2009 Reimbursement Outlook

An Update on the 36-Month Oxygen Cap, Competitive Bidding Delay and CPAP LCDs

• By Elisha Bury
• Nov 01, 2008

Wondering what changes are in store for respiratory providers in 2009?

“I think you’re going to see providers financially struggle and some may fail, big and small,” predicts Chris Kane, COO of Pacific Pulmonary Services and spokesman for the Council for Quality Respiratory Care (CQRC). “I think you will see the impact of very sudden and very significant reimbursement changes hitting providers and patients in a delayed fashion, so that it will be several months before many providers realize they’re being paid much, much less. How they react to that and what they do will be very uncertain but is bound to create a lot of distress for the patient community. We expect for our business that 2009 will be the most challenging year we’ve ever had.”

In addition to the reimbursement changes already in place, the industry faces the additional burden of a new president and Congress whose top priority will be reforming health care and Medicare, says Cara Bachenheimer, senior vice president, Government Relations, Invacare. “There’s going to be a flurry of activity. There’s going to be hearings. There’s going to be bills. There’s going to be a lot of scrutiny of this industry.”

Walt Gorski, AAHomecare’s vice president of Government Relations, concurs. “The economic condition of the Medicare program in the country is difficult,” he says. “There is going to be a drive for Medicare reform as well as cost-savings. Typically oxygen is center stage on that.”

To keep further reimbursement cuts in check, providers must continue the grass-roots activity that helped delay the competitive bidding program, Bachenheimer advises. “We’re a small industry, but there are only 535 members of Congress,” she says. “We need to make sure that all of those folks are favorably disposed to us and they understand the benefits of the products and services that we provide.”

The following are overviews of the three major changes in respiratory reimbursement.

THE 36-MONTH OXYGEN CAP
In accordance with the Deficit Reduction Act of 2005, the Centers for Medicare & Medicaid Services (CMS) capped payment for oxygen rental equipment at 36 months. After three years, the first patients reach that cap Jan. 1. Kane estimates that anywhere between 25 and 35 percent of providers’ patients will reach the cap in January.

Most providers have had time to consider how the cap will affect their businesses — namely if the payment for portable supplies will be enough.

Kane, like many in the industry, argues it’s a consideration that CMS failed to make when arbitrarily deciding to cap payment at 36 months. “A major cost center for providers every month a patient is on service is not how much the medical devices cost but the money we spend to visit the patients, to deliver supplies and essentially to deliver a whole host of services that go along with a patient using the device,” he says. “Those service costs do not go down or change month over month.”

Unfortunately, providers may have drastically different reactions to this problem. Larger providers may be able to absorb the costs to sustain services, Kane explains, but smaller providers may not.

“The obvious but unacceptable answer is you just stop serving patients,” he says. “Much smaller providers who make up half of the caretakers for home oxygen therapy patients in the United States may be forced to either radically diminish their levels of service or eliminate them because they’re not big enough to absorb the costs.”

Still Waiting on a Maintenance Fee
Even after payment stops, providers will retain ownership of the equipment in accordance to the Medicare Improvements for Patients and Providers Act (MIPPA), which repealed the clause that would transfer the title of the equipment to the patient. The repeal presents an interesting regulatory question.

“The basic Medicare policy on repairs and maintenance is that if it’s a rental product, Medicare doesn’t pay it because it’s a series of continuing rental payments,” Bachenheimer says. “They just pay the rental fee and whatever has to be repaired or maintained during that rental period will be done because the supplier is getting payment. That’s why this oxygen policy is whole new territory because it is theoretically still a rental product because the patient doesn’t own it, but there’s no payment stream to sustain or support any level of service and maintenance.”

While most of the industry agrees that providers should retain ownership of these devices, the industry is balking over how providers can afford to maintain them. To date, CMS has yet to indicate what the reimbursement will be for service and maintenance.

“What we are worried about is if they maintain unrealistically low reimbursement for service and maintenance because essentially they think it’s not needed, that you’re going to have the exact same problem you’re going to face with service levels,” Kane says. “Some providers are simply going to throw up their hands and say, ‘I’m not being paid for this patient.’ ”

Kane says he’s hoping CMS establishes a reasonable annual fee that’s equal to approximately one month’s rental at the current reimbursement rate per patient.

Industry in Action
In late August, AAHomecare submitted a list of nearly two dozen questions to CMS regarding the oxygen rental cap implementation. The questions focused on the specifics of billing, maintenance and service; contracts for emergency care after 36 months; backup equipment billing issues; reimbursement for traveling patients; and detailed documentation required to obtain new 36-month rental contracts.

On Sept. 29, the AAHomecare Regulatory Committee met with CMS staff in Baltimore for a listening session on industry concerns. CMS indicated that the agency is developing policy but could not provide a timeline.

Timing is a key issue as the industry awaits clarification. Gorski says it’s not only providers but also the DME MACs that need time to update their systems before Jan. 1.

Bachenheimer says CMS will most likely answer those questions in a program memorandum typically released 30 days in advance. She says Dec. 1 is a likely date for the transmittal. CMS has “told us they’re going to be putting something out, but they haven’t told us exactly when that’s going to happen or even what the scope of the guidance is going to be,” Bachenheimer says.

THE COMPETITIVE BIDDING DELAY
In July, Congress overrode the president’s veto of H.R. 6331, a bill that would delay the competitive bidding program. MIPPA, the new law, achieved the delay, but also mandated a 9.5-percent cut to oxygen and sleep products, which hits providers in January.

“I think what is being underestimated about the impact of that cut… is the double-cut impact of that 9.5-percent cut and the DRA cap hitting in January,” Kane says. “Collectively, you’re looking at a cut that for many providers could be as high as 30 percent.”

Kane says the cut will catch many providers off guard.

In response, providers will once again be forced to streamline operations and look for ways to cut costs, Gorski says. “However, because the field’s payments have been under such assault over the past several years, we believe we’re getting to the point where there are few efficiencies that can be squeezed out of the system,” he says. “We believe that the race to the bottom has already begun and that services are going to be adversely affected as more cost-cutting pressures come to bear on the field.”

Unfortunately, delaying the bidding program would not have been an option, Bachenheimer says, if the industry had refused the cut. She says that the industry’s choice was between a 9.5-percent cut and a 26-percent cut, which was the average savings of the first round of competitive bidding. “If you didn’t have this law, then CMS had every authority — and we believe they probably would have applied that authority — effective this coming January, to apply bid rates across the nation,” she says.

Many in the industry hope the delay, which will be at least 18 months, will result in the end of competitive bidding. Bachenheimer is hopeful that will happen, but says it will also come at a price. “If the industry can develop some alternative payment system — and I don’t have anything in mind when I say that — that will satisfy policymakers that they are paying appropriately for this benefit, it’s feasible,” she says.

Gorski says finding an alternative system will be a key challenge in 2009. AAHomecare has already established a task force to identify this payment system.

Kane doesn’t believe competitive bidding will go away. “I think there is significant interest in the notion of competitive bidding for durable medical equipment products if done well,” he says. “The critical perspective here is … how will the industry and Congress and CMS work together to address the flaws in competitive bidding as it stands today?”

Those discussions will not begin until 2009.

LCDs FOR PAP THERAPY
In July, the medical directors for the four DME MAC jurisdictions released identical local coverage determinations (LCDs) regarding CPAP policy. Prior to the Sept. 1 implementation date, however, the LCDs were delayed. At press time, revised LCDs had just come out.

HMEs Shut Out of Home Sleep Testing
One of the most shocking provisions of the LCDs was the restriction on home sleep testing that prohibited HME involvement.

“I think the home sleep testing part right now as the rule is written would more or less quash its value,” says Joe Lewarski, chairman for the AAHomecare HME/RT Council and vice president of the Respiratory Products Group for Invacare. “I think the restrictions were so rigid it would really eliminate the spirit of the intent of CMS to create an opportunity for patients to be tested in the home.”

While the provision is unlikely to have a direct effect on providers’ bottom lines, many were hoping home sleep testing would open up growth opportunities.

“The role that HME providers could play in this process is a pretty simple one, which is transporting the equipment from the physician, who ostensibly would own it, to the patient and then back again, which sounds perfunctory; but believe it or not, the inability to get the devices to a patient and then get them back to a doctor who can download the data and diagnose the problem is the biggest hurdle in the whole process of getting the patient tested,” Kane says.

Kane says he doesn’t understand why CMS would refuse to take advantage of the HME industry’s expertise in that area.

CMS cited concerns about fraud and abuse, but Kane says that the argument does not hold water. “The potential for fraud and abuse is nonexistent, meaning that the way that these devices work is they are sealed testing devices that are tamper-proof,” he says. “There is no way for anyone — the patient, the physician, an HME provider — to alter the outcome of the data the device collects.”

The HME Burden
The LCD included many problematic stipulations for providers if implemented. One issue for providers is the requirement for the patient to meet with the physician between the 61st and 91st day of treatment for reimbursement to continue. The revised LCDs eased those restrictions, moving the requirement back between the 31st and 91st day.

“If the patient does not return to the physician, that reimbursement for the device will be terminated,” Kane explains. “The issue there is that DME providers have no way and no business trying to get a patient and a physician back together in the second and third month just to sustain their therapy. There is no way for us to coordinate that.”

Kane says it’s ironic that CMS is worried about HMEs delivering medical devices for home sleep testing but then in the same LCD called for providers to deliver compliance data from CPAPs to physicians and report it to CMS.

“There are a lot of mixed messages in this LCD,” Kane says.

In addition, Lewarski says the treating physician definition could create problems for providers regarding CMNs and paperwork. “If you’re limited to a very small number of physicians who are responsible for treatment, it can obviously affect a provider’s ability to provide timely care and service to the patient, as well as obtain and process the required medical necessity and claims paperwork efficiently,” he says.

The LCDs at first mandated the use of high-end CPAPs with memory capabilities to monitor compliance, though CMS failed to increase reimbursement for these more expensive devices. The revised LCDs now accept visual inspection of adherence data vs. direct download.

“This allows HME providers more flexibility in device selection, along with their follow-up procedures,” Lewarski says. “There is a substantial difference in cost between the devices with download vs. those with visual compliance data.”

Perhaps the biggest problem with CMS’ compliance regulations is the definition of adherence to therapy — use of the PAP device for greater to or equal to four hours per night, 70 percent of nights — which Lewarski says could impact patients who are benefiting from treatment but not meeting the required hours per night. “They picked a common but relatively arbitrary definition of CPAP adherence that isn’t necessarily an agreed upon standard,” he says.

“Now you have a situation where you may have a patient who is clearly benefiting from therapy but not meeting this arbitrary line in the sand, whose primary care physician feels very strongly that this patient still needs to be on therapy. The patient feels they are benefiting from therapy, but Medicare won’t pay for it,” he continues.

That is one regulation that the medical directors did not revise. Lewarski says this will create logistical and documentation hurdles for providers and patients.

The Industry Reacts
In response to the new LCDs, AAHomecare submitted unsolicited comments to the medical directors arguing that the LCDs made extensive and substantive revisions to the existing policy and added new coverage conditions, which require a comment period and implementation time.

“We believe that, in general, the LCDs did not represent a clarification of policy but represented new policy. We believe that because it represented new policy, those policies needed to be vetted through a public comment period,” Gorski says. “The polices that were put forth in the LCD, we believe, would have hindered access to CPAP technology.”

AAHomecare found fault with the requirement that only certain physicians can interpret sleep tests. In its comments, AAHomecare said, “This limitation on coverage for PAP devices is far too restrictive given that the number of physicians who are board-certified in sleep medicine is small compared to the physicians who are likewise qualified to interpret sleep studies by virtue of their training or experience.”

In response, the revised LCDs give physicians until Jan. 1, 2010, to get the appropriate credentials to interpret sleep tests.

Lewarski, who helped AAHomecare draft the comments, remains puzzled by CMS’ focus on saving money regarding CPAP treatment when the diagnostic process costs so much. “Depending on what levels of things were done, that diagnostic process can cost from a few thousand dollars to as much as $5,000-6,000 before the patient is referred for a CPAP machine,” he says. “I think it’s ironic that we put all of this energy and resources into the diagnostic side of a patient with sleep apnea, and then the focus is on the minutia of the treatment side, which is a fraction of the total cost.”

Compared to other chronic diseases such as diabetes, COPD, hypertension, asthma and congestive heart failure, CMS’ restrictions for sleep apnea seem unwarranted, Lewarski notes. “All of those diseases have issues with compliance to therapy, with serious costs and health issues when there’s non-compliance,” he says. “No one would think about stopping the payment for insulin for a diabetic who’s non-compliant. It would be unethical and totally illogical.”

Additional revisions to the LCDs included a definition of the type IV home sleep testing device as one that must record AHI or RDI; clarification on how instruction of home sleep testing devices can be provided (this cannot be performed by a DME supplier); and permission to use auto-titrating devices for home titration, though the policy failed to provide additional reimbursement for these devices. No revised implementation date was provided, though the LCDs frequently refer to Nov. 1, 2008.

“I think that some of the changes were meaningful and help with the logistic and cost burdens, but I am concerned that overall, the LCD does not support HST as intended in the spirit of the CMS decision,” Lewarski says.

Lewarski expects that the medical directors will make additional changes down the road. “Sleep therapy utilization is increasing and this is clearly on the radar, or more accurately, in their sights,” he says.
A comment period is not expected.

This article originally appeared in the Respiratory Management November 2008 issue of HME Business.