New Study: Oxygen Providers to Lose $850M in 2009

WASHINGTON — Oxygen providers who bill Medicare will be
about $850 million short in reimbursement in 2009, according to a
new study on Medicare payment policy and home oxygen therapy.

Commissioned by the Council for Quality Respiratory Care, the study by
Washington-based Avalere Health, titled “Home Oxygen Therapy: An Analysis of Recent Medicare
Payment Policy,” looks at the cumulative effects of the
36-month oxygen rental cap and the 9.5 percent Medicare
reimbursement cut, both of which are set to take effect Jan. 1.

“We estimate that Medicare spending on home oxygen therapy will
actually decrease by approximately 27 percent in 2009 as a result
of the impact of the 36-month capped rental period and the 9.5
percent [Medicare Improvements for Patients and Providers Act of
2008]-stipulated payment reduction,” the study said.

According to Avalere, there are more than 1.5 million Medicare
beneficiaries on oxygen therapy, 26 percent of whom are expected to
continue use of oxygen past 36 months. Avalere believes these
patients are distributed across the country in the same proportion
as the total Medicare oxygen user population. That means the cap
could affect 34,500 beneficiaries in Florida, 29,800 in Texas and
24,000 in California alone.

“We estimate that the 36-month capped rental policy will reduce
Medicare expenditures for home oxygen by approximately $550 million
beginning in 2009,” the study said.

In addition, providers will feel the effects of the 9.5 percent
cut to oxygen reimbursement specified under MIPPA. The law, which
passed in July and delayed competitive bidding for 18 months,
stipulated the cut to all product categories included in Round 1 to
“pay for” the bid delay. One of those categories was oxygen.

“We estimate that this provision will reduce Medicare spending
on home oxygen therapy by almost $300 million in 2009,” Avalere
said.

Wayne Stanfield, president and CEO of the National Association of
Independent Medical Equipment Suppliers, said in a press release he believes providers will take
an even greater hit. Included in the final rule for oxygen, he
said, is another 2.53 percent cut that is listed as a “budget
neutrality reduction” required by the Social Security Act. Also, he
noted, oxygen is exempt from the 5 percent CPI increase.

“NAIMES feels strongly that CMS abused their authority by
applying the 2.53 percent reduction based on the 2006 rule, knowing
that an additional 9.5 percent reduction would exceed budget
neutrality requirements set by the DRA 2005. It is again a case of
CMS using the authority given by Congress to penalize suppliers,”
Stanfield said.