Respiratory Expert Charts the Changes, Predicts Solid Year Ahead

ATLANTA–Though beset with challenges like the 36-month rental
cap for home oxygen, respiratory providers should see a solid 2008
with significant opportunities, according to one industry
expert.

“Providers can expect less-expensive concentrators, in-home
qualifications for CPAP patients and transitions to nebulizer
medications that only have to be taken twice each day as opposed to
the four times each day of the normal medications prescribed
today,” said Mickey Letson, president, The Letco Companies,
Decatur, Ala.

If CMS approves the in-home CPAP qualification next month,
Letson said, providers can look forward to “huge successes” as more
CPAP patients are qualified in 2008 than ever before.

“The importance of this is that now HME providers will be
bringing in patients who are significantly younger and have the
potential to extend profitability on a per-patient basis by more
than double that which is enjoyed today,” he said. “This should
provide more stable, long-term growth over the next several years
for a market that is facing capped rental for oxygen in 2009.”

Letson noted that, because it is becoming “much more difficult”
to make it as a specialty provider of respiratory medications in
home health, those providers are now focused on providing oxygen,
CPAP therapy, nebulizer medications and related supplies. While a
small provider used to be able to open shop and do only neb med
business, he said, such specialization can now only be successful
for established companies with significant volumes in a specific
market.

In addition, respiratory medication providers have had to change
the way they forecast, Letson said.

When reimbursements were posted in December and remained in
effect for the entire following year, providers could plan a
strategy and then spend the year executing it. But with
reimbursements now based on an Average Sales Price formula–a
four-quarter average of previous pricing reported by manufacturers,
plus 6 percent–“it is extremely difficult in today’s environment
to plan and strategize when pricing can change dramatically each
quarter,” he said.

The intent of the moving averages was to limit price
fluctuations, Letson explained, but “this obviously did not work,
as albuterol reimbursement dropped 25 percent in a single quarter.”
Moreover, he said, in today’s marketplace, physicians are resisting
allowing providers to change prescriptions for patients several
times each year.

“Providers still must plan for the year and execute that plan,”
Letson said. “Focus has now shifted … to providing medications
that offer a more stable, consistent reimbursement as well as a
much broader drug mix for the provider’s patients.”

Having all patients on just one or two primary medications is no
longer a smart strategy, he continued. “This could prove
devastating should the reimbursements move significantly on those
products.”