Consignment Closets And Employee Liaisons: Good Marketing Tools So Long As Legal Guidelines Are Met

(March 2012)

Consignment Closets

A consignment closet is also known as a loan closet or a stock and bill arrangement. An HME company may place inventory in an office or facility that is a referral source such as a physician, hospital, or sleep lab (collectively referred to as a “facility”). The inventory must be for the convenience only of the facility’s patients and the facility cannot financially benefit, directly or indirectly, from the inventory. For example, a physician may not use the inventory for in-office procedures. It is important that the facility ensure patient choice. Technically, the HME company can pay rent to the facility so long as the rental agreement complies with the Space Rental safe harbor to the Medicare anti-kickback statute. Among other requirements, the rental term must be at least one year, the rent must be fixed on an annual basis and be fair market value, and the rent may not take into account the anticipated number of referrals from the facility. However, from a practical standpoint, because the physical space utilized by the placement of the inventory is so small, it is preferable for the HME company to pay no rent to the facility. In setting up a consignment arrangement, it is important to examine state law to determine if there are any restrictions or notice requirements to the patients. Although the law does not require it, it is preferable for the HME company and the facility to enter into an Equipment Placement Agreement that sets out the parameters of the consignment arrangement.

Employee Liaison

It is permissible for an HME company to place an employee on the premises of a facility. In order to avoid problems under the Medicare anti-kickback statute, the liaison may not perform services that the facility is responsible to perform. Doing so saves expenses for the facility; this is “something of value” that constitutes remuneration in violation of the anti-kickback statute. If the facility wants to rent an office to the HME company for the employee liaison to use, then this is acceptable so long as the rent paid by the HME provider complies with the Space Rental safe harbor to the anti-kickback statute.

This monograph is not intended to be legal advice or legal opinion on any specific facts or circumstances. The contents are intended for general information purposes only. The law pertaining to this monograph may have changed following the date of the monograph. The reader should consult his or her own attorney for legal advice concerning the contents of this monograph. Except where noted, attorneys are not certified by the Texas Board of Legal Specialization.

Prepared by:

Health Care Group
Brown & Fortunato
P.O. Box 9418
Amarillo, Texas 79105-9418
(806) 345-6300
(806) 345-6363 (fax)
www.bf-law.com

© Brown & Fortunato

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