CPAP Rule Can Trap Those Using Home Sleep Studies

Original story posted on: August 28, 2019

Federal regulation is causing headaches for providers performing home sleep studies.

I often comment that I learn a new rule every week and that my clients constantly teach me new things. This story combines those two truths. 

A client taught me about a rule you need to know if your organization offers home sleep studies and any related organization dispenses continuous positive airway pressure (CPAP) devices. The federal regulation 42 CFR 424.57(f) creates a “payment prohibition:”

“No Medicare payment will be made to the supplier of a CPAP device if that supplier, or its affiliate, is directly or indirectly the provider of the sleep test used to diagnose the beneficiary with obstructive sleep apnea. This prohibition does not apply if the sleep test is an attended facility-based polysomnogram.”

Before analyzing the provision, it is worth noting that it is very poorly drafted.  Note that the regulation uses both the term “supplier” and the term “provider” as descriptive nouns, using the words for an organization that “supplies” or “provides” tests or equipment. Such wording is perfectly acceptable in casual conversation, but in a highly regulated environment where there are defined terms, language matters. Both of those terms are very specifically defined within the Medicare program as proper nouns. A “supplier” is a person or thing offering services reimbursed under Medicare Part B, such as a physician, physical therapist, durable medical equipment (DME) entity, or independent diagnostic testing facility. A “provider” is a facility like a hospital, skilled nursing facility, or home health agency enrolled under Part A. 

Whoever wrote this regulation should know better than to say that a “supplier” is serving as a “provider” of the sleep test. Under Medicare, a supplier is not a provider, and a provider is not a supplier. Instead, the author should have used a verb so common in Medicare regulations:  “furnish.” The regulation should say “no payment will be made to a supplier who furnishes a CPAP if that supplier, or a related organization, furnished a home sleep study.

Now, back to the text. According to the regulation, when a supplier performs a sleep study that diagnoses a patient’s apnea, any CPAP device sold to the patient by any entity that is affiliated, either directly or indirectly, with the organization that did is not covered, unless the sleep study was an attended facility-based polysomnogram. Functionally, this means that when an organization provides a home sleep study, CPAPs provided by that organization or an affiliate are not covered by Medicare. The regulation defines “affiliate” as “a person or organization that is related to another person or organization through a compensation arrangement or ownership.” 

That definition seems quite broad. There is a compelling argument that all entities within a corporate organizational chart are affiliates. That could allow someone to argue that if one entity in a health system provides a home sleep study to a patient, no other entity in the system can deliver the CPAP to that Medicare patient. Organizations that are trying to lower healthcare costs by offering more economical home sleep studies need to understand that the use of a home sleep study may prevent that system from supplying the CPAP. If any affiliate in the same system provided the CPAP, there may well be an overpayment.

I can’t explain the policy that differentiates between home sleep studies and polysomnograms done in a facility, but Medicare has chosen to make the distinction. It isn’t realistic to know every Medicare rule. This particular one was not on my radar screen until a careful client pointed it out. 

Programming Note:
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David M. Glaser, Esq.

David M. Glaser, Esq., is a shareholder in Fredrikson & Byron’s Health Law Group. David helps clinics, hospitals, and other healthcare entities negotiate the maze of healthcare regulations, providing advice about risk management, reimbursement, and business planning issues. He has considerable experience in healthcare regulation and litigation, including compliance, criminal and civil fraud investigations, and reimbursement disputes. David’s goal is to explain the government’s enforcement position and to analyze whether the law supports this position. David is a popular panelist on Monitor Mondays and a member of the RACmonitor editorial board.


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