Negotiating the Bumpy Path of Legislation and Regulation

Operation Headwaters Stings Wound Care

    Operation Headwaters, one of the largest and longest running healthcare fraud sting operations ever conducted, is a joint initiative conducted by the FBI, the Health and Human Services Office of the Inspector General (HHS OIG), and the US Postal Inspection Service.

Government investigators set up an undercover business front known as Southern Medical Distributors and over several years purchased medical equipment and pharmaceutical supplies. They focused on companies suspected of using fraudulent marketing schemes. One of the first companies against whom charges were brought was Arizant, formerly known as Augustine Medical, manufacturer of Warm-Up, a device used to treat chronic wounds.

    A Federal ruling earlier this year allows the government to proceed with its lawsuit against Arizant. The Centers for Medicare and Medicaid Services (CMS) allege that the company suppressed the fact that Medicare had denied coverage for Warm-Up. In addition to claiming the company told providers to list the product under a generic code without actually identifying it, the suit also asserts that the company told their suppliers and providers not to contact Medicare with questions relating to the Warm-Up product. In essence, the government alleges that the company encouraged their customers to seek illegal Medicare reimbursement. The indictment against Arizant describes an “intentional, orchestrated scheme to counsel providers to categorize and code Warm-Up in a way that would circumvent Medicare review and evaluation of the product.”¹ A trial was set for May 2004.

Legislation Proposed to Repeal MMA Reimbursement Cuts

    The Medicare Prescription Drug, Improvement, and Modernization Act of 2003 (MMA) contains provisions to reduce the payment for the top categories of durable medical equipment (DME), including oxygen and oxygen equipment, standard wheelchairs, nebulizers, diabetic supplies, and semi-electric hospital beds with mattresses. In 2005, cuts are to be based on the percentage difference between the Medicare payment for the item and the median price for the same item (same HCPCS code) in the Federal Employees Health Benefits Program (FEHBP) as of June 2002.

    Representative Bill Hobson (Republican, Calif.) plans on drafting legislation to rescind the proposed DME cuts on the grounds that the proposed method of calculating the cuts is inappropriate. Representative Hobson believes that comparing the needs and healthcare costs of the relatively young and healthy members of FEHBP to the needs and healthcare costs of the older, sicker Medicare population is inequitable and unfair. At AAHomecare's Leadership Conference earlier this year, Tom Scully, former CMS administrator, called inclusion of the FEHBP-based reimbursement cuts in the Medicare reform package “bad luck, bad policy or a combination of both.”¹

UOA Continues Petition for Elimination of Ostomy Supplies from HH PPS

    The United Ostomy Association (UOA) feels that the provision of ostomy supplies should be removed from the Prospective Payment System (PPS) for home care and returned to Medicare Part B immediately. The organization believes that the current policy — wherein the home health agency (HHA) is required to provide ostomy supplies to its patient during a PPS episode of care, regardless of whether the ostomy is the reason the patient was admitted to home care — causes psychological and clinical problems for the patient and confusion for Part B suppliers. If the HHA does not carry the specific brand of ostomy product used by the patient, the patient is forced to use a product that may not fulfill his/her clinical needs or accommodate his/her lifestyle. Switching between brands and types of ostomy supplies while under the care of a HHA also can cause peristomal skin problems, anxiety, a loss of a sense of security, and confusion, especially for a new ostomy patient.

    When a patient is under the care of a HHA, a Part B supplier is unable to bill for covered supplies under the Part B benefit, as all charges are billed to Part A. Once the patient is discharged from the HHA, the Part B benefit is again effective and the ostomy supplies can be obtained through a medical supplier. However, no mechanism exists under which a supplier knows whether a patient is currently being treated by a HHA. This causes confusion for the supplier, the patient, and the healthcare professionals involved in the patient’s care. 

1. HomeCare Monday. April 19, 2004. Available at: www.homecaremag.com/homecare_Monday. Accessed April 21, 2004.