Take a Deep Breath

Paul Gammie calls it the “double whammy.” The general manager of Gammie HomeCare in Kahului, Maui, like other respiratory providers in the nation, is grappling with new Medicare oxygen reimbursement cuts — which, in Hawaii, top out at 20 percent for stationary oxygen and 29 percent for portable systems.

“We got the double whammy. We're also getting squeezed out of the cost-of-living adjustment for businesses [located in an area] with a higher cost of living,” Gammie says. “We weren't expecting to get both of those at the same time.”

So Gammie is scrambling to ensure that his home medical equipment business somehow remains on solid footing. “I've run our raw numbers; this will not cause us to close our doors. We'll still be here next year,” he says, “but what kind of changes do we have to make [to continue to be a viable business]?”

It's a question oxygen providers across the nation are asking as they figure out ways to deal with Medicare's 2005 oxygen fees, which went into effect in early April. The drop in reimbursement was dictated by the Medicare Modernization Act, which required the Centers for Medicare and Medicaid Services to align oxygen fees with the median Federal Employee Health Benefits Plan pricing set down by the Office of Inspector General.

According to CMS, the average rate reduction is 8.6 percent for stationary oxygen and 8.1 percent for portable units. The cuts vary by state; those with higher Medicare fees saw the deepest cuts, while states with reimbursement already in line with FEHBP pricing saw lesser or no cuts. New reimbursement rates range from $194.48 to $200.41 for stationary oxygen, and from $30.57 to $32.08 for portable units.

REVISITING THE PAST

For some providers, it is, as Yogi Berra says, like déjà vu all over again. Back in 1997-98, providers were hit with oxygen cuts mandated by the Balanced Budget Act that totaled about 35 percent. Consumer Price Index raises were frozen, as well. Providers took it on the chin then, and for many it proved to be a good business lesson since they were forced to figure out exactly how much it cost to deliver oxygen and service their patients.

This time around, though, the stakes are a bit higher. Most companies have already pared unprofitable business lines, sought other venues such as retail opportunities or private contracts and computerized their business operations for better efficiency. Today, they're living with narrower profit margins and higher fuel, insurance and personnel costs.