Home Health & Hospice Week

Cost data could drive change.

A new report on home oxygen therapy costs may be the industry's ticket to staving off yet another round of Medicare payment cuts.

"There is more to providing oxygen therapy than delivering a piece of equipment, and this report provides hard evidence of that," says Joseph Lewarski, vice president with Goleta, CA-based Inogen and vice chair of the American Association for Homecare's HME/Respiratory Therapy Advisory Council.

To conduct the study, consulting firm Morrison Informatics Inc. of Mechanicsburg, PA gathered data from 74 oxygen providers that deliver service and equipment to more than 600,000 beneficiaries.

Key findings: Nearly three-quarters (72 percent) of the cost of providing home oxygen therapy to Medicare patients is for services, delivery and other operational expenses that benefit patients. Only about one-quarter (28 percent) of the cost is for oxygen equipment, the report maintains.

The report--commissioned in March by AAHomecare and released June 27--aims to educate policymakers about a new Medicare requirement that caps the rental of oxygen equipment at 36 months, explains Lewarski. The provision, which went into effect Jan. 1 for all new rentals, calls for transfer of the equipment title to the beneficiary after the 36-month rental period (see Eli's HCW, Vol. XV, No. 1).

About 25 percent of Medicare home oxygen patients continue to need oxygen therapy beyond 36 months, estimates AAHomecare. The cap on oxygen Medicare reimbursement, which was passed as part of the Deficit Reduction Act of 2005, treats providers like "drop-shippers" and oxygen therapy like a commodity, AAHomecare has argued.

Mystery: Though the Centers for Medicare & Medicaid Services has indicated it will pay providers for equipment maintenance, service and accessories, it has yet to elaborate on how Medicare might do so after the transfer of title to the patient.

Rough Waters Ahead

A bill introduced last month (H.R. 5513) to repeal the cap gained several co-sponsors upon the release of the report, with 21 representatives signing on by the end of June 27. But if that effort fails, the capped period could grow even shorter.

From bad to worse: In his 2007 budget, President Bush proposes reducing the maximum oxygen equipment rental period to 13 months for an estimated $6.6 billion savings over five years.

The Morrison Informatics report will at least position suppliers for the coming fight, says Sheila Ewing, an analyst with Frost & Sullivan, a business consulting firm based in New York.

"Having aggregate data about costs from an independent third-party should help us prevail," Lewarski agrees.

Note: The report, "A Comprehensive Cost Anal-ysis of Medicare Home Oxygen Therapy," is available at www.aahomecare.org.