Medicare Compliance & Reimbursement

Care management activities not part of Medicare benefit, agency says.

In a move that left respiratory drug providers gasping, the Centers for Medicare and Medicaid Services has cut the monthly dispensing fee for nebulized inhalation drugs by more than 40 percent starting Jan. 1.
 
The decision will reduce inhalation drug therapy providers' revenues and may even force some to close up shop, industry insiders say.

CMS on Nov. 2 announced it would reduce the monthly dispensing fee for inhalation drugs in 2006 from $57 per monthly supply to $33 after the first month, in which the fee will remain at $57.

The agency is also cutting the fee for a 90-day supply by more than 17 percent, from $80 to $66. The figures were unveiled in the 2006 physician fee schedule.

Official rationale: "On further review of the available information and comments, CMS has concluded that the industry cost data on which the 2005 dispensing fee was based includes care management activities (such as in-home visits, patient education, caregiver training, and care coordination) that do not fall within the scope of a dispensing fee, and that do not have a Medicare benefit category," CMS announced in a release.

The agency pointed to a September HHS Office of Inspector General report that found little evidence suppliers widely offer such care management services to beneficiaries.
 
CMS established the interim dispensing fees based on cost data collected last year by the Washington-based American Association for Homecare. Home care pharmacies' total dispensing costs for services related to nebulized inhalation drugs are $66.55 for a 30-day supply and $138.80 for a 90-day supply, according to a follow-up survey conducted for the group earlier this year.

HHAs Fretting Over Cuts

AAHomecare expressed "deep disappointment" in the fee cut. "Studies have carefully documented the fact that the current $57 fee under-reimburses providers for this therapy, which requires a wide array of services," says president and CEO Kay Cox.

From a mergers and acquisition perspective, the cut "further devalues an already compromised product line," observes Steve Braff of the The Braff Group, a Pittsburgh-based M&A company.

The move "continues to put pressure on the smaller, lower margin companies who have a significant stake in the neb med business to diversify product lines and payors," Braff tells MLR.

Some smaller inhalation drug providers say the cut will likely force them out of business. They include Wayne Stanfield, owner of Home Care Pharmacy in Halifax, VA and executive director of the Home Care Alliance of Virginia.

"There's no way we can survive unless fees for the drugs themselves go up," Stanfield tells MLR. If the fees don't rise, he expects to close his doors at the end of March.