurance lapsed.

CMS proposes to require a supplier to have a comprehensive liability insurance policy in the amount of at least $300,000 per incident. The supplier must list NSC as a certificate holder on the policy and notify NSC within 30 days of any policy changes and cancellations. The supplier is also responsible for providing the NSC with the contact information of an individual employed with the underwriter. In addition, if the supplier manufactures its own items, the insurance must also cover product liability and completed operations. A supplier may use self insurance to comply with this section as long as CMS or NSC can verify the policy and its coverage provisions with an independent underwriter.

In addition, CMS proposes to revise the rules on soliciting beneficiaries. Currently, the supplier standards require that a supplier agrees not to contact a beneficiary by telephone when supplying a Medicare-covered item unless one of the following applies:

  • The individual has given written permission to the supplier to contact them by telephone concerning the furnishing of a Medicare-covered item that is to be rented or purchased.
  • The supplier has furnished a Medicare-covered item to the individual and the supplier is contacting the individual to coordinate the delivery of the item.
  • If the contact concerns the furnishing of a Medicare-covered item other than a covered item already furnished to the individual, the supplier has furnished at least one covered item to the individual during the 15-month period preceding the date on which the supplier makes such contact.

CMS proposes to clarify that suppliers cannot directly contact patients, and this includes, but is not limited to, telephoning, e-mailing, instant messaging, internet advertising that coerces responses, or in-person contacts. The supplier may still only contact a patient if one of the conditions listed in the current standard applies.

Finally, the new standards propose to amend the delivery requirements. The current standard requires that a supplier “[m]ust be responsible for the delivery of Medicare covered items to beneficiaries and maintain proof of delivery,” and that “[t]he supplier must document that it or another qualified party has at an appropriate time, provided beneficiaries with necessary information and instructions on how to use Medicare-covered items safely and effectively.” CMS proposes to clarify this standard by also requiring the supplier to:

  • Maintain proof of the delivery in the beneficiary’s file
  • Furnish information to the beneficiary at the time of delivery of items on how the beneficiary can contact the supplier by telephone
  • Complete and document instructions to the beneficiary on the safe and effective use of the equipment at the time of delivery or another appropriate time.

New supplier standards proposed

CMS proposes to clarify that, among other requirements, a DMEPOS supplier must be licensed in order to provide services if required by state law, and cannot contract with an individual or entity to provide these services.The proposed rule also sets forth five new supplier standards, only some of which are of interest to the O&P community. The new standards proposed by CMS include the following:

  • A supplier is prohibited from sharing a practice location with another Medicare supplier. CMS is also soliciting comments on whether there should be an exception for physicians and other licensed nonphysician practitioners who obtain a DMEPOS supplier number and furnish DMEPOS from their office.
  • A supplier must be open to the public a minimum of 30 hours per week, except for DMEPOS suppliers who work with custom-made or fitted orthotics and prosthetics. This is a specific example of how CMS is beginning to recognize a distinction between DME and O&P suppliers.
  • A supplier cannot have any Internal Revenue Service (IRS) or State taxing authority delinquency if it intends to have its supplier accreditation approved. For example, a supplier cannot owe any money to the IRS, or have a tax lien filed against it.

The proposed rule increases the administrative requirements for DMEPOS suppliers, and will significantly affect suppliers who provide contracted services. The new and revised standards are clearly intended to address some of the most egregious findings of recent DME fraud and abuse investigations, and to CMS’s credit, seem to make appropriate exceptions for the O&P field. NAAOP and the O&P Alliance plan to submit comments to this proposed rule as well.

DME fraud and abuse drives surety bond issue

On February 7, Senator Mel Martinez (R-Fla.) introduced the “Medicare Fraud Prevention Act of 2008” (S. 2603). The bill proposes to increase civil and criminal penalties for Medicare fraud and abuse, and also increases a surety bond requirement for DME suppliers.

Currently, federal law requires DME suppliers to obtain a $50,000 surety bond before obtaining a Medicare provider number, but this provision has never been implemented. The bill would increase this requirement to $500,000. The contents of the bill were subsequently introduced as an amendment to another health care bill that was recently under consideration in the Senate, but the surety bond provision was set aside for further review due to concern from the health care community, especially the DME industry.

The bill clearly states that this surety bond requirement applies to DME suppliers, and this should not include orthotic and prosthetic suppliers. However, CMS has recently proposed a surety bond requirement that would apply to DME suppliers and orthotic and prosthetic suppliers.

On August 1, 2007, CMS published a proposed rule for a surety bond requirement for DMEPOS suppliers. NAAOP through the O&P Alliance submitted comments to this proposed regulation. In the proposed rule, CMS stated that it proposed to require DMEPOS suppliers that wanted to enroll in Medicare to obtain a surety bond in the amount of $65,000 for each National Provider Number. CMS is proposing this requirement in part to:

  • Limit the Medicare program risk to fraudulent DME suppliers; enhance the Medicare enrollment process to help ensure that only legitimate DME suppliers are enrolled or are allowed to remain enrolled in the Medicare program; ensure that the Medicare program recoups erroneous payments that result from fraudulent or abusive billing practices by allowing CMS or its designated contractor to seek payments from a Surety up to the penal sum; and help ensure that Medicare beneficiaries receive products and services that are considered reasonable and necessary from legitimate DME suppliers.

Despite the use of the term “DME supplier” in that section, CMS uses the term DMEPOS elsewhere, and sought comment on whether this proposal should apply to orthotic and prosthetic suppliers.


The impact of Medicare legislation in the near term on the O&P community remains to be seen, but there will certainly be additional cuts in payments to all Medicare providers and suppliers in the future. CMS continues to focus on fraud and abuse issues for DMEPOS suppliers, and the final rules for the surety bond requirement, the supplier standards, and the quality standards will provide additional insight into how CMS views O&P services and will significantly impact the O&P community for years to come.

Peter Thomas

Peter W. Thomas, JD, is general counsel for the National Association for the Advancement of Orthotics and Prosthetics.

Kate Romanow, Esq.

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