Home Health & Hospice Week

Companies' stock prices surge on word of adequate fee.

Although the new dispensing fee for inhalation medications isn't yet set in stone, the respiratory equipment industry is praising the development - and seeing its financial benefits already.
 
In response to a Government Accountability Office report recommending an appropriate dispensing fee, the Centers for Medicare & Medicaid Services says it is planning a fee of $55 to $64 per month in 2005.
 
CMS announced in August that it would slash payment rates for inhalation drugs nearly 90 percent under the new average sales price system starting Jan. 1. Respiratory companies Lincare Holdings Inc., Apria Healthcare Group Inc. and American HomePatient Inc. responded by warning that if CMS didn't raise the dispensing fee from its current $5 a month, they would be forced to stop furnishing the inhalation medications to Medicare beneficiaries.
 
After CMS revealed its planned fee, Lincare said it "expects to be able to continue to provide these services to Medicare patients next year."
 
Apria was equally sanguine. "Although we await the publication of the final rule later this month, we are optimistic that the service fee endorsement by CMS today ensures that Medicare beneficiaries will continue to have access to care and these drugs in 2005," Apria CEO Larry Higby says in a release.
 
Both companies have benefited from the dispensing fee announcement already, with stock price increases. Lincare's stock went up nearly 20 percent the day after the announcement, while Apria's stock price increased almost 4 percent. AHP's stock shot up almost 50 percent, and Rotech Healthcare Inc. stock gained more than 12 percent.
 
The dispensing fee coming in so close to the amount recommended by a recent industry-sponsored study is good news, says attorney Lisa Smith with Brown & Fortunato in Kerrville, TX. The study conducted by Muse & Associates and funded by the American Association for Homecare recommended a fee of $68.11 per month (see Eli's HCW, Vol. XIII, No. 31, p. 246).
 
If the fee comes through in the final physician fee schedule next month, it should avert most potential access problems caused by the drastic payment rate cut to albuterol sulfate and ipratropium bromide, says Phil Porte, executive director of the National Association for Medical Direction of Respiratory Care.
 
Whether the final fee will come in on the low or high side of CMS' estimate remains to be seen. The GAO found a wide range of dispensing costs for the drugs when it analyzed data from 12 inhalation therapy suppliers, notes the report. Estimated dispensing costs ranged from $7 to $204 a month in 2003, the agency concluded.
 
The GAO considered a wide range of items when figuring dispensing cost, including shipping, billing, respiratory therapists, rent, taxes and more.

Issues Continue to Loom

While respiratory therapy suppliers are out of the woods for the moment, there could be more concerns just around the corner. Both CMS and the GAO mention switching to a 90-day supply period for the medications rather than the current 30-day period. But suppliers shouldn't expect to see the monthly dispensing fee tripled in that case, Smith cautions.
 
Furnishing a 90-day supply of drugs costs less than twice as much as furnishing a 30-day supply, the GAO maintains in its report. If CMS adopts the 90-day period either this year or next, expect to see the fee set accordingly, Smith says.
 
Also, increasing the dispensing fee so drastically is bound to catch the eye of government watchdogs, one source warns. Don't be surprised if the HHS Office of Inspector General puts suppliers' dispensing costs under a magnifying glass after the change. 
 
Editor's Note: The GAO report is at www.gao.gov/cgi-bin/getrpt?GAO-05-72.