O2 Oh, My

“Oxygen” is the word that’s on everybody’s lips these days in the respiratory sector of the home medical equipment industry. Oh, sure, there are other things going on — a boom in the sleep market and the slashing of reimbursement for nebulizer medications, for instance.

But it’s oxygen that has center stage in the respiratory world right now. That’s because the government is not only cutting oxygen reimbursement, it is changing the model for reimbursement.

The Deficit Reduction Act, which was signed into law in February, among other things stipulates that oxygen no longer falls into a rental-only category, which allowed providers to continue providing and servicing equipment as long as the beneficiary met the criteria for Medicare coverage. Instead, oxygen is now treated as a capped rental. After 36 months, the beneficiary will own the equipment — and have responsibility for its maintenance and service.

Even more than the drastic 30 percent oxygen reimbursement cuts of nearly a decade ago, this newest government move has sent shockwaves through an already jittery industry. Indeed, three lawsuits challenging the DRA’s constitutionality have been filed.

The anxiety has been exacerbated by President Bush’s proposed 2007 budget, which calls for reducing the capped-rental timeframe to 13 months.

The situation has seriously stymied HME providers, who are wondering how the changes will actually play out.

In a CMS document issued April 28, the agency explained that, once the equipment title is transferred, Medicare will continue to pay for “reasonable and necessary maintenance and servicing” of beneficiary-owned portable and stationary systems. But so far there are no more details.

“I think the entire industry is concerned by recent legislation and proposed legislation that forces everyone to rethink patient care and service,” says Len Serafino, vice president, eastern division sales, for Chatsworth, Calif.-based Chad Therapeutics.

“We don’t know what providers will be paid or how they will be paid for equipment maintenance after 36 months, and we don’t know what CMS considers ‘reasonable and necessary’ maintenance or service. But I think the overriding concern is, or should be, what will happen to these patients.”

WHAT ABOUT PATIENTS?

Leighann Matthews is worried. The manager of Complete Care in Fort Payne, Ala., and her team pride themselves on providing excellent care for the numerous oxygen beneficiaries their HME company services. That means traveling long distances throughout the rural area they cover just to change tubing or to provide backup service when the power goes out.

But under the DRA, that level of service will likely be compromised, Matthews says. She is concerned that ill, often elderly patients will be required to ascertain whether their saturation levels are correct, if the concentrator is working properly, if their tubing needs to be changed. “It’s a true injustice to say they are going to be able to maintain the equipment,” she says.

Patrick Hanna agrees. “It’s hard to argue about how absurd it is for patients to own their own concentrator and check on the oxygen levels and the idea of people bartering with providers,” says the president of B&K Home Medical Services, Tiffin, Ohio.

Doris Posner, RRT, the clinical coordinator for Samaritan Medical Equipment in Newport, Ore., says she understands the need for cost-saving measures and she doesn’t even mind — too much — the capped-rental idea. It’s the servicing of the equipment and the care of the patient that has her concerned.

“I would have liked it if CMS had said, ‘We are going to stop paying you a monthly fee after three years, but we will pay you $300 per patient for servicing,” says Posner. “I think all of us have to realize that this is our government trying to save money, and we all have to give a bit. But I would have liked to have seen clearer guidelines and cost-saving measures that really advocated for the patient.”

There is another vital concern, says Matthews. “Living in an area where we have tornadoes, ice storms and hurricanes, what are those patients going to do when the power goes off?” she asks. “There’s no backup. Right now, they are provided for. Under these new guidelines, who is going to be responsible for that?”

That’s also a worry for Posner. “Because we’re part of a hospital, our patients will be pulled into our disaster planning,” she says, “but what is going to happen in a Portland or a San Francisco or an L.A.? What’s going to happen to those people who are out there and no one has seen for year or two — [are they] just going to drop off the radar?”

Then there is the possibility that, unable to succeed in such a business climate, oxygen providers will simply close up shop.

That scares Matthews. “I think you’ll see a lot of companies close,” she says. “What are you going to do with all those beneficiaries who were served by companies that have gone out of business?”

The capped-rental plan is simply unwise, according to Matthews. “The beneficiaries are going to be the ones who lose all the way around,” she predicts. “These people are going to go back into the hospital and their [Medicare] costs are going to quadruple.”

Whether or not that happens, just about everyone in the industry agrees with Matthews that the capped-rental idea is an ill-thought-out plan.

”With transfer of title, you’re talking about Class 2 medical devices that are very complicated, and you have to worry about safety and performance,” Mal Mixon, chairman of the board and CEO of Elyria, Ohio-based Invacare Corp., told HomeCare at this year’s Medtrade Spring in Las Vegas.

“To my way of thinking, to thrust this on an elderly person with [chronic obstructive pulmonary disease] is dangerous and very, very insensitive to the most severely disabled community in America.”

Mike Reinemer, vice president for communications and policy for the American Association for Homecare, agrees. “For a therapy like oxygen — where it is a prescription drug used in a prescription device where there can be dire consequences if the dosage is not correct or there is an oversight in [service] — that’s bad medical policy.”

And, at least in Fort Payne, beneficiaries are saying the same thing. “We have had numerous beneficiaries who are just irate about this oxygen cap,” Matthews says, noting that about 30 percent of her company’s oxygen patients have been on oxygen for more than three years already. “They are calling congressmen, getting petitions up.”

What has the response been? “They are told not to worry, that everything is OK and nothing is going to change; it’s all been taken care of,” Matthews says.

But it is clear she isn’t soothed by that response.

WHAT ABOUT BUSINESS?

As concerned as providers are about their patients, they are also worried about their ability to do business in such a volatile climate.

“The biggest challenge is trying to guess what the actual regulations are going to look like when they are completed,” says Tom Pontzius, president of Nationwide Respiratory for Waterloo, Iowa-based VGM. “These policies were put into place without [the Centers for Medicare and Medicaid Services] taking a look at them or using any of the information the [Office of Inspector General] may have had.

“For instance,” he continues, “how is servicing going to be handled? What happens if a patient moves away or is transferred in the middle of their 36 month period? There are so many questions and variables that many providers are trying to guess the worst-case scenario and guard against it.”

Until CMS issues additional information, it is indeed a guessing game right now, stakeholders say.

There’s a “lack of information about how these changes will be implemented. There is still no information about how maintenance and service, contents and accessories will be reimbursed,” notes Robert D. Hoover Jr., M.D., senior vice president, global clinical services, for Sunrise Medical in Longmont, Colo.

“Providers are concerned that equipment maintenance will not be addressed appropriately,” adds Jacquelyn McClure, director of the National Respiratory Network, government relations, for Lubbock, Texas-based The Med Group.

“What happens to the equipment when the beneficiary no longer has the medical need for the device? Will we find concentrators on eBay? With the ever-changing technology, who will monitor the home-transfilling systems? Who will remind the beneficiary to have the cylinders tested? Who will answer the after-hours call? There are so many unanswered questions that place the beneficiary in a potential dangerous situation as well as the provider.”

In fact, AAHomecare sent a letter to CMS on April 20 detailing the industry’s concerns about the DRA and listing a total of 33 questions about its oxygen and DME rental cap provisions. “AAHomecare understands that these new payment methodologies do not take effect immediately. However, their impact on our members’ operations is immediate because they must begin to structure their operations to respond to the changes,” the letter said. “Moreover, providers must plan now for their implementation in order to ensure a smooth transition for Medicare beneficiaries.”

The uncertainty of it all — on top of unknowns about competitive bidding and accreditation — has left some home care company owners frustrated, to say the least. But there are things providers can do to stabilize their businesses, experts say.

Increasing patient mix will help, says Pontzius, as will creating operational efficiencies. McClure recommends working smart by using activity-based cost accounting, seeking out niche markets and “partnering with other health professionals and payers to create avenues of care.”

The bottom line is, “The provider needs to focus on how to be a low-cost, quality provider,” says Tom Ryan, president and CEO of Homecare Concepts in Farmingdale, N.Y., and chairman of AAHomecare. “We need to continue to see where and how we can drive costs out of our delivery and service model without sacrificing the quality of the products and services we provide.”

That might mean rethinking the equipment lines you carry, the suppliers you deal with or even developing an entirely new business model.

“Providers need to work with reliable suppliers known to make quality products,” says Serafino. “It might be very tempting to go with cheaper products. But how many service calls are you going to have to make to replace or fix equipment that isn’t working? Contain your costs with reliable products.”

Providers should also consider transfilling concentrators as a way of ultimately reducing delivery and content costs, Serafino and others suggest.

Joe Priest, president of AirSep in Buffalo, N.Y., believes that stability lies in making a sea change in the basic entitlement — and he says providers have the ability to make that change.

“Home care providers need to review what the Medicare entitlement is and, given the lack of definition and the volatility in the market, they need to whittle down that entitlement to its basic form,” he says.

And with the help of the Advanced Beneficiary Notice, a provider can do that, Priest says.

“Providers should establish a baseline Medicare oxygen benefit,” he explains. “Maybe it’s a concentrator and one cylinder and a regulator, and anything more than that would have to be up charges. The ABN is a mechanism to allow the provider to say, ‘If you would like a better or quieter product, you’ll have to pay for that yourself.’”

Providers should also consider setting up service contracts, Priest says. It’s an idea Posner thinks might work — and it could allay one of her great concerns. Posner worries that fly-by-night businesses offering to service oxygen patients might surface and eventually leave patients in the lurch. “People who are already on fixed incomes will be taken advantage of,” she fears.

Priest recognizes that such ideas are significant departures from the way providers have traditionally done business. But this is not a “business-as-usual” climate. To survive, Priest believes, “it takes a revamping of the business strategy.”

Manufacturers will likely be making changes in the way they do business, as well, he says.

“We have come out with new products recently that are expensive alternatives, particularly in the ambulatory field,” Priest says, noting that historically, providers have “eaten” the cost until reimbursement rises to a profitable level.

But that won’t work anymore under the new guidelines, he says, and he is against lumping such advancements under the current code for oxygen. “That’s not a good thing for the provider,” he says. “We think a lot of the new technology should be outside Medicare.”

That way, it would be up to the beneficiary to decide on the value of the product — and pay for it.

WHAT ABOUT THE SOLUTION?

Finding cost efficiencies and changing the blueprint for the way you do business might be necessary self-protective moves, but they won’t fix the problem in the marketplace.

So what is the solution?

“The short-term fix would be to put oxygen back into its own category and not have it be a rent-to-purchase item,” says Reinemer. At press time, a bill called the Oxygen Patient Protection Act, which would repeal the DRA’s oxygen capped-rental provision, was set to be introduced in the House of Representatives.

“In the longer term,” Reinemer continues, “we need to continually and constantly educate Congress and CMS about the benefits of oxygen therapy and the cost-effectiveness of it and also what it entails. And we need to combat this idea that [Medicare] is only paying for a piece of equipment.”

According to Cara Bachenheimer, vice president, government relations, for Invacare, congressional members don’t understand the issues involved with home oxygen. “Members of Congress truly do not understand home oxygen therapy, how the various technologies work and most important, the kinds of services that home oxygen suppliers provide to their patients.

“We must change that.”

Adds Ryan, “The challenge is to provide the data that home oxygen therapy is clinician-preferred, patient-preferred and the most cost-effective therapy used in the treatment of COPD. We need to show why there should be an increase in expenditures for home oxygen therapy as we shift the costs from treatment in the acute-care settings.”

Serafino also champions better documentation among providers. “We need to do a better job of documenting patient needs and outcomes,” he says. “We have to get past anecdotal evidence and get into much more organized and specific records that clearly demonstrate the value of what we do.”

WHAT ABOUT THE FUTURE?

The thing to remember about the future of home oxygen is that there are a growing number of people who continue to need this therapy. Indeed, Posner says, not only is the number growing but she is seeing younger and younger patients who will need to be on oxygen the rest of their lives. And someone will have to care for those patients.

“The value of the services and the need for increasingly better technology is where the excitement about this sector is,” says Ryan. “During this turbulent decade of reimbursement cuts, we have seen a paradoxical response from the manufacturers, who have responded to the changing reimbursement and rising operational costs with the introduction of better technology and more efficient systems.

“We as a stakeholder group must come up with new legislation to allow this technology trend to continue; for that, I remain excited about the coming climate in the respiratory sector.”

Still, it’s hard not to wonder about the clouds hovering over the industry: Will the DRA’s provisions prevail? Will patients suffer? Will providers bail out?

For all the gloomy possibilities, Serafino remains optimistic. “The demographics … clearly favor a very robust and booming market,” he says. “Who will be doing the business?

“I would not bet against the HME business. It’s proven to be very resilient.”

Come to the Fair

At its annual Legislative Fly-in June 19-20, the American Association for Homecare will hold an oxygen technology “fair” to show members of Congress how home oxygen patients actually use their equipment and to demonstrate the technologies that are currently available. The association also will arrange meetings for providers with their state’s federal legislators to discuss the issues that will shape home health care policy. For information or to register, call AAHomecare at (703) 535-1887 or visit www.aahomecare.org.