Medical Equipment Loan And Consignment Closets

Wednesday, November 18th, 2015

Do you have durable medical equipment, prosthetics, orthotics or related supplies (DMEPOS) in your healthcare office provided by a home medical equipment (HME) supplier? If so, you should have a lending arrangement with that supplier, which is often called a loan or consignment closet.

The medical equipment and supplies in loan and consignment closets are owned by the HME supplier. The HME supplier bills Medicare or a private insurance company when a patient is provided with DMEPOS from the closet. This lending arrangement benefits healthcare practitioners by providing a ready selection of supplies to meet patient needs. It is important for healthcare practitioners to understand how Medicare views loan and consignment closets and who will be affected by the proposed changes to them.

How Medicare views medical equipment loan and consignment closets

Medical equipment loan and consignment closets are currently acceptable to Medicare and Medicaid. However, the government has suggested that current loan and consignment closet arrangements may not be acceptable in the future.

In August 2009, the Centers for Medicare and Medicaid Services (CMS) issued a change request for the Medicare Program Integrity Manual. The change would have made most medical equipment loan and consignment closets unacceptable for any healthcare provider who accepts Medicare funds. The change was supposed to go into effect on March 1, 2010, but in early 2010, the CMS cancelled it.

Many experts believe the CMS will likely reissue the change in the future. The change would set strict guidelines on loan and consignment closets and how they will be implemented in offices that accept Medicare funds. To be acceptable, the loan and consignment closets would have had to meet four key provisions.

The first provision addressed by the CMS regarding medical equipment loan and consignment closets pertained to who actually owned the DMEPOS. In current lending arrangements, the HME supplier retains ownership of the equipment and bills Medicare directly for their use. With the proposed changes, the HME would no longer own the equipment. Instead, the ownership of the DMEPOS would move to the healthcare provider prior to it being given to a patient.

The second provision proposed by the CMS regarding loan and consignment closets addressed who would bill Medicare. In current arrangements, the HME supplier bills Medicare whenever a patient receives an item from the medical equipment loan or consignment closet. With the proposed changes, the healthcare provider would bill Medicare then reimburse the HME supplier.

The third change to medical equipment loan and consignment closets addressed services concerning the fitting and use of DMEPOS. In current arrangements, fitting and instruction on how to use the DMEPOS are the responsibility of the HME supplier. If the CMS changes go into effect, the healthcare practitioner would be responsible for fitting and instruction on how to use the DMEPOS.

The fourth change proposed by the CMS addresses who the patient would contact in case of problems or questions with the DMEPOS. With the proposed changes, issues would go to the healthcare practitioner instead of the HME supplier.

Who would be affected by the proposed changes to medical equipment loan and consignment closets?

The proposed changes to medical equipment loan and consignment closets would affect all physicians and non-physician providers. The changes would not affect hospitals, sleep labs, or other non-practitioner healthcare providers.

If you have a medical equipment loan or consignment closet, or are thinking of adding one to your practice, you should have an attorney review the arrangement. Contact the healthcare team at Brown & Fortunato, P. C. at (806) 345-6300. You can also connect with us on our Contact Us page. Our website offers a full review of our other practice areas. Feel free to visit our law offices at 905 S. Fillmore, Suite 400, Amarillo, Texas.

This information is subject to change. Please check for updates that are more recent than the published date of this article.