Inhalation Therapy Dispensing Fee to Drop in 2006

BALTIMORE–As many providers had feared, CMS announced last week
that it will slash the monthly Medicare dispensing fee for Part B
inhalation drug therapy next year–from $57 per monthly supply to
$33.

CMS will continue to pay a $57 dispensing fee for the first
month a patient ever uses inhalation drugs, but the fee will then
will drop to $33 for each subsequent month, according to the 2006
physician fee schedule released Wednesday. The fee for a 90-day
supply will be reduced from $80 to $66.

According to CMS, the decision was made after review of
government data, including a September report from the Office of
Inspector General, found little evidence that care management
services–such as in-home visits, patient education, caregiver
training and care coordination–are widely provided to
beneficiaries in actual practice.

The industry, which had fiercely opposed a fee cut for months
(see
HomeCare Monday, Sept. 1), was disheartened by the
announcement.

“Even at $57 per month, the dispensing fee does not cover the
many services associated with providing home inhalation therapy to
Medicare beneficiaries and … there is no data that justifies a
reduction in the fee,” the American Association for Homecare stated
in its weekly newsletter.

The results of an AAHomecare survey of home care pharmacies,
conducted by Muse & Associates during August and September,
showed that providers’ costs are $66.55 for a 30-day supply and
$138.80 for a 90-day supply. Earlier, the association said it had
found “serious flaws” in the OIG report, which did not include core
services for dispensing the drugs related to pharmacy work,
processing, packaging and shipping, delivery, billing and coding,
quality control or other administrative and overhead costs.

But a CMS statement explaining the reduction said such services
“do not fall within the scope of a dispensing fee” and do not have
a Medicare benefit category. And in a late afternoon press
conference, CMS Administrator Mark McClellan said while CMS felt
the $57 fee was warranted for first-time patients, the government
report showed the fee “substantially exceeded some providers’
costs.”

Following the news, Brentwood, Tenn.-based American HomePatient,
which has 265 branches in 35 states, announced that the dispensing
fee change would reduce its annual inhalation drug revenue by
approximately $4.1 million. Rotech, Orlando, Fla., said the cut
would reduce its revenue by a projected $15 million in 2006. The
company has 475 locations in 48 states. American HomePatient and
some other large U.S. providers have been threatening to exit the
respiratory medication business if the dispensing fee was
substantially cut.

In the AAHomecare survey, 44 percent of home care pharmacies
said they would stop providing inhalation drug therapy if the
dispensing fee was cut. The survey was based on responses from 82
companies serving more than half of all Medicare beneficiaries who
use inhalation drug therapy, according to the association. (See

HomeCare Monday, Oct. 3.)

In a recent HomeCare Web poll, 72 percent of respondents
said they would no longer continue to serve Medicare beneficiaries
if the dispensing fee for respiratory medications was lowered
significantly.

According to Harold Davis of Davis & Associates, McRae,
Ark., and a respiratory specialist for Nationwide Respiratory, a
division of VGM, pharmacies that have been compounding should be
able to weather the cut because their business is based on mixing
rather than the dispensing fees. “But for those doing it out of the
box, it will be tough,” he said. “I think [CMS has] lowered it so
much that it’s going to be really hard for them to make enough
profit to stay in the business.”

CMS also announced on Wednesday that it is developing a
demonstration program for care management and coordination for
inhalation therapy users to determine whether such services “have a
positive impact on outcomes and reduce overall Medicare spending.”
The demonstration will focus on care for beneficiaries with
relatively severe or complex respiratory conditions who need both
nebulizer treatments and drugs dispensed through metered dose
inhalers that will now be covered as part of the new Medicare drug
benefit.

“We recognize that there are important opportunities to provide
high-quality care management for Medicare beneficiaries with
chronic respiratory conditions,” McClellan said. “These services,
when they are delivered and delivered effectively and appropriately
to patients, can potentially make a significant difference in
patient outcomes and cost of care.”

McClellan said the program “could involve additional payments to
the providers, to the physicians and to the inhalation therapy
companies that are involved with delivering care management
services for inhalation therapy … but we want to be sure that if
we’re providing those services, we’re doing so in a way that
ensures that the services are delivered.”

Respiratory providers are not the only ones who are facing
cuts–the new rule also will reduce physicians’ payment rates by
4.4 percent.

The final rule, which will appear in the November 21 Federal
Register, will be effective Jan. 1, 2006. For more information
on the 2006 Physician Fee Schedule, visit www.cms.hhs.gov/physicians/default.asp?.