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|April 4, 2011||Volume 17, Number 12|
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Table of Contents
- HomeCare Poll: Majority of HME Providers Want Out
- CMS Proposes Change to Direct Solicitation Rule
- BCBS of South Carolina to Buy CGS
- Government Moves from Pay-and-Chase to Guarding the Henhouse
- Medtrade Spring Features 'Command Center' to Repeal Competitive Bidding
- Sebelius, Berwick Announce ACO Initiative
- Mediware Acquires CareCentric
- H.R. 1041 Hits 50+ Cosponsor Mark; AAHomecare Recommends Standards for NPWT; Have Your Own Face-to-Face at Medtrade Spring
For more industry news, features and highlights from our latest issue, please visit our Web site at www.homecaremag.com.
- Headline News
HomeCare Poll: Majority of HME Providers Want Out
ATLANTA—A shocking 60 percent of the participants in HomeCare’s March Web poll said they are trying to sell or close their HME businesses before Round 2 of competitive bidding.
Of 477 votes in the poll—which asked the question, “Will you bid in Round 2 of competitive bidding?"—here’s how the responses broke out:
• Yes: 13%
• No: 10%
• Haven't decided: 4%
• Audits may put me out of business before Round 2 is implemented: 13%
• I'm trying to sell/close my business before I have to: 60%
But these days, selling out won’t be so easy, say merger-and-acquisition experts. The very reason those in the home medical equipment sector want out—competitive bidding and the resulting reimbursement nosedive—is also the reason few buyers want in.
“Sadly, there is a rumble of people heading toward the exit. But the doors aren’t as wide as they once were,” said Bob Leonard of Pittsburgh, Pa.-based The Braff Group. “Supply and demand has certainly tilted in favor of the buyer. And the other thing is, it is all about risk and return. [Buyers] know the risk, and the returns are diminishing.”
Richard Glass, president of Steven Richards & Assoc., Tarpon Springs, Fla., said he believes providers are getting worn down. While his company hasn’t seen as much seller movement as in 2008 when the first Round 1 was implemented, he said, “I certainly sense every day in my work frustration on the part of many providers.”
The market for sellers “is not as robust as it was years ago,” Glass said. “We have buyers … we probably sold seven or eight HME companies last year and some this year, but there are certainly not as many buyers as there were.”
Leonard said Braff also has completed sales in the HME sector and there are more in the works, but he is seeing few outside investors. “Most of what we are seeing is buyers who are already in the business, who already have an infrastructure in place so they can pick up a patient base without the cost of putting that in place,” he said.
Provider Todd Tyson, president of HiTech Healthcare in Norcross, Ga. (a suburb of Atlanta, which is included in Round 2), said he has gotten calls from other providers who are closing their doors and are trying to find service for their patients. He recently heard from a neighboring provider looking for a company to take its 200 oxygen patients.
“We hear a lot of frustrated comments with people saying they wish they were out of the business,” Tyson said.
There is little doubt that many providers are actively seeking buyers—and not only those in Round 2. Some in Round 1 areas are still trying to sell three months after implementation.
Chris Rice of Diamond Respiratory Care, a Riverside, Calif., company that was awarded multiple contracts in the Round 1 rebid, said his company routinely gets calls from other Round 1 providers. “Most of the calls are looking to subcontract,” he said.
“However, there are several looking to sell. We’ve only made two acquisitions this year,” Rice said. “Unfortunately, the ones we’ve talked to are just not worth much—they are essentially asset sales only.”
Even with a buyer, getting out of the business is neither easy nor painless.
“Prices are a fraction of what they were at the peak,” said Leonard, noting that providers successful in selling are those who have made a strategic decision to exit the business and “are willing to sell fairly cheap.”
“The company that might have been [worth] around $2 million is now worth around $700 grand,” Glass said. “I think there is an element of price disconnect. Sellers think the price of the company should be based on what it makes today.”
But with reimbursements still likely to plummet as costs continue to rise, buyers generally are not willing to buy at the seller’s price.
“If [sellers] are interested in selling at market value, we’ve been successful in getting some transactions done,” Glass said.
“When the Round 1 competitive bidding contracts were first awarded, some winners felt that they had hit the jackpot,” said attorney Jeff Baird of Amarillo, Texas-based Brown & Fortunato. “For example, if ABC Medical was issued a contract for four product lines in four [competitive bidding areas], then this essentially equates to 16 contracts. ABC might have initially thought that it could enter into 16 separate asset sales that would, in essence, allow it to sell all 16 contracts.”
No such luck.
“The CBIC saw this coming and threw cold water on this type of approach,” Baird said. “The CBIC issued a directive that said that if ABC plans to enter into an asset sale, then it must sell all of its assets associated with all 16 contracts. In other words, ABC can enter into one asset sale, not 16 asset sales. This CBIC directive has pushed many transactions to being stock acquisitions.”
Leonard said for some providers, it might make sense to stay with the business.
“For some going into Round 2, they might be better off hanging on to it and taking a little money home every week,” he said, noting owners would need to calculate when reimbursement is going to change, how much time they have before that happens and what other elements of their business can carry them forward.
Others, said Glass, need to “move sooner rather than later.”
Baird noted the high number of providers in HomeCare’s poll who said they want out surprised him. “Only a small percent of our clients in Round 2 have expressed a desire to sell,” he said. Instead, most of his Round 2 clients are “taking aggressive steps to lessen their dependence on Medicare” as well as figuring out what their options are if they don’t win bids.
“There is a hope among many suppliers in the Round 2 CBAs that Round 2 will not go through to its fruition,” he said.
Have you had to add staff to comply with the growing number of audits? To vote in HomeCare's monthly Web poll, visit www.HomeCareMag.com.
CMS Proposes Change to Direct Solicitation Rule
BALTIMORE—Under a proposed rule published in today’s Federal Register, the circumstances under which HME providers can contact Medicare beneficiaries directly would be revised.
An Aug. 27, 2010, final rule on the DMEPOS supplier standards enlarged the scope of the direct solicitation ban beyond prohibition of unsolicited telephone contacts to include in-person contacts, email and instant messaging.
The proposed rule would modify the definition of “direct solicitation” because CMS said it is “unfeasible” as written in the final rule and “has been criticized as it covers some types of marketing activity outside the bounds of what we intended to prohibit under our regulations.”
As a result, CMS would “revert to restrictions on suppliers effective before publication of the Aug. 27, 2010 final rule.”
That’s good new for providers, according to the American Association for Homecare, which has been working with CMS on the standards.
“The current standard prohibiting direct solicitation has proved operationally unworkable for suppliers,” said the association’s Walt Gorski, vice president for government affairs, in a Friday afternoon statement. “It is so broad that it seemingly prohibits communication between the supplier and the beneficiary that is essential to ensure continuity and coordination of care.”
Attorney Neil Caesar of the Health Law Center, Greenville, S.C., agreed. “The changes last year to Supplier Standard 11 were a valid attempt to curb abusive solicitation practices,” he said, “but CMS created a definition for ‘direct solicitation’ that had some large loopholes, and these loopholes both weakened the rule and created confusion.”
In addition, Caesar said, “the rule was broader than the anti-solicitation statute, which still is limited to abusive telephone solicitation.”
While the changes would allow suppliers greater marketing freedom, he pointed out, “CMS did not change the portion of Standard 11 dealing with physician verbal orders. The scope and implications of this rule remain unclear and troubling, and we still don’t understand what sort of evidence of consent is required. I hope further clarification will be forthcoming.”
In its comments on the proposal, CMS said it would continue “to actively monitor the issue of potentially unwanted and unsolicited communications between DMEPOS suppliers and beneficiaries” and would engage in further rulemaking on the issue if warranted.
The proposed rule would also modify subcontracting rules under the supplier standards.
In last year’s final rule, CMS said it sought to ensure oversight of DMEPOS suppliers by adding an additional layer of oversight in the form of state law. But the absence of express state law in certain areas “has led to confusion among suppliers as to who they may contract with under our programs.”
CMS said it is seeking to clarify that contracting with an individual or entity for licensed services is permissible if subcontracting is not expressly prohibited by state law. The new rule would also eliminate any distinction between contract and noncontract suppliers in their ability to subcontract for licensed services.
“By making the proposed clarification (that is, it is permissible for suppliers to contract for licensed services in the absence of an express State prohibition), we believe the requirements for contract suppliers are also clarified and that the reference to competitive bidding program contract suppliers in the existing regulation is unnecessary and redundant,” CMS said in the rule.
Gorski said those proposed changes should provide greater clarity on the requirements for subcontracting “and will make these relationships easier for suppliers to administer.”
Caesar also said the changes to Standard 1 “are quite welcome. CMS now says that licensure and employment questions simply must follow state law requirements, which makes sense. The prior expansion was unnecessary and overreaching, and I’m glad CMS proposes a more limited approach.”
View the proposed rule, which has a 60-day comment period, in the April 4, 2011, Federal Register.
BCBS of South Carolina to Buy CGS
COLUMBIA, S.C.—BlueCross BlueShield of South Carolina has signed an agreement to purchase Cigna Government Services as part of a strategy to build on its government business line, a spokesperson for the giant insurer confirmed March 28. The sale is expected to close in late April.
“CGS will probably undergo a name change,” said Elizabeth Hammond, a spokesperson for BCBS of South Carolina, “but otherwise will continue to operate with all its current 850 employees and management in its current locations in Nashville, Tenn., and High Point, N.C.”
CGS, a subsidiary of Philadelphia-headquartered Cigna, would become a wholly owned subsidiary of S.C. BlueCross.
“It’s a good fit,” Hammond said. “Both BlueCross and CGS and its predecessor companies have worked for Medicare since its inception.”
CGS holds the current five-year contract as the DME MAC for Jurisdiction C, which includes 15 southern states, Puerto Rico and the U.S. Virgin Islands. The $144 million contract was originally awarded to Palmetto GBA in 2006, but after a protest, CGS was eventually awarded the contract and took over as the DME MAC in 2007.
On Nov. 30, 2010, CMS issued a solicitation for DME MAC Jurisdiction C and said it expects to award the new contract in August of this year.
CGS currently processes and pays claims for 14 million Medicare beneficiaries and over 100,000 providers and suppliers in the jurisdiction, according to a spokesperson for Cigna. As of March 2010, the area included 35,804 Medicare DME suppliers.
CGS also serves Medicare providers in Idaho and North Carolina through two Part B contracts, and beginning in May, will expand to 16 additional states as it provides a variety of claims and customer services for hospitals, physicians and home health and hospice providers as part of its new A/B MAC Jurisdiction 15 Medicare contract.
With its acquisition, CGS would become part of BlueCross’ government services division, which includes PGBA, InStil Health Insurance Co., Palmetto GBA and Trailblazer Health Enterprises. Together, the four companies hold 36 contracts related to Medicare, the TRICARE military health plan, and the U.S. Department of Justice’s Bureau of Prisons health coverage. Their work encompasses information systems, claims processing, customer service and payment safeguard functions.
“Overall, under the S.C. BlueCross umbrella, we comprise more than 40 companies involved in insurance,” Hammond said.
Cigna decided to sell the CGS subsidiary because it no longer aligns with the company’s core business as a health services company. “Cigna is focusing on those businesses that are part of our core strategy to go deep, go individual, and go global,” the Cigna spokesperson said.
Government Moves from Pay-and-Chase to Guarding the Henhouse
BALTIMORE—On March 25, new screening requirements for Medicare DME enrollees took effect, along with new application fees.
According to attorney Jeff Baird, chairman of the health care group at Brown & Fortunato, Amarillo, Texas, the new requirements are part of the government's move away from "pay-and-chase" to "guarding the henhouse" when it comes to fighting fraud.
"In the early days of the industry, it was easy for a company to obtain a Medicare Part B supplier number," Baird said. "The screening process was rudimentary."
A sham company could "easily" get a billing number, submit fraudulent claims and then "shut down and escape just ahead of the posse," Baird said. But with the government's growing focus on fraud, now a company "must jump through multiple hoops before it is awarded a supplier number."
Two of those hoops include purchasing a surety bond and becoming accredited, which by themselves have weeded out a lot of the crooks, Baird pointed out. As of March 25, newly enrolling DME company principals will also be subject to a criminal background check and fingerprinting at a future date.
Baird said HME providers are also experiencing unannounced site visits from a variety of sources, including the National Supplier Clearinghouse, the Office of Inspector General, state Medicaid, accrediting organizations and Medicare contractors.
"If a DME supplier is conducting a non-compliant, or perhaps a fraudulent, operation, there is a reasonable chance that the non-compliance/fraud will be discovered when a person walks unannounced onto the supplier's premises, eyeballs the operation and asks for evidence that the supplier standards are being followed," Baird said.
In addition to expecting an NSC site visit when it's time for reenrollment, he added, HME companies should expect unannounced site visits on a periodic basis. Last year, CMS issued final rules enhancing Medicare supplier standards for DME companies, including more stringent operations and facilities requirements.
For more from Baird on new screening and disclosure requirements under health reform, see his "Law School" column in HomeCare's March issue.
Medtrade Spring Features 'Command Center' to Repeal Competitive Bidding
LAS VEGAS—Medtrade Spring attendees will be able to ask their members of Congress to sign onto H.R. 1041, the House bill to repeal national competitive bidding, on the spot.
At the event, to be held April 14-16 at the Sands Expo and Convention Center in Las Vegas, attendees can search for their U.S. representative on the list located in the Expo registration area to see if they have signed on to the bill. If not, then they can stop by the H.R. 1041 “Command Center” in the American Association for Homecare booth (2419) and send an email asking their representative to support the repeal bill.
“There is no better time than now to become involved in the grassroots effort to repeal competitive bidding, and our goal is to have over 2,000 messages sent to Capitol Hill to support H.R. 1041 during Medtrade Spring,” according to Kevin Gaffney, show director.
In addition to the email campaign, attendees can support industry advocacy efforts at the AAHomecare Stand Up for Homecare reception on April 12. The campaign delivers key HME messages through the media and to every member of Congress. The fundraiser will be held at Dal Toro Ristorante at The Palazzo from 5:30-7 p.m. Tickets will be available at the door.
For more information or to register for Medtrade Spring, go to www.medtrade.com.
Sebelius, Berwick Announce ACO Initiative
WASHINGTON—A multi-media blitz from HHS and CMS this week detailed a government proposal to form Accountable Care Organizations (ACOs)—entities comprised of doctors, hospitals and other health care providers to better coordinate care for Medicare patients.
On a press call yesterday, HHS Secretary Kathleen Sebelius said greater efficiencies from ACOs could yield savings of up to $960 million over a three-year period. But during a Q&A on the call, a CMS official admitted that figure could conceivably end up about $400 million lower.
ACOs are part of health care reform, as mandated by the Affordable Care Act. “Rules we are proposing today will help teams of doctors, hospitals and other health care providers form ACOs where they will be able to take full responsibility for the health of their patients,” said Sebelius during her opening statement. “In return, if they meet the tough standards for health care quality, they will be able to share in savings that come with improving care coordination and improving health. This will align the way we pay for care with the kind of care we know is most effective.”
The concept is to give physicians and others in the ACO a financial incentive to make sure patients get the proper care. "One in every five Medicare beneficiaries who leaves the hospital is back within 30 days,” Sebelius said, adding that in many cases, “it is because they failed to receive the correct follow-up care."
According to CMS Administrator Donald Berwick, MD, “An ACO will be rewarded for providing better care and investing in the health and lives of patients. ACOs are not just a new way to pay for care but a new model for the organization and delivery of care.”
For home care advocates, the idea of shifting government’s focus to more effective care has been a priority for many years.
Wayne Stanfield, president and CEO of the National Association of Independent Medical Equipment Suppliers, believes ACOs are the perfect opportunity to reiterate that message. “I firmly believe that care delivered under the ACO structure will have an effect on home care providers,” said Stanfield. “A large part of saving, beyond eliminating duplication of tests and services, will be reducing inpatient care through home care services. DME suppliers will need to be involved with all of their local ACOs to remain in the referral stream.
The ACO model announced is “somewhat different than some speculated in that providers will continue to bill for their services as in the past,” Stanfield explained. “Under such a primary care model, with one leading PCP directing a patient’s integrated care, suppliers will be at the leading edge of reducing costs through prevention and wellness. Under the ACO model, growth in home care means a cost reduction on the other side of the coin.”
Stanfield urged all HME providers “to engage their hospital systems and make sure they are at the table as these ACOs are developed.”
“If the focus of ACOs is on coordinating and improving care to ensure patient safety and preventative measures, especially for frail or elderly beneficiaries in Medicare, then clearly HME must be a part of that picture,” added the American Association for Homecare’s Michael Reinemer, vice president, communications and policy. “This is exactly what home care provides for Medicare beneficiaries. We want to make sure policymakers and regulators connect those dots.”
According to the official press release from HHS, ACOs will create “incentives for health care providers to work together to treat an individual patient across care settings—including doctor’s offices, hospitals, and long-term care facilities. The Medicare Shared Savings Program will reward ACOs that lower health care costs while meeting performance standards on quality of care and putting patients first.” Patient and provider participation in ACOs is purely voluntary.
The proposed rule and joint CMS/OIG notice are posted at www.ofr.gov/inspection.aspx.
A fact sheet is available at www.HealthCare.gov/news/factsheets/accountablecare03312011a.html. Comments on the proposed rule will be accepted for 60 days, and CMS will respond to all comments in a final rule to be issued later this year.
HME Company Newswire
Mediware Acquires CareCentric
LENEXA, Kan.—Mediware Information Systems announced Thursday that it will acquire the assets of CareCentric’s home medical equipment, home health and home infusion businesses.
The deal, which is expected to close within 30 days, will add more than 300 new customers and related products, services and contracts to Mediware’s Alternate Care Solutions business line.
“With the additional customers, Mediware software will now support more than 700 sites delivering home infusion, home medical equipment, specialty pharmacy and home care services for patients with chronic illnesses throughout the United States,” said Thomas Mann, Mediware’s president and CEO, in a release.
Mediware formed ACS in March 2010 following its December 2009 acquisition of Healthcare Automation and Advantage Reimbursement, and the November 2008 acquisition of Hann’s On Software.
ACS currently includes HomecareNet, a business solution used to maximize efficiency and safety for alternate site care providers including home infusion, home health and HME; HomecareNet Mobile, a patient support tool that leverages mobile technologies; and Ascent Pharmacy, utilized by specialty pharmacies, home infusion providers and small acute care hospitals to ensure safe medication management.
The acquisition will add CareCentric’s latest product, Caretinuum, as well as the company’s legacy products, MestaMed and PharMed, to Mediware’s support portfolio.
H.R. 1041 Hits 50+ Cosponsor Mark; AAHomecare Recommends Standards for NPWT; Have Your Own Face-to-Face at Medtrade Spring
WASHINGTON—At latest count, H.R. 1041 has 53 cosponsors representing bipartisan support—“a significant accomplishment in just 20 days,” according to AAHomecare. To see whether your U.S. representative has signed on to the competitive bidding repeal bill, check the cosponsor list at www.aahomecare.org to look at the state-by-state roster, or stop by the H.R. 1041 Command Center at the AAHomecare booth (2419) at Medtrade Spring (see story in this issue). Read the text of H.R. 1041. Read a “Dear Colleague” letter on H.R. 1041.
AAHomecare Recommends Standards for NPWT
ARLINGTON, Va.—The AAHomecare Medical Supplies Council has developed new quality standards for negative pressure wound therapy and is recommending that they be incorporated into the accreditation requirements for HME providers. In its newsletter last week, the association reported that its work on the additional standards was prompted by recent attention on NPWT payment from the HHS Office of Inspector General and CMS. Last year, the FDA also outlined concerns about several categories of complex therapeutic devices that have migrated from institutional settings into the home, including NPWT. According to the association, “The additional standards will help ensure that only those providers qualified to provide the full range of services associated with NPWT are eligible to provide this service.”
Have Your Own Face-to-Face at Medtrade Spring
LAS VEGAS—Want to talk in person to representatives of the DME MACs, the NSC, the CEDI or the CBIC? You’ll get your chance at Medtrade Spring, April 12-14 at the Sands Expo and Convention Center in Las Vegas. Staff from all the contractors will be available to address questions in booth 1736. The DME MACs will also give a "Medicare Updates" presentation on Tuesday, April 12, and will conduct a session on the most common errors found by the Comprehensive Error Rate Testing program on April 13. For information, go to www.medtradespring.com.
To revisit this news anytime during the week, check www.HomeCareMag.com. We welcome your comments. Drop a line to HomeCare Editor-in-Chief Gail Walker at firstname.lastname@example.org.
HomeCare provides its subscribers with timely legislative, regulatory and business news; in-depth analyses of various market segments; features on emerging issues and trends; practical how-to advice on business operations; best-practices profiles; and a constant stream of new product information. Subscribe to HomeCare magazine.
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