In an industry facing deep budget cuts, decreased reimbursement rates and an uncertain future, consignment
closets, also known as stock and bill arrangements, can inject much needed
revenue into a financially strapped O&P company’s bottom line. On its
surface, stock and bill arrangements are a valuable marketing tool for an
O&P company that offers a distinct convenience advantage over the
But what is the catch? There is no such thing as easy money. These
arrangements have been identified as a potential risk area in the past from the
Office of Inspector General (OIG) and the Centers for Medicare and Medicaid
Why stock and bill?
Sandy Roguska, marketing director and clinical representative, Teter
Orthotics and Prosthetics, has been with Teter O&P since September 2001.
She has worked with stock and bill arrangements for more than 10 years. Roguska
believes the health care profession is trending towards all-inclusive patient
care. Stock and bill arrangements offer the patient the possibility of being
fit for an off-the-shelf orthosis immediately by the physician. Under a stock
and bill arrangement, practitioners would maintain off-the-shelf inventory at a
physician’s office as a matter of convenience for the patient.
“We identify the need,” Roguska told O&P Business
News. “If there is a physician who is seeing patients for orthotic
needs, stock and bill is something we would talk about. From our standpoint, it
is a marketing tool. But first and foremost, it benefits the patient. We look
at different areas for marketing, but how can we make this visit easier for the
patient? I think if a physician sees it as a benefit, we would consider stock
The referral relationship
The main purpose of stock and bill, from a clinical perspective, is
simply patient convenience. A patient showing signs of a fracture or sprain can
visit the orthopedic surgeon’s office where the injury can be confirmed.
The patient can then be fitted with a prefabricated device, such as a walking
boot. The physician, assuming he or she has received the proper training, can
fit the boot for the patient immediately. The patient can leave the office with
a walking boot instead of visiting another location with an unstable injury.
From the outside looking in, this procedure is beneficial to all parties
involved. However, there are specific details that must be implemented in order
for a smooth delivery of service. The physician must offer the patient an array
of orthotic choices, while noting that the walking boot they have in stock at
the office can be fitted immediately.
“You get the sense that the disclosure is actually marketing to get
the patient interested in the easy route because they get the equipment right
away,” Neil Caesar, president, Health Law Center, told O&P
Business News. “The vast majority of patients say, ‘if these
guys like XYZ company, it’s good enough for me’ or they say, ‘I
do not care. Whatever is easiest.’ In any event, they gave the patient a
choice of suppliers.”
Caesar strongly recommendeds that the patient’s decision be
accompanied by a clear, demonstrable evidence trail showing that the patient
had a choice.
“You want to make clear that this kind of arrangement, which at its
heart gives the supplier a leg up at getting business, is never going to be
viewed suspiciously as some kind of sweetheart deal,” Caesar said.
“It is important not to vary from these carefully set out terms in order
to eliminate anyone’s ability to look at the situation through a
suspicious gaze. You do not want anything being viewed suspiciously or
Most referral sources develop referral relationships based on the
quality of work by the O&P company.
r Entities to which Physicians
Refer, outlines the questionable rental arrangements for space in
physician’s offices, reiterates the anti-kickback law and details the
appropriate and reasonable amounts of rent charged for office space.
Section 1128B of the Social Security Act (the Act) prohibits knowingly
and willingly soliciting, receiving offering or paying anything of value to
induce referrals of items or services payable by a federal health care program.
Both parties of the kickback transaction are liable. Violation of the Act is a
felony and is punishable by a maximum fine of $25,000, imprisonment for up to 5
years or both.
An O&P company’s first concern when pursuing a stock and bill
arrangement is making sure they stay within the parameters set forth by the OIG
recommendations and the Social Security Act. This requires extensive research
and education from both parties.
“One of the most important things that anyone considering venturing
into these arrangements should take into account is the significant education
prior to beginning of the dispensing of items,” Joe McTernan, director of
coding and reimbursement services, programming and education, American Orthotic
and Prosthetic Association (AOPA) told O&P Business News.
“The physician’s office may or may not know what the supplier
responsibilities are and the O&P company is relying on the physician staff
to make sure that the documentation is obtained and forwarded back to the
Prior to launching their stock and bill program, Teter O&P consulted
with health care attorneys to confirm compliance.
Questionable rental arrangements
The exchange of money between the two parties will likely raise red
flags. The OIG alert also called into question the necessity of rent for
consignment closets in physicians’ offices entirely, noting that “in
general, payments for rent of consignment closets in physicians’ offices
If a physician were to require rent for their closet space, the OIG
alert requires the rental amount to maintain fair market value, be fixed in
advance and not take into account — directly or indirectly — the
volume or value for referrals or other business generated.
“If an O&P company enters into a consignment closet arrangement
with a physician and the company is renting space for the office to maintain
their stock, those rent payments have to be within the market rent
guidelines,” McTernan said. “There is the potential for the use of a
consignment arrangement to mask essentially a kickback. OIG does not want a
situation where you are paying $5,000 a month for 10 feet of space, and all of
a sudden your referrals go through the roof.”
According to the alert, the rate paid by the supplier should not exceed
the amount the rate paid by the physician in the primary lease for their office
space, except in rare circumstances.
On the CMS radar
Stock and bill arrangements were subject to scrutiny at the
reimbursement level from CMS as recently as 2 years ago. The changes which were
to take effect March 2010 restricted stock and bill programs in
physicians’ offices. In early February 2010, a month before the scheduled
restrictions were to take effect, CMS rescinded their ruling.
“CMS did not understand how prevalent these arrangements were and
still are,” McTernan said. “There was significant pushback from the
provider community and from the physician and DMEPOS side.”
Although rescinded, McTernan said he expected another ruling regarding
stock and bill would be coming down the line, possibly changing some of the
rules. As of press time, no rulings regarding consignment closets have been
made. Still, stock and bill was at one time a concern for CMS.
“Teter O&P’s stock and bill has been an incredible
marketing tool,” Roguska said. “We continue to stay within the
“I think stock and bill is both practical and worth the effort
because this is a great way for an O&P company to establish a preferred,
favorable position regarding referrals,” he said. “As part of the
compliance policy, those relationships need to be monitored. We need to make
sure the checks and balances put in place the relationship is established
remain in place.”
From an operational standpoint, engaging in a stock and bill arrangement
with a physician or referral source requires stellar documentation and
communication practices from the physician and O&P company’s
“Every stock and bill arrangement has to be reflected in a written
contract between the two parties,” Caesar said. “The terms should
clearly demonstrate that the arrangement is a legitimate relationship which was
thought out by each party, making it less likely to be a smokescreen or last
minute excuse for something more suspicious.”
In a stock and bill arrangement, the O&P company must be willing to
take on the responsibility of ensuring that all of the patient documentation is
obtained, collected and maintained appropriately. As the biller of record, the
O&P company maintains responsibility that the Medicare documentation
requirements are met, according to McTernan. This would include valid detailed
prescription that includes any secondary billed components. The patient must
also receive a copy of Medicare supplier standards.
“The office dispensing the device must get a validation of receipt
or delivery acknowledgement signed by the patient as well,” McTernan said.
“All of that documentation must be obtained just as if the patient was
receiving the device at the O&P office.”
While both offices need to be in constant communication, the onus is on
the O&P company to get the documentation right.
“Ultimately the O&P company is the biller of record,”
McTernan said. “The O&P company is giving up a lot of control over the
delivery of items. They maintain both liability and responsibility to make sure
the device fits properly because they also maintains follow-up responsibility.
So the patient needs to be informed as to whom to contact for follow-up care
because they are not going back to the physician. They should be directed to
the O&P company.”
The best way for an O&P company to alleviate communication, billing
and documentation concerns is to remain actively involved in the stock and bill
arrangement. Even though the O&P company is allowing the physician to fit
their items, O&P practitioners should open themselves up to phone calls or
questions from the physician or the patient.
“Even if the involvement is just a conversation, it still
demonstrates that the practitioner has not simply delegated all of the
responsibility to the doctor,” Caesar said. “In many arrangements,
suppliers play an active role after the equipment is given to the patient,
whether in communication, education, maintenance or replacing new equipment.
There are all sorts of variations after the decision is made by the
patient.” — “Further, if the reimbursement paid for the
equipment is supposed to include fitting services or other services, the
O&P company remains responsible for ensuring these services are provided
Be sure to remind the patient that he or she will receive a bill from
the O&P company, not the physician’s office. At Teter O&P, a
patient with an ill-fitting brace can visit any of their 20 locations around
Michigan for a new fitting or equipment.
“At the end of the day, despite concerns on either side of the
referral, stock and bill is, for the vast majority, built on a perception of
quality, good patient relations and making the referral source’s life
better, which usually means easier,” Caesar said. — by Anthony