What the Round 2 Recompete Means for Oxygen

Competitive bidding is back, and its presence means more potential problems for respiratory service providers. The DMEPOS Competitive Bidding Round 2 Recompete will go into effect July 1, 2016, with the winners being announced several months earlier. Although the bid start dates may seem far off, CMS’s proposed timeline will leave unprepared providers scrambling to catch up. On Dec. 11, 2014, CMS announced its target dates. Registration began on Dec. 18, 2014, with a 63-day bidding window starting one month later, on January 22, meaning—at the time of this writing—providers have roughly three months to prepare and submit bids. In addition, there are several important changes to the bidding process that respiratory providers will need to navigate. As opposed to years past, CPAP, respiratory assist devices and oxygen services will now be lumped together in a category called “Respiratory Equipment and Related Supplies and Accessories.” This means that, for Medicare purposes, providers will no longer be allowed to choose between oxygen and CPAP/RAD services. In order to bid on one of these services, HMEs will be required to provide all of them, which also means being accredited as a supplier for each service. In addition to looming deadlines and new product categories, providers still have to worry about submitting bids that can win, and allow them to be profitable, amid declining reimbursement rates. As a response to cuts in oxygen reimbursement over the past few years, many HMEs have chosen to forego the service altogether, focusing instead on more profitable services. However, with the new product category, that may no longer be an option. Instead, providers will need to consider creative ways to reduce their oxygen-related costs. One growing trend to reduce these costs is through the use of portable oxygen concentrators (POCs). The obvious opposition to providing POCs is the large up-front expense. Most DMEs were born under the delivery model and therefore already have the infrastructure to support it. With the tanks, trucks and drivers already in place, incorporating POCs into their business model may seem like an unnecessary expense. However, many providers have found that this change will result in more long-term profitability. During Round 2 of competitive bidding, reimbursement was cut more severely on tanks than on POCs. In addition, the low annual maintenance of POCs tends to offset their more expensive initial setup. When compared with the cost of repeatedly picking up empty tanks, filling them and delivering them back to patients, the simplicity of a POC certainly has its advantages. This long-term approach toward profitability explains why some of the largest home care providers in the country are aggressively converting their patients and rolling out portable units. In addition, POCs often allow patients to live a more comfortable lifestyle. New machines often weigh less than 4 pounds, and can run for several hours longer than a typical oxygen tank. By carrying a spare battery, patients can double the run-time and ensure that they receive the necessary treatment. Overall, it’s an exciting time. As long as the industry adapts to new solutions, it will thrive as it always has.