CMS Cuts Inhalation Therapy Dispensing Fee for 2006

Baltimore

As many providers had feared, CMS announced that it will slash the monthly Medicare dispensing fee for Part B inhalation drug therapy for 2006 — 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 drop to $33 for each subsequent month, according to the 2006 physician fee schedule released in November. 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 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, 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.

The results of an AAHomecare survey of home care pharmacies, conducted by Muse & Associates, 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 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. Orlando, Fla.-basedRotech, with 475 locations in 48 states, said the cut would reduce its revenue by a projected $15 million in 2006.

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.

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, the association said.

According to consultant 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] lowered [the fee] so much that it’s going to be really hard for them to make enough profit to stay in the business.”

The final rule will take effect Jan. 1, 2006. For more information on the 2006 Physician Fee Schedule, visit www.cms.hhs.gov/physicians.