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On December 1, 2016, Parker Hannifin Corporation and CLARCOR Inc. announced that the companies have entered into a definitive agreement under which Parker will acquire CLARCOR for approximately $4.3 billion in cash, including the assumption of net debt. The transaction has been unanimously approved by the board of directors of each company. Upon closing of the transaction, expected to be completed by or during the first quarter of Parker’s fiscal year 2018, CLARCOR will be combined with Parker’s Filtration Group to form a leading and diverse global filtration business. Bass, Berry & Sims has served CLARCOR as primary corporate and securities counsel for 10 years and served as lead counsel on this transaction. Read more here.

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Securities Law Exchange BlogSecurities Law Exchange blog offers insight on the latest legal and regulatory developments affecting publicly traded companies. It focuses on a wide variety of topics including regulation and reporting updates, public company advisory topics, IPO readiness and exchange updates including IPO announcements, M&A trends and deal news.

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Double-Take on DMEPOS: CMS Relaxes Supplier Standards

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April 13, 2012

On March 14, 2012, the Centers for Medicare & Medicaid Services ("CMS") published in the Federal Register a final rule (the "Final Rule") [1] revising certain standards applicable to suppliers of durable medical equipment, prosthetics, orthotics, and supplies ("DMEPOS").  These revised standards should offer some relief to suppliers who have been struggling to comply with the more restrictive set of standards that took effect on September 27, 2010 (the "2010 Rule").[2]  Specifically, the Final Rule relaxes standards related to solicitation of Medicare beneficiaries, contractual arrangements, local zoning requirements and state licensing requirements.  These changes will take effect on April 13, 2012.

Direct Solicitation

The Social Security Act (the "Act") prohibits DMEPOS suppliers from making unsolicited telephone contact with Medicare beneficiaries.[3]  Thus, prior to the issuance of the 2010 Rule, much of the regulatory guidance regarding unsolicited contact with beneficiaries predictably focused on telephone contact.  However, the 2010 Rule added a new, broad definition of "direct solicitation," which expanded the scope of the Act’s prohibition to include not only telephone contact but also in-person contact, computer, email and instant messaging without the consent of the Medicare beneficiary.[4]  Once the broadened definition took effect, CMS realized that the implementation of it might not be feasible and that the 2010 Rule affected marketing activities beyond CMS’ intended scope.  As a result, the Final Rule removes the broad definition of "direct solicitation" and revises the prohibition set forth in 42 C.F.R. § 424.57(c) to refer only to telephone contact.[5]  The Final Rule permits telephone contact in the three circumstances allowed under the Act.[6]

In the preamble to the Final Rule, CMS states that it received comments requesting confirmation that DMEPOS suppliers are permitted to contact a Medicare beneficiary pursuant to a physician’s order without the physician having obtained a written consent from the beneficiary, so long as the beneficiary is made aware by the physician that he or she will be contacted by a supplier.[7]  In an earlier-released Frequently Asked Question (FAQ) from February 2010, CMS had indicated that such contact would not be considered "unsolicited."[8]  In the preamble to the Final Rule, however, CMS declines to confirm this position, stating that it did not specifically solicit comments on this issue in the proposed rule and therefore is unable to act on it in the Final Rule.  Instead, CMS merely refers readers back to its FAQs, which it indicates may be updated in the future.

Other Changes

Contractual Arrangement Issues:

The Final Rule allows DMEPOS suppliers, including those that are competitive bidding program contract suppliers, to contract with licensed agents to provide such supplies, "unless prohibited by state law."[9]   CMS had determined that the 2010 Rule had caused some confusion because it had stipulated that a DMEPOS supplier must not contract with an individual or other entity to provide the licensed services, unless "allowed by the State where the licensed services are being performed."[10]  The terminology "allowed by State law" had left some suppliers wondering if state law needed to expressly permit contracting in order for them to contract.  CMS believes that the language "unless prohibited by state law" in the Final Rule should clear this type of confusion. [11] 

Local Zoning Requirements:

The Final Rule also removes the requirement for compliance with local zoning laws. [12]  In the 2010 Rule, CMS required that DMEPOS suppliers comply with local zoning requirements.[13]  CMS has explained that this standard was originally enacted to ensure that DMEPOS suppliers were providing goods and services to beneficiaries in a physical location, rather than out of a residence, which is often prohibited by municipal code zoning requirements.[14]  However,  CMS has now concluded that wide variances in state and municipal laws and, in particular, the potential difficulty that CMS contractors could have in verifying compliance with municipal codes, justify the elimination of the requirement that suppliers comply with local zoning laws. [15] In hindsight, CMS has decided that "the task of ensuring that DMEPOS suppliers comply with local zoning requirements is best left to the States."[16]

Square Footage Requirement Exceptions:

CMS also broadens the exception from the minimum square footage requirement to encompass all orthotic and prosthetics suppliers, not just those located in states that license orthotic and prosthetics suppliers.  According to CMS, "due to variations in State licensing procedures, comparable practitioners should not be excluded from this exception."  Of course, CMS cautions, "if a State does offer licensure for orthotic and prosthetic professionals, the supplier must obtain licensure in order to qualify for the minimum square footage exception." [17]

Minimum Hours Requirement Exception:

The Final Rule clarifies which practitioners are exempt from the requirement that suppliers be open for thirty (30) hours each week. CMS stipulates that this exemption is applicable only to physical and occupational therapists and removes the phrase "licensed non-physician practitioners," instead referring to physical and occupational therapists specifically. [18]

Conclusion

DMEPOS suppliers should stay tuned for future guidance on direct solicitation.  CMS has indicated that, over the coming months, it will be conducting significant outreach to the DMEPOS and Medicare beneficiary communities, including the issuance of the updated FAQs section on its website.


[1] 77 Fed. Reg. 14989 (Mar. 14, 2012).
[2] See 75 Fed. Reg. 52629 (Aug. 27, 2010).
[3] S.S.A. Sec. 1834(a)(17).
[4] 75 Fed. Reg. 52648-49.
[5] 77 Fed. Reg. 14994; see also 75 Fed. Reg. 52648-49 (Aug. 27, 2010).
[6] S.S.A. Sec. 1834(a)(17).  The Act allows for DMEPOS suppliers to make telephone contact where:
"(i) The individual has given written permission to the supplier to make contact by telephone regarding the furnishing of a covered item.
(ii) The supplier has furnished a covered item to the individual and the supplier is contacting the individual only regarding the furnishing of such covered item.
(iii) If the contact is regarding the furnishing of a covered item other than a covered item already furnished to the individual, the supplier has furnished at least 1 covered item to the individual during the 15-month period preceding the date on which the supplier makes such contact."
[7] 77 Fed. Reg. 14994.
[8] 77 Fed. Reg. 14990.
[9] Id.
[10] 77 Fed. Reg. 14991.
[11] 77 Fed. Reg. 14991-92.
[12] 77 Fed. Reg. 14992.
[13] 77 Fed. Reg. 14992 .                         
[14] 76 Fed. Reg. 18472, 18474 (April 4, 2011).
[15] 76 Fed. Reg. 18472, 18474 (April 4, 2011).
[16] 77 Fed. Reg. 14989, 14993 (Mar. 14, 2012).
[17] 77 Fed. Reg. 14989, 14993 (Mar. 14, 2012).
[18] 77 Fed. Reg. 14989, 14993 (Mar. 14, 2012).

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