Physicians Beware! Groups Providing DME, Prosthetic Devices, and Other Medical Supplies to Their Medicare Patients Risk Violating the Strict Liability Stark Law Since the Expiration of COVID-19 Public Health Emergency

When the COVID-19 Public Health Emergency (“PHE”) ended on May 11, 2023, many physician groups furnishing certain medical equipment, devices, and/or supplies to their Medicare patients became in violation of the federal Physician Self-Referral Law (the “Stark Law”), which has draconian penalties, such as clawback of Medicare payments plus additional stiff monetary penalties and possible exclusion from participation in federal health care programs. 

During the COVID-19 PHE, CMS issued temporary waivers, including a waiver of the “location requirement” of the In-Office Ancillary Services (“IOAS”) exception. That waiver allowed physician groups that furnish certain durable medical equipment, orthotics, prosthetic devices – including intermittent urinary catheters (“IUCs”) – and other medical supplies (collectively referred to here as “DME”) to provide home delivery of such DME to their Medicare patients without facing sanctions for violating the Stark Law.[1] With the end of the PHE having occurred over three months ago, that temporary waiver of sanctions ended and can no longer be relied upon for legal compliance with the Stark Law.[2]     

This means, in most cases, that Medicare beneficiaries must now come to a physician practice’s office location to pick up their DME – including IUCs – when the DME items are furnished and billed by physicians or their practices. Physician practices that continue to deliver or mail such DME items – including IUCs – to Medicare beneficiaries’ home addresses are now doing so in violation of the Stark Law unless the ordering/prescribing physician both: (i) personally (and not the physician’s practice, staff, or vendor) enrolls as a Medicare durable medical equipment, prosthetics, orthotics and supplies (“DMEPOS”) Supplier, and (ii) personally performs ALL the services related to the DME item(s) furnished in compliance with all Medicare DMEPOS Supplier Standards (found at 42 C.F.R. § 424.57(c)). 

The Stark Law prohibits a physician from making a “referral” (including prescribing or ordering) of one or more “designated health services” (“DHS”) payable by the Medicare program, if such services are provided by any entity with which the physician or an immediate family member of the physician has a financial relationship, unless a Stark Law exception or definitional “carve out” applies. In all but the most unique (and uncommon) circumstances, there is no longer any exception to the Stark Law that enables a physician practice’s mailing or home delivery of DME to Medicare beneficiaries. 

• The IOAS exception does NOT apply. The IOAS exception  requires, among other things, that both: (1) the practice be a “group practice” (as defined in the Stark Law regulations), and (2) the furnishing of the DHS (e.g., DME including IUCs) must comply with all requirements of the IOAS exception, including the “location requirement,” which mandates that the DHS be furnished by the group practice in a location that qualifies as a “same building” or “centralized building.” 

• Thus, the IOAS exception can only be met now when a patient directly receives the DHS (including IUCs) in the physician’s office and in a manner that is sufficient to meet applicable Medicare billing and coverage rules. In other words, as CMS has warned, the “location requirement” “would not be satisfied if a patient receives an item by mail outside the physician’s office, as it would not be dispensed to the patient in the office.” [3] As indicated above, the temporary waiver that allowed mailing or home delivery of DME during the COVID-19 PHE expired May 11, 2023 and is no longer available.  

• Similarly, the Stark Law carveout from the definition of “referral” – for services that are personally performed by a physician – rarely will apply with respect to DME. That is because qualifying for such carveout requires that both:

(A) each ordering physician (not their practice) personally enroll as a DMEPOS supplier,

Per CMS, “There are few, if any, situations in which a referring physician would personally furnish DME and supplies to a patient, because doing so would require that the physician himself or herself be enrolled in Medicare as a DME supplier and personally perform all of the duties of a supplier as set forth in the supplier standards in § 424.57(c).”[4]

and

(B) each such physician (not their staff) personally perform all DMEPOS Supplier requirements.[5]  

As CMS has explained, it is “highly unlikely that a referring physician would meet the criteria for personally performed services when dispensing … [DMEPOS] equipment”  because “[a] referring physician claiming to provide [DME] personally would need to maintain adequate documentation to establish that the physician personally performed” all of these supplier requirements.[6] Without such documented compliance, “the dispensing of … equipment by a physician would almost always constitute a ‘referral’ for purposes of the physician self-referral [Stark] statute, as would the dispensing of … equipment by anyone else affiliated with the referring physician, such as a nurse or physician assistant.”[7]

In sum, physician practices that, after May 11, 2023, furnish DME (such as IUCs) by mail or other delivery method to Medicare beneficiaries at their home addresses clearly violate the Stark Law, unless the physician is personally (him/herself) enrolled in Medicare as a DMEPOS Supplier, and personally (him/herself) performs all supplier standards. 

We are not aware of any physician who personally meets both standards—especially the requirement that the physician personally enroll as a DMEPOS Supplier (which requirement would not be met if only the group is enrolled as a DMEPOS Supplier.)

So, just like before the COVID-19 pandemic, Medicare beneficiaries once again must come to their physician practice’s office to pick up each order of DME, including IUCs if the physicians want to bill Medicare for such DME furnished to their patients. [8] Physicians cannot avoid violating the Stark Law by simply engaging a vendor or other third party and delegating their duties related to furnishing the DME to such vendor or other third party while the physician or their practice retains the right to bill for the DME. Moreover, these arrangements may also pose a significant risk of violating the Federal Criminal Anti-Kickback Statute as suspect contractual joint ventures.[9]

We have heard that certain health care consultants, specialty software vendors, and suppliers – who can reap lucrative financial rewards from arrangements with physicians for home delivery of DME – are telling physicians they legally are permitted to continue billing Medicare for home delivery of DME for their Medicare patients. But they aren’t pointing out the aforementioned pitfalls and they are putting physicians – not themselves – at significant risk of significant financial penalties, including being subject to the clawback of Medicare payments and other financial liability under the Stark Law and the False Claims Act, including fast-accumulating per claim penalties, additional penalties of up to three times the amount of actual damages to the government, and possible exclusion from participation in federal health care programs. 

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[1] Centers for Medicare & Medicaid Services, Blanket Waivers of Section 1877(g) of the Social Security Act Due to Declaration of COVID-19 Outbreak in the United States as a National Emergency, Effective March 1, 2020, Blanket Waiver 15,  https://www.cms.gov/files/document/covid-19-blanket-waivers-section-1877g.pdf (last accessed Aug. 2, 2023).

[2] Centers for Medicare & Medicaid Services, Spotlight: Physician-Owned Hospital Expansion Exception Requests – Changes Effective October 1, 2023, available at https://www.cms.gov/medicare/fraud-and-abuse/physicianselfreferral/spotlight (last accessed August 2, 2023).

[3] See CMS Physician Self-Referral Law Frequently Asked Questions, FAQ 18 on page 9, Published September 20, 2021, available at https://www.cms.gov/Medicare/Fraud-and-Abuse/PhysicianSelfReferral/Downloads/FAQs-Physician-Self-Referral-Law.pdf (last accessed Aug. 2, 2023).

[4] 72 Fed. Reg. 51011, 51019 (Sept. 5, 2007) (emphasis added).

[5] Id. at 51020.

[6] Id. (emphasis added)

[7] Id. (emphasis applied)

[8] The concerns noted in this blog post regarding mail or home delivery of DME to Medicare beneficiaries relate only to DME that such beneficiaries obtain from their physicians who also order the DME for the beneficiaries. Nothing discussed in this blog post prevents Medicare beneficiaries from obtaining DME via mail or home delivery from a non-physician supplier.

[9] See OIG Special Advisory Bulletin on Contractual Joint Ventures, April 2003, available at https://oig.hhs.gov/documents/special-advisory-bulletins/885/042303SABJointVentures.pdf (last accessed Aug. 11, 2023)