Subcontracting of DMEPOS Services Fact Sheet

The Centers for Medicare & Medicaid Services (CMS) Durable Medical Equipment, Prosthetics, Orthotics, and Supplies (DMEPOS) Quality Standards require that a DMEPOS supplier is responsible for furnishing the item, billing Medicare, and coordinating the care for a beneficiary in compliance with the physician’s order and Medicare rules and guidelines. However, a DMEPOS supplier may subcontract certain services.

Consistent with the Medicare DMEPOS Supplier Standards, competitive bidding contract suppliers may use a subcontractor to perform the following services:

• Purchase of inventory: 42 CFR §424.57(c)(4) Fills orders, fabricates, or fits items from its own inventory or by contracting with other companies for the purchase of items necessary to fill the order. If it does, it must provide, upon request, copies of contracts or other documentation showing compliance with this standard. A supplier may not contract with any entity that is currently excluded from the Medicare program, from any state health care programs, or from any other federal government executive branch procurement or non-procurement program or activity. A subcontractor that performs only this service does not need to be accredited.
   
• Delivery and instruction on use of Medicare-covered item: 42 CFR §424.57(c)(12) Must be responsible for the delivery of Medicare-covered items to beneficiaries and maintain proof of delivery. (The supplier must document that it or another qualified party has, at an appropriate time, provided beneficiaries with necessary information and instructions on how to use Medicare-covered items safely and effectively). A subcontractor that only delivers the item does not need to be accredited. If the subcontractor provides more than the delivery by setting up the equipment or giving instructions on the use of the item, then the subcontractor needs to be accredited, unless a professional exemption or the pharmacy exemption applies.
   
• Maintenance and repair of rented equipment: 42 CFR §424.57(c)(14) Must maintain and replace at no charge or repair directly, or through a service contract with another company, Medicare-covered items it has rented to beneficiaries. The item must function as required and intended after being repaired or replaced. A subcontractor that only repairs equipment that a supplier is renting to a beneficiary does not need to be accredited. If the subcontractor provides more than the repair of the equipment by setting up the repaired item or giving instructions on the use of the repaired item, then the subcontractor needs to be accredited, unless a professional exemption or the pharmacy exemption applies.

In addition to complying with the DMEPOS Supplier Standards, DMEPOS suppliers must meet the DMEPOS Quality Standards, which have been issued consistent with the mandate in §1834(a)(20) of the Social Security Act (the Act). The DMEPOS Quality Standards delineate the services that a DMEPOS supplier is required to perform in the course of furnishing quality items and services. While the DMEPOS Quality Standards are not meant to be an exhaustive list of services a supplier performs when furnishing DMEPOS, they do highlight many of the services that a DMEPOS supplier performs in the course of furnishing the item and coordinating the care for the beneficiary. Services such as intake and assessment, coordination of care with the physician, submitting claims on behalf of the beneficiary, ownership and responsibility for equipment furnished to the beneficiary, ensuring product safety, etc., are all services that cannot be subcontracted. Therefore, only contract suppliers can communicate with referral agents and Medicare beneficiaries to arrange for furnishing of competitively bid items and services.

The DMEPOS Quality Standards document many supplier services and are, therefore, a good reference tool for distinguishing the role of a contract supplier versus the role of a subcontractor. Contract suppliers are accountable for ensuring that all of the services associated with furnishing the item, including subcontracted services, are performed in compliance with the physician’s order and Medicare rules and guidelines. All suppliers, including those that perform subcontracted services, must be accredited, unless they qualify for one of the professional exemptions provided in §1834(a)(20)(F)(ii) of the Act or they are pharmacies that are exempt from accreditation because they satisfy the criteria described in §1834(a)(20)(G) of the Act. (Please note that while the pharmacy accreditation exemption applies to pharmacies that perform as subcontractors, the exemption does not apply to pharmacies that bid in the DMEPOS Competitive Bidding Program. All contract supplier locations must be appropriately accredited.) Contract suppliers and their subcontractors must also possess the applicable state licenses to furnish the items in the competitive bidding area.