DME Supplier Compliance Programs: Referrals, Marketing and Screening

A DME supplier's compliance program has to cover ground a claim-file checklist never reaches: referral and marketing arrangements, refill contact rules, and whether a referral source is barred from federal programs. OIG's Compliance Program Guidance for the Durable Medical Equipment, Prosthetics, Orthotics, and Supply Industry, published July 6, 1999, read at oig.hhs.gov for this article, names these as risk areas separate from the claim file itself.

What OIG's 1999 Guidance Recommends

The guidance is OIG's recommendation; no regulation makes a compliance program a condition of Medicare payment. It names marketing and referral-source arrangements, staff and contractor screening, and internal auditing as risks specific to DME, beyond the general elements covered in Building an Effective Compliance Program That Counts.

The order intake, the written order, medical necessity records measured against the governing Local Coverage Determination, any required prior authorization or face-to-face encounter, and proof of delivery make up the claim file, covered in Building an Audit-Proof Documentation System for Your DME Supplier Business and DME Medicare Audits: Proof of Delivery and Orders. This article covers supplier-billed DME; DME billed through a pharmacy follows a different path, covered in DME Billed Through a Pharmacy: Audit Exposure.

Refills, Continued Need and Contacting Beneficiaries

Under 42 CFR Section 410.38, a supplier may not ship a refill on a pre-set schedule, even with the beneficiary's standing authorization. Contact confirming continued need is required before each refill, with the affirmative response documented within 30 calendar days of the expected end of the current supply; delivery may happen no sooner than 10 calendar days before that date. 42 CFR Section 424.57(c)(11) separately bars calling a beneficiary to solicit a covered item unless the beneficiary gave written permission, the call coordinates delivery of an item already furnished, or the supplier furnished at least one covered item to that beneficiary in the preceding 15 months. A refill shipped without the documented contact can turn a sample of refill claims into an extrapolated recoupment.

Marketing and Referral Arrangements Under the Anti-Kickback Statute

OIG's guidance lists, as practices that may violate the Anti-Kickback Statute (42 U.S.C. Section 1320a-7b(b)), paying a referral source for each order signed, compensation tied to order volume, joint ventures with anyone positioned to refer business, storing supplier inventory in a referring physician's office, and high-pressure patient solicitation or telemarketing. A knowing and willful violation can carry criminal fines, jail terms, program exclusion, and civil penalties of $100,000 per violation under the statute (127,973 as adjusted for inflation through 2025), and three times the remuneration paid. How these arrangements become a federal fraud case is covered in DME Fraud Charges: How Supplier Cases Are Built.

Screening Staff and Referral Sources Against Exclusion Lists

The guidance recommends checking employees, contractors, and referral sources against the HHS-OIG List of Excluded Individuals/Entities and the General Services Administration's System for Award Management (SAM) exclusion list before they touch Medicare-related work. A claim is denied if an excluded physician provided the referral, even though the supplier could not have verified the patient's medical necessity. OIG posts a monthly exclusion supplement, so a check at hiring is not a substitute for a recurring one.

Supplier Standards, Accreditation and Routine Self-Audits

Accreditation is a separate exposure from the claim file. Under 42 CFR Section 424.57(c)(22), every supplier location must be accredited for the specific products and services it bills; under paragraph (e), CMS revokes billing privileges for failing the standards in paragraphs (b) and (c), which makes a lapse a revocation risk rather than a paperwork delay. A Recovery Audit Contractor (RAC) review, or the reviews covered in UPIC Audits of DME Suppliers, is a separate line of audit exposure for a DME supplier. Keeping National Supplier Clearinghouse enrollment information current is a related obligation, covered in How DME Suppliers Can Maintain Compliance with Medicare Enrollment Requirements.

The guidance recommends every supplier run an internal audit on a defined schedule: a baseline review of a risk-based claim sample, periodic follow-up audits, and a re-audit once a problem is corrected. Scoping that audit is covered in Medicare Self-Audits: Scope, Privilege, and Handling the Findings.

A referral arrangement, an unscreened hire, or a refill shipped without a documented beneficiary contact is a program failure an auditor finds the same way it finds a missing proof-of-delivery form, in the file.

Why Early Legal Counsel Is Critical

It is critical that DME suppliers promptly retain experienced healthcare defense counsel upon receiving an audit request, a National Supplier Clearinghouse inquiry, an accreditation deficiency notice, or any government inquiry touching referral, marketing, screening, or refill practices. Early legal intervention protects the supplier's rights, avoids inadvertent admissions during the exchange, and lets counsel communicate with the contractor or OIG on the supplier's behalf. Delaying representation can turn a correctable gap into a revocation or an exclusion action.

How Health Law Alliance Can Help

Health Law Alliance's attorneys have overseen 2,000+ audits and handled 5,000+ matters, with 25+ years of experience. If your DME business needs its compliance program built or stress-tested, contact Health Law Alliance's Medicare audit defense attorneys for a free, confidential consultation.