Be Prepared the Next Time NSC Knocks on Your Door

The National Supplier Clearinghouse (NSC) is using the Medicare Supplier Standards to ratchet up its scrutiny of Durable Medical Equipment, Prosthetics, Orthotics, and Supplies (DMEPOS) suppliers.

In addition to more detailed site inspections, NSC, which is currently operated by Palmetto GBA, is having fraud analysts comb through suppliers’ documentation, including documentation provided to surveyors at site visits, as well as with 855S submissions, to oust non-compliant suppliers. NSC’s aggressive posture means that NSC is weeding out fraudsters, but NSC also is sometimes incorrectly accusing high-quality, compliant suppliers of failing to comply with the Supplier Standards. Because NSC can revoke a Medicare Supplier Number for any violation of the Supplier Standards, and suppliers may only challenge the decision after-the-fact, NSC’s misunderstanding of a supplier’s operations can be costly, and even devastating. DME suppliers therefore should revisit their compliance programs now to minimize the chance that NSC mistakenly revokes their supplier numbers and puts their businesses at risk.

The key challenges for suppliers are threefold: First, NSC can issue a revocation determination without any warning. Second, a Supplier Number revocation cuts off the supplier from Medicare and also can trigger requirements and limitations on a supplier’s ability to bill Medicaid. Third, the appeals process is designed with a “guilty before proven innocent” framework. If NSC believes there is non-compliance, NSC will send a letter to the supplier, and the Supplier Number is revoked 30 days from the date of NSC’s letter. The supplier has no opportunity to call or write to NSC to explain its position, other than by engaging in the formal appeals process. And the appeals process — with rare exception — takes much longer than the 30 days’ notice given to the supplier.

In response to a revocation letter from NSC, a supplier may submit a Corrective Action Plan (CAP) or a Request for Reconsideration. A CAP is used to explain the supplier’s compliance program and propose a way to fix any real or perceived deficiencies. A Request for Reconsideration asserts that NSC reached the wrong conclusion. Either way, the NSC is not required to, and in most cases will not, address the appeal before the 30-day period is complete. This is in part because the Medicare Program Integrity Manual allows NSC 60 days to review a CAP and 90 days to review a Request for Reconsideration. Therefore, even if a supplier is able to quickly submit its appeal after receiving NSC’s letter, the supplier is likely to have at least some time during which it is unable to bill Medicare. In a worst-case scenario, if the supplier ends up having to appeal its case to an Administrative Law Judge and then the Departmental Appeals Board (both of which are required before a supplier can seek a court’s review of the matter), the supplier could be stuck for at least six months to a year.

Making matters more difficult, there is no way to contact the NSC employee who made the revocation decision or the person reviewing the appeal. A supplier is restricted to calling NSC’s customer service representatives, who are able to report only what is noted in the log for the supplier’s account. These calls are nevertheless worthwhile — sometimes the notes provide additional information about the revocation decision that was not included in the letter from NSC.

NSC has a history of revoking suppliers’ billing privileges, only to reinstate them after the suppliers demonstrate compliance. Over the last several months alone, two DME suppliers have been caught up in bet-the-company disputes with NSC. In each case, NSC issued a letter to the company revoking their Medicare Supplier Number. In both cases, NSC misinterpreted aspects of the company’s operations, incorrectly concluding that the supplier failed to comply with the Supplier Standards. And, in each case, the supplier’s billing privileges were reinstated, but only after incurring the costs, risks, and stress of an appeal and the accompanying threat that sales to Medicare patients would not be reimbursed.

NSC seems particularly concerned about suppliers with multiple locations properly enrolling their facilities. In both of the recent cases, the companies maintained several retail facilities, some of which were not enrolled with Medicare. NSC noticed that the companies’ surety bonds and other documentation listed multiple locations that were not enrolled in Medicare, and NSC assumed that these other locations were improperly servicing Medicare beneficiaries. NSC concluded, based on very limited investigation, that the suppliers were furnishing supplies to Medicare beneficiaries from these non-enrolled facilities. NSC was mistaken, however. Both suppliers appropriately furnished supplies to Medicare beneficiaries only from their enrolled locations, but there was no way to correct NSC’s misunderstanding without going through the appeals process.

Faced with this predicament, the suppliers filed appeals as quickly as possible to ensure that NSC would begin to review the matter even before the revocation went into effect. It was vital for NSC to understand that each supplier was not required to enroll locations that were not used to furnish items to Medicare beneficiaries. The appeals were backed up by sworn declarations from company leadership, as well as substantial documentation to support the companies’ positions. Because a CAP is designed to be reviewed faster and provide an opportunity for negotiation of the issue with NSC, filing a CAP simultaneously with a Request for Reconsideration ensured the quickest resolution.

The suppliers were then left to wait for NSC staff to review the submission in detail. In one case, the supplier was denied the CAP and subsequent Reconsideration because NSC took a highly technical view of the supplier’s paperwork. The supplier was vindicated only after the next level of appeal, when a CMS attorney reviewed the file and confirmed that the supplier had sufficiently demonstrated that it complied with the Supplier Standards. The Supplier Number was retroactively reinstated, but this took more than seven months, during which the supplier could not bill Medicare.

Not every supplier can afford to wait for NSC to correct its errors. For instance, in 2005, NSC revoked an Oklahoma supplier, AAA Pharmacy. It is unclear whether AAA could have obtained an injunction or restraining order to halt the revocation while the company’s appeal was pending. But the company relied heavily on Medicare sales and was cash-poor, and thus was already forced out of business by the time NSC corrected its mistake after months of appeals. AAA’s representatives later tried to sue the government, Palmetto, and a host of others for damages in two federal courts, and AAA was just recently — seven years after NSC’s initial revocation – granted the opportunity to proceed to litigate its case against the government.

These cases demonstrate that, in the face of aggressive action by NSC, Medicare suppliers need to be ready to respond quickly. If a dispute with NSC arises, suppliers should engage competent legal counsel as quickly as possible to ensure that there is no delay in addressing the issue with NSC. However, the cost of an appeal, together with even temporary losses of Medicare billing privileges, can be daunting for many suppliers. So, avoiding the dispute in the first place is the best action.

Suppliers should, therefore, avoid missteps with NSC by proactively implementing best-practices now. For example, suppliers should keep copies of every piece of documentation provided to NSC, whether during the application process, a site inspection, or in response to requests from NSC. Also, suppliers should maintain proofs of delivery of documents mailed or faxed to NSC to be sure that suppliers can demonstrate when and how they provided the documents to NSC. Moreover, suppliers should create and maintain documented policies, procedures, and supporting evidence related to each element of the Supplier Standards. Suppliers with multiple locations should include in this documentation a description of the functions performed at each location This documentation can ensure that employees understand their obligations. The materials, or aspects of them, may also be provided to NSC during a site inspection to ensure that there are no unresolved questions or misunderstandings when NSC’s analysts later search for potential problems. Finally, suppliers should be sure that any correspondence they receive from NSC is immediately channeled to the right people, so that a response can be handled as quickly as possible.

Medicare DME suppliers are wise to take steps now to evaluate, plan for, and hopefully avoid the impact NSC can impose when it knocks on the door.

* This article was originally published in the American Association for Homecare’s e-newsletter.