Industry Labels OIG Report on PWC Costs ‘Ridiculous’

WASHINGTON–Medicare could save millions on power wheelchairs if
the government reimbursed them at the rates available to consumers
on the Internet, according to a report from the Department of
Health and Human Services Office of Inspector General.

The report–called “A Comparison of Medicare Program and
Consumer Internet Prices for Power Wheelchairs”–found that
Medicare payments for PWCs were 45 percent higher than median
Internet prices for the equipment. For the first three months of
2007, the report said, the government could have saved nearly $40
million if its fees had been the same as those Internet prices, and
beneficiaries could have saved $233 in copays for the products.

Issued Tuesday, the OIG report drew immediate fire from a slew
of HME stakeholders.

“The whole report is quite ridiculous,” said Tim Pederson, CEO
of WestMed Rehab in Rapid City, S.D., and chair of the Rehab and
Assistive Technology Council for the American Association for
Homecare, adding that the report is “not an apples-to-apples
comparison.”

“CMS’ potential for additional savings is completely overstated
by the OIG,” Pederson said. “It has already been established that
the provision of PMDs to Medicare beneficiaries is far more
expensive than cash sales to ‘drop ship’ customers.”

Pride Mobility Products’ Seth Johnson also termed the report
“ridiculous.” Vice president of government relations for the
Exeter, Pa.-based manufacturer, Johnson said “the comparison is not
even apples to oranges. It’s completely different. It’s more like
apples to bicycles or apples to automobiles.”

Johnson pointed out that “there is a significant difference in
cost between an online retail model and a Medicare provider
model.

“A consumer buying through the Internet pays cash and walks away
with a power chair,” he continued. “An online retailer doesn’t have
to comply with Medicare standards. There is no requirement for a
face-to-face exam, no evaluation, no fitting or customization that
goes into providing power wheelchairs for Medicare
beneficiaries.”

According to a response from Elyria, Ohio-based Invacare, “The
Internet company does not incur all the costs associated with being
a Medicare supplier, meeting all the Medicare supplier standards,
complying with Medicare-required documentation rules (a complex and
burdensome process that requires the supplier to obtain detailed
medical record information from the prescribing physician),
submitting the claim on behalf of the beneficiary …

“In short, Internet pricing is wholly inapplicable,” Invacare
said. “In fact, in 2006 when CMS was considering data to use in
setting fees for the new power wheelchair codes, it specifically
rejected Internet pricing information for these very reasons.”

Pederson noted the OIG study “is fatally flawed particularly
with respect to Group 3 products. The OIG was only able to find
more than two products for sale on the Internet for only three of
the 10 Group 3 codes. This completely invalidates the findings for
Group 3 complex rehab products. Similarly, the OIG could only find
more than four Group 2 products on the Internet for nine of the 15
Group 2 codes,” he said. “The data presented for Group 2 products
is therefore questionable.”

Of 28 codes for which it collected information, the OIG found
median Internet prices were less than the Medicare fee schedule
amounts for 24. The report also found that Medicare’s payment
amount for K0823, the most frequently reimbursed code, exceeded the
median Internet price by 36 percent, accounting for 68 percent of
the total possible savings to the program.

But Pederson noted “the greater risk for providers of these
services is the increasing scrutiny of these services by CMS. The
results of the TriCenturion widespread probe of the K0823 code
indicate that providers assume an abnormally high risk for denied
claims just by providing PMDs to Medicare beneficiaries.

“The increased reimbursement through Medicare relative to cash
sales is completely offset by the results of the TriCenturion
probe, which indicated that 90 percent of these claims were denied.
In this case, a provider has no recourse to collect the denied
amount from the patient, and it must absorb the loss on those
items,” Pederson said. (For a report on the K0823 probe review, see

HomeCare Monday, Sept. 24.)

Pride’s Johnson noted the OIG report is a follow-up to an
investigation it conducted in 2004 that showed Medicare paid more
for power wheelchairs than other health care payers. At that time,
the industry argued vigorously about the differences in Internet
pricing and Medicare reimbursement, “and we think CMS understands,”
Johnson said.

But he added that the effects of the new OIG report remain to be
seen.

The OIG report recommended that CMS conduct additional reviews
of Medicare’s PWC reimbursements to see whether adjustments should
be made–and CMS concurred.

“In talking with CMS as recently as a month ago, there were no
plans to further revise the PWC feel schedule amounts, so I don’t
really think it’s going to have much of any impact in the short
term,” Johnson said. “But we know that the government likes to pull
up old reports and use those to roll out changes three or four
years later, so it wouldn’t surprise me that in the future if they
want to make some changes, they refer to this report in some form
or fashion.”

And in July 2008, unless the industry succeeds in getting
Congress to exclude complex rehab from Medicare’s competitive
bidding program, PWC pricing in the first 10 bidding areas will be
based on suppliers’ bids for those items.

Johnson said AAHomecare’s RATC is working to get a meeting with
the OIG “just to educate them on the vast differences between the
online retailer model and the Medicare provider model.”

The RATC also will submit a formal response to Inspector General
Daniel Levinson outlining the flaws in the study.

“The only way CMS can use Internet pricing as a basis for
reimbursement is to abolish the documentation requirements that
providers must follow,” WestMed’s Pederson said. “If providers
could bill CMS in advance with only a prescription and drop ship to
patients after payment is received, then Internet pricing is a fair
comparison. We all know that this is not going to happen. The OIG
needs to come back to the real world.”

Read the
OIG report in full.