Lincare OK, but Other Oxygen Providers Maybe Not, Analysts Say

HALIFAX, Va.—“It’s health-care-reform-crazy in
Washington this week.” That’s how Wayne Stanfield
described the Capitol Hill wrangling over reform proposals, which
has risen to fever pitch as congressional committees with
jurisdiction over health care issues scurry to figure out how to
pay for the overhaul. 
 
The Senate Finance Committee is still working on its draft reform
bill, which insiders have said will likely include further cuts to
oxygen as one way to shave costs.
 
On Tuesday, said Stanfield, president and CEO of the National
Association of Independent Medical Equipment Suppliers, providers
got a jolting glimpse of just how deep those cuts might be in three
Wall Street analysts’ reports. The reports, on Clearwater,
Fla.-based Lincare, one of the nation’s largest oxygen
providers, tossed out some Finance Committee behind-the-scenes
scenarios.
 
A report from Deutsche Bank said Lincare might be the only
respiratory service provider capable of surviving the more than 30
percent cut the Finance Committee is considering. Such a cut would
reduce the monthly reimbursement for oxygen concentrators by about
$80, increase the payment for portables by $20 and eliminate the
36-month cap. 
 
The remaining public companies would not be able to withstand the
cut “without extreme duress,” the report continued, and
“smaller mom/pop entities … would likely fare even
worse.”
 
Another possibility reported by Soleil-Pomeroy Research would be to
spread current oxygen cap payments over a longer time; in other
words, taking the amount of money that Medicare currently pays for
stationary concentrators and spreading it over 60 months instead of
the current 36. According to the investment report, “this
would in theory reduce monthly reimbursement from $176 currently to
$105.”
 
However, the report continued, Congress is also said to be
considering increasing the add-on payment for portable oxygen to
$77 from $32, which should help to “partially offset the
adverse impact of the near-term reduction to payment for the
stationary equipment.”
 
A third report from SunTrust Robinson Humphrey noted the delay of
competitive bidding
until January 2011 could increase the risk of a cut in 2010. With
many providers already struggling under the 36-month home oxygen
cap, the report said, any additional cuts could lead to an exodus
from the market, driving growth opportunities for Lincare.
 
The SunTrust analysis said “a staggering 60 percent” of
respondents in a recent survey of oxygen providers would consider
exiting the business if further cuts are implemented.
 
“We don’t know where these reports got their
numbers,” said Stanfield, adding they could have come from
leaks inside Congress or could be Wall Street sales pitches.
 
What is certain, according to a NAIMES message, is “that if
these plans go forward, the 30 percent-plus cuts to
reimbursement will forever change the provider landscape and
eliminate most small oxygen providers, leaving Lincare to be
the big winner in both the oxygen market and competitive
bidding.”
 
Although it is unclear how serious any of the plans might be,
Stanfield said, “the figures that are talked about in these
reports are at the point where most providers couldn’t remain
profitable. Now that these numbers are out in the public, we
can’t take the risk of waiting to see what happens. We must
respond,” he said.
 
NAIMES and other industry groups have urged all HME stakeholders to
call their state’s senators and representatives about oxygen
payments.
 
For federal legislators’ contact information, go to 
www.congress.org or call the U.S. Capitol
switchboard at 202/224-3121 for direct connection.