AAHomecare Commissions Industry Cost Analysis Study

WASHINGTON, D.C. (July 7, 2016)—The American Association for Homecare (AAHomecare) has commissioned Dobson DaVanzo & Associates, LLC to conduct a full study of suppliers’ fixed and variable costs for furnishing the services associated with supplying durable medical equipment. While limited cost study analyses have been performed in the past, this will be the first to consider DME in multiple categories that are under threat by competitive bidding pricing.

From the beginning of Medicare’s bidding program for DME, suppliers have expressed concern that the bid prices are too low to cover their costs, especially in rural areas where providers face higher delivery and associated service and repair costs.

But what are these true costs of doing business? In 2006, a study by Morrison Informatics found that only 28 percent of the cost of providing services for oxygen related DME was due to the equipment. The remainder (72 percent) represents costs associated with training, patient education, medical documentation and other required services. A similar report, The Muse Study, focused on the cost of services provided in support of nebulized inhalation drug therapy and how those services related to the proposed dispensing fee. The findings of this study indicated that without an appropriate dispensing fee there would be severe hardship on suppliers and beneficiaries would suffer.

Both of the studies focused on inhalation therapies and demonstrated that there are significant costs associated with services beyond the cost of the DME itself.

“While these studies provided valuable information, they stopped short of giving the full picture of a medical supply companies costs,” said Laura Williard, senior director of payer relations for AAHomecare. “When you look at these services in an isolated manner as with the respiratory study, you do not see how the full amount of cuts are eating away at small businesses. For many companies respiratory is one of many products being delivered at Medicare competitive bidding rates, along with wheelchairs, hospital beds and walkers. The current competitive bidding rates put financial pressure on suppliers and, ultimately, hurts the vulnerable seniors and the disabled who rely on DME products and services.”

Beginning the week of July 18, Dobson DaVanzo & Associates, LLC will disseminate this cost study survey free for all providers to participate. The more suppliers who complete the survey, the stronger the report will be. Ultimately, this will be a tool to be shared with members of Congress, but it will also be available for companies to compare their costs of doing business to the average costs of the industry.

The cost study will focus on selected products from oxygen, sleep, manual wheelchairs, hospital beds and walkers. All organizational data will be kept confidential and reporting will be in the aggregate only.

AAHomecare urges all suppliers to take part in this survey and help build the critical data needed to show that CB rates are truly unsustainable. “This is our opportunity to provide hard numbers industry wide to Congress and CMS to explain the depth of cuts we are receiving compared to the actual cost of doing business,” explains Williard. “This Cost Study will be one more arrow in the quiver to build support on Capitol Hill. A critical mass of participation will make the difference for this strong lobbying tool.”

Visit aahomecare.org for more information.