Home Health & Hospice Week

CMS plans to lower Medicare reimbursement as of April 8.

Oxygen suppliers who were holding their breath while waiting for the new Medicare rates can exhale now.
 
Though many suppliers will be paid less for their oxygen wares, the cuts won't be as drastic as some durable medical equipment industry insiders had feared.
 
The HHS Office of Inspector General last week released its long-awaited report comparing Medicare and Federal Employee Health Benefit Plan rates for home oxygen equipment. The OIG concluded that FEHB Plans' median payment rates are 12.4 percent lower than Medicare for stationary equipment and 10.8 percent lower for portable equipment.
 
The greatest disparity in payment rates was for oxygen concentrators, with Medicare paying on median 12.6 percent more than FEHBPs. The Centers for Medicare & Medicaid Services will now bring the Medicare rates in line with FEHBP rates.
 
Minus: At press time, Medicare contractors planned to implement the cuts by April 8. All claims for oxygen and oxygen equipment furnished on or after Jan. 1, 2005 that contractors receive after CMS implements the new fees will be paid using the 2005 fee schedule amounts, according to CMS.
 
Plus: Contractors will not retroactively adjust claims with dates of service on or after Jan. 1 that were previously paid using the 2004 fee schedule amounts.
 
The same day that the OIG released its report, CMS published a state-by-state listing of new fee schedule amounts calculated based on the information in the OIG report.
 
The new monthly payment amounts for stationary oxygen equipment in the states range from $194.48 to $200.41 and from $30.57 to $32.08 for port-able equipment.
 
Providers in states with the highest Medicare fees will suffer the sharpest cuts. Hawaii, for example, faces a 25 percent cut for stationary oxygen and a 28 percent cut for portable systems, while New York must contend with a 12 percent cut on stationary systems and a 10 percent cut for portables.
 
Payment reductions are smaller in states where current fees are closer to the FEHBP median, while states with fees already at or below the FEHBP median price will see no changes.

Cuts Could Have Been Deeper

DME providers and industry advocates expressed mixed reactions to the reduction, which was mandated by the Medicare Modernization Act of 2003.
 
"It's a chunk," John Gallagher of The VGM Group in Waterloo, IA says of the cuts. "Anytime you whack 10 percent off someone's profit margin, that's a huge amount."

American HomePatient Inc. of Brentwood, TN estimates that if the new cuts had been in effect for the same time period in 2004 as they will be for 2005, they would have reduced the company's total revenue for 2004 - $335.8 million - by about $6.2 million.
 
But others noted with relief that the rate reductions were not as drastic as those called for by last Sept-ember's OIG report, which found that FEHBPs paid as much as 20 percent less than Medicare for the same items.
 
The American Association for Homecare disputed those earlier findings, hiring Morrison Informatics Inc. to conduct an independent study of FEHBP payment rates for oxygen (see Eli's HCW, Vol. XIII, No. 33, p. 262).
 
The Morrison study claimed FEHBP oxygen prices were within 1 percent of Medicare levels. That's because the OIG study surveyed all of a FEHBP's product lines while AAH's study focused solely on plans' fee-for-service products. AAH felt that was the most appropriate comparison since the traditional Medicare program does not contract directly with home oxygen providers and does not guarantee enrollee volume in exchange for pricing concessions.
 
The Morrison findings helped moderate the OIG's final rate reductions, AAH officials believe.
 
"These reimbursement cuts for oxygen are several percentage points lower than they would have been if AAHomecare had not pressed OIG and CMS on this issue," AAH CEO Kay Cox says in a statement.
 
While the organization still has questions about some of the methods the OIG used to calculate the new rates, it is "very grateful for the level of openness and cooperation at the OIG and CMS," Cox adds.

Lower Rates Could Hurt Patients

Many providers have already been taking steps to prepare for the cuts, reports Jackie McClure of The MED Group headquartered in Lubbock, TX. "Our members have been looking at business efficiencies over time," she says. "But still, any cut is difficult to take."
 
The rate reductions will ultimately affect beneficiaries. "Providers can run their businesses more efficiently only to a point, and then it gets harder and harder to provide good patient care," McClure says. 
 
Editor's Note: The OIG report is online at www.oig.hhs.gov/oei/reports/oei-09-03-00160.pdf. The new state-by-state fee amounts are at www.cms.hhs.gov/suppliers/dmepos/oxygen_011305.pdf.