As reimbursements continue to be compressed and malpractice insurance rates skyrocket, a growing number of orthopedic clinics are dispensing durable medical equipment to increase revenue and improve patient outcomes.
Durable medical equipment (DME) can be a lucrative solution, said Gregory J. Simms, president of Creeker Medical LLC in Cave Creek, Ariz., during his presentation at the BONES Society annual conference. It is legal for doctors, clinics and ambulatory surgical centers to dispense DME as long as they follow the rules, he said.
“Even the law says that it is in the patient’s best interest to receive this equipment directly from their doctor,” he said. “Plus, it provides a great new revenue stream.”
Still, “This isn’t for everybody. But clinics that do it right can capture [an additional] $3,000 to $10,000 per month per doctor,” Simms added.
Range in profits
The variation in profit depends on how much DME the clinic uses and their payer mix, he said. In the 1990s, many clinics tried dispensing DME but actually lost money as they struggled to bill properly and get reimbursement, he said. Manufacturers began “stock and bill” programs at clinics, meaning those facilities stored and distributed DME while manufacturers earned most of the profit, he said.
As a result, some clinics have begun handling DME themselves. Some get advice and assistance from firms that provide entire DME programs. Creeker, for example, hires an athletic trainer who works onsite to educate staff and patients about DME. The firm also supplies the equipment, manages preauthorizations and billing, collects reimbursements and handles appeals.
Some clinics successfully handle the process themselves, said attorney David M. Glaser, JD, of Minneapolis. Still, “You must have someone [on staff] you trust going through the checklist of guidelines and paying attention to detail,” he told Orthopedics Today.
And handling all of the responsibilities in house can pose a strain on staff resources. There are clinics that shortchange themselves or struggle to comply, Simms said.
Before deciding to dispense DME, clinics should build a business plan to make sure it is worthwhile, Simms said. You must be able to handle the operational challenges, coding, price negotiation, preauthorization, recruitment and training of staff, compliance and inventory management so you don’t put your professional services business in danger, he added.
The two federal laws dealing with DME are:
- the Medicare/Medicaid Anti- Kickback Statute, which prohibits the payment or acceptance of remuneration in return for referrals; and
- the Stark Act, which prohibits the referral of Medicare and Medicaid beneficiaries for certain health services, including DME and orthotics, to an entity with which the referring physician has a financial relationship.
Both laws carry strict penalties. Stark Act violations can result in a $15,000 penalty per patient, a $100,000 fine and exclusion from participation in any federal health care program.
Glaser agreed that there is risk associated with dispensing DME. The laws are complicated and vary by state, and the Stark Act does not allow clinics to use ignorance of the law as an excuse. Glaser knows of clinics that unwittingly broke federal law for violations such as dispensing DME from a business office instead of the clinic itself.
“It has to be done on the site where the doctor spends most of his time,” Simms noted, “and the DME must go to your patients only.”
Some DME cannot be provided to federally funded patients and billed to Medicare Part B, he said. In fact, the only products clinics can provide to federally funded patients and then bill and collect for are orthotics, walkers, wheelchairs, canes and crutches. “You must outsource billing for other products,” he said.
To minimize risks, clinics must have a number of processes in place, such as a complaint resolution protocol, patient agreements and product failure forms, he said. They must also be competent in preauthorization and preutilization, billing, collection, appeals and coding.
Clinics must realize they will face denials from insurers, and will need to be aggressive in securing proper reimbursement, Simms said.
“The insurance companies will tell you preauthorization is not a guarantee of benefits, but that’s a crock,” he said. “They have induced you to use that product, and they must reimburse you the fair market value. But you must remember to document, document, document.”
Clinics should also remember that insurers cannot direct them in how to practice medicine, Simms said.
“They’ll try,” he said. “They’ll deny, especially with DME. But if it’s a medical necessity, they must pay.”
As part of the Centers for Medicare & Medicaid Services’ new competitive acquisition program, suppliers of DME, prosthetics, orthotics and supplies will need accreditation to bill and be paid for that equipment, Simms said. And once the competitive bidding program is in place, suppliers will need accreditation to bid to provide off-the-shelf orthoses to Medicare patients.
The accreditation process should typically take 60-90 days and cost clinics a few thousand dollars every 3 years, he said.
Besides boosting profits, dispensing DME makes it more convenient for patients and leads to better compliance, Simms added.
“It helps them to follow protocol and to better heal,” he said. “Otherwise they may not get the results they want and sue you.”
The challenge for clinic managers is converting the behavior of physicians reluctant to dispense DME, he said.
“Start with a small pilot test of six patients,” he said. “Once they see the benefits clinically and profit-wise, it will become part of the protocol.”
DME can bring in large revenue, but the amount varies by product and state, Simms said. For example, bone growth stimulators can produce an additional $500-$1,000 in profit per case for a practice, while postop braces can yield $300-$400 and hip abduction braces an additional $600-$800.
For more information:
- David M. Glaser, JD, is a health care attorney at Fredrikson & Byron PA, 200 South Sixth St., Suite 4000, Minneapolis, MN 55402; 612-492-7143; e-mail: email@example.com.
- Gregory J. Simms can be reached at Creeker Medical LLC, 4815 E. Carefree Hwy., Suite 108, Cave Creek, AZ 85331-4717; 480-575-6521; e-mail: firstname.lastname@example.org.
- Simms GJ. A DME revenue program every clinic must have! Presented at the BONES Society 38th Annual Conference. May 6-9, 2007. Chicago.