Home Health & Hospice Week

Will a dispensing fee turn the tide?

The average sales price system for drug payments is set to hit Jan. 1, and it's probably even worse than you've imagined.
 
The Centers for Medicare & Medicaid Services proposes to cut the reimbursement rates for inhalation drugs albuterol sulfate and ipratropium bromide by a staggering 89 percent, according to the agency's proposed 2005 fee schedule for physicians. That's on top of a cut to those drugs' payment rates from 95 percent of average wholesale price to 80 percent of AWP that took effect this past Jan. 1.
 
Under the ASP-plus-6 percent methodology, albuterol sulfate will be reimbursed at $0.04 per milligram and ipratropium bromide at $0.30 per mg. Those rates could change slightly as drug manufacturers report new data quarterly for ASP calculations, CMS says in the rule published in the Aug. 5 Federal Register.
 
Payment rates for nebulizers themselves, which are required to administer the drugs, are set to undergo unspecified cuts to Federal Employee Health Benefit Plan levels in 2005 as well. Nebulizers under code E0570 will be affected, CMS adds. Because the maintenance and servicing fee is based on the first month's rental payment, that fee will be reduced accordingly.
 
Prediction: These drastic cuts could be the death knell for the respiratory services industry - and for Medicare beneficiaries' access to badly needed respiratory medications. Industry giants Lincare Holdings Inc., Apria Healthcare Group Inc. and American Homepatient Inc. say they will be forced to exit the Medicare respiratory business if the cuts go through as planned.
 
"Lincare plans to cease providing respiratory therapy drugs and will send appropriate notices to its patients by mid-October so that they can make alternative treatment arrangements, no matter how inadequate," the Clearwater, FL-based behemoth that operates in 47 states says in a release. Likewise, Lake Forest, CA-based Apria with 455 branches in 50 states says it will stop accepting referrals for new Medicare respiratory patients "in the next few months" if the proposal stands.
 
Brentwood, TN-based AHP with 285 locations in 35 states "will need to begin notifying [patients] in late October that it will be unable to continue to provide the drugs after January 1, 2005 unless there is a significant change in reimbursement methodology," it says.
 
The cuts that may force respiratory companies to withdraw will leave the approximately one million Medicare beneficiaries needing respiratory medications stranded with limited access to them. "Medicare beneficiaries must continue to have access to critical inhalation therapies," Kay Cox, president and CEO of the American Association for Homecare, urges in a release.
 
"CMS does not yet fully understand the severity of the potentially harmful impact of the proposed regulation on the large number of Medicare beneficiaries suffering from chronic lung disease," Lincare worries. "We are extraordinarily concerned" that the proposed rule will result in increased out-of-pocket costs for Medicare beneficiaries and lower quality of care for COPD patients.
 
The industry has acknowledged that the AWP-based reimbursement rates for the drugs are higher than strictly necessary. But the extra margin on those rates is used to furnish a number of services to Medicare beneficiaries, including personnel, delivery, facility expenses, information systems, patient support and customer services, billing, accreditation, regulatory compliance and liability insurance, AAH notes.
 
"The planned cuts are so severe that it will be impossible for suppliers like [AHP] to provide the drugs, much less the related services," the company warns.
 
"The 6 percent add-on ... would not begin to cover the costs of providing pharmacy, compounding, patient management, delivery, billing and other ancillary services," Apria says.

Ray of Hope: Dispensing Fee

All is not lost quite yet, though. CMS does say it is seriously considering upping the dispensing fee to pay for those costs previously covered under the generous AWP-based payment rates. "We believe that it is appropriate for Medicare to continue to pay a separate dispensing fee to pharmacies that furnish inhalation drugs to beneficiaries," CMS says in the proposal.
 
The current fee is $5 per month, and CMS specifically asks for comments on the appropriate amount for the fee under the ASP system. And the agency wants "comments about whether the dispensing fee should include a somewhat higher, transitional payment."
 
Suppliers doubt the dispensing fee will make up for "the drastic cut" to inhalation drug payment levels, says Jacki McClure, director of the National Respiratory Network and government relations for The MED Group in Pittsburgh, PA. But they hope it will at least allow them to continue servicing their Medicare patients, McClure tells Eli.
 
To keep suppliers in the respiratory business, there must be a "meaningful increase in the dispensing fee," Lincare insists.
 
"We are hopeful that a potential dispensing fee or other service fees mentioned in the [proposed rule] will be sufficient to pay for" servicing costs, says Apria CEO Lawrence Higby. "A reasonable dispensing fee is absolutely crucial to maintain Medicare beneficiaries' access to respiratory medications," Higby stresses.
 
CMS should use data from previous studies conducted by The Lewin Group and AAH, as well as an imminent study from Muse & Associates and the association, to set reasonable dispensing fee levels, Apria contends. The General Accounting Office is conducting a similar study on the cost of furnishing respiratory medications, Apria adds.

Will Regulatory Changes Reduce Costs?

CMS admits that cutting reimbursement rates for these drugs by nearly 90 percent is likely to cause some access problems, and thus it solicits comments on the dispensing fee. But it also claims that regulatory changes it has made will reduce costs for home care suppliers and cushion the blow of the payment reduction. These changes include: