In The News

Opbiznews
September 1, 2006

The Benefits of
Stock-and-Bill Programs

Professionals discuss why they support stock-and-bill programs, and why some find them to be controversial.

The concept and practice of stock-and-bill programs in the O&P industry continues to be a contentious issue. Medicare refers to stock-and-bill programs as loan closets. According to Joe Sansone, chief executive officer of TMC Orthopedic in Houston, stock-and-bill programs entail:

• A durable medical equipment (DME) company provides products on consignment at the physician's location.
• Either the supplier staff or the physician's staff can dispense the products.
• The DME supplier bills third-party payers for the products.

Many O&P providers deride stock-and-bill programs insisting that a patient fit by someone other than an O&P professional has not received proper care. Be that if it may, stock-and-bill programs do exist, and some health care providers and business owners have found the programs are beneficial to their businesses or practices. The focus of this article is on the clinicians or business owners who experience positive benefits from incorporating a stock-and-bill program into their health care business. Future articles will cover the O&P practitioners' viewpoints, as well as the legal issues surrounding such programs.

Loan closets

Sansone said that he first started hearing about these loan closets about 15 years ago when oxygen was provided for patients in rural areas.

"There were no home health companies nearby and patients needed oxygen, so the DME company would maintain an inventory of oxygen at the physicians office and the physician would dispense it while the DME company billed for it."

Who is using the program?

There is no single type of practice that uses these programs. Customers range from the larger orthopedic practices to the solo practitioner podiatrists.For instance, James B. Kendrick, MD, an orthopedic surgeon at Bone and Joint of Northwest MHS Physicians in Houston, has found his stock-and-bill program to be successful.

"I view the TMC stock-and-bill program as a great adjunct to my practice," said Kendrick. "In the past, several managed care plans forced me to send my patients out for bracing products. Now that we have products in stock, it is more convenient for my patients to receive their products at my office. I also like the fact that I can have in stock whatever product I need and do not have to worry about selecting vendors and negotiating pricing. I had earlier concerns about patients being upset by aggressive collection efforts, but I have never received one complaint."

Robert Leisten, DPM, of Diagnostic Foot Specialists in Houston, finds that his stock-and-bill program is a great benefit for his patients.

"In the past, I was forced to send patients to shop for an in-network provider, but since the provider for my stock-and-bill program is on almost every contract, it is no longer a concern," said Leisten. "This is much better for my patients in that my practice is incurring no liability risk by sending my patients out of my office on their way to get a brace they really needed in my office to begin with.

Yes, I was concerned about legal issues of the stock-and-bill program, but since I receive no rental payments or any type of free products, I feel safe in knowing I am in compliance with legal requirements."

According to Sansone, Houston is a bit more progressive in that the city has almost 100 stock-and-bill programs in hospital emergency rooms, outpatient surgery facilities and orthopedic surgeons' offices.

Rod Walters, DA, ATC, an assistant athletic director for sports medicine at the University of South Carolina, Columbia, S.C., has applied the stock-and-bill program in an athletic environment. He buys a certain amount of inventory every week and the company bills him for replacements.

"It is our philosophy that if we have the products, mostly braces, right here in the training room, we can intervene in the patient's care a lot quicker," said Walters. "It is my facility so I am notpaying rent. It is my inventory so I am not paying a consignment fee. I buy it at cost."

Benefits of the program

Why would physicians prefer stock-and-bill programs rather than referring to O&P facilities? According to Sansone, referring patients to an O&P facility for soft goods can be difficult. Reasons include:

• The physician's office is forced to seek an in-network provider.
• The patient is inconvenienced with an extra trip to another medical office.
• Incorrect products may be dispensed at the O&P facilities.
• Patients may be subject to aggressive financial policies at O&P facilities.
• Patients may not receive products at O&P facilities.
• O&P facilities may not be open during clinic hours.
• Patients may have to wait to be seen at O&P facilities.

Stock and Bill ProgramLegal aspects

Sansone maintains that stock-and-bill programs are absolutely legal. "I have yet to find a health care attorney who tells me otherwise," he said. However, Sansone cannot stress enough the extreme difficulty of operating a stock-and-bill program within the confines of all the legal guidelines. A few of the programs he encounters are questionable in meeting the requirements for compliance.

"In my opinion, stock-and-bill programs are oftentimes not operated within the confines of federal guidelines because companies violate standards in one of three areas:

The most common violation seems to be when companies offer remuneration (often disguised as rent) as an inducement for referrals. The Office of Inspector General of the Department of Health and Human Services has made it clear in several fraud alerts that they are concerned that kickbacks can be disguised as rental payments. For this reason, we do not pay rent at any of the facilities we offer stock-and-bill programs"

According to health care attorney Jeff Baird, Esq. of Brown & Fortunato in Amarillo. Texas, providers can safely set up a loan closet if they follow three guidelines:

"If you adhere to these three things, you are going to be okay," Baird said.

Taking business away from O&P? Sansone looks at the situation from a business standpoint.

"I did not want my O&P business to lose customers and I saw there were other companies who were obtaining business because I was not providing a stock-and­bill program," he said. "So I developed my own."

The O&P industry is generally against stock-and-bill programs because it is costing them market share, he added. There are two types of business owners, said Sansone, those who lie there and take it, and those who do something about it.

"Practitioners can no longer open their doors and expect business to come marching in," he said. "We need to be more advanced. Companies that offer stock-and-bill programs have a more entrepreneurial spirit."

Sansone said it can be easy to call something we do not understand a bad thing. He said that the vast majority of wrist splints, knee immobilizers, arm slings and the other miscellaneous soft goods dispensed in the United States are not put on by O&P practitioners. They are almost always applied by the employee of the physician or even bought at a pharmacy or sporting goods store. There is a distinct difference between off-the-shelf soft good items and custom bracing.

"We never advocate custom products being dispensed or fit outside the realm of an O&P provider," he said. Walters said that less than 5% of his patients see an orthotist.

"I am not trying to cut anybody out," Walters said. "I am simply trying to provide a high standard of care for my athletes. The industry is changing. There are many off-the-shelf products that are as good as, or better than custom products."

FOR MORE INFORMATION:

Moran, M. OIG gives advice on loan closets. HME News. 2002.

Rachel Kelley is a staff writer for O&P Business News.

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