Funding Focus

A Silver Lining Amid the Black Clouds of the New Oxygen Policy

• By Kelly Riley
• Apr 01, 2009

Saying there is anything positive in the new oxygen policy is a bit akin to telling someone newly unemployed that they will now receive a few more tax advantages. Nevertheless, with so little positives mentioned, it is important that providers are aware of the few threads that are out there.

• While opinions vary regarding whether or not the transfer of ownership to the patient is good or bad, the impact is that the equipment will always belong to the provider. As a result, the device could be placed back in the rental fleet on multiple occasions. With this change, some providers are going back to a 60-month depreciation schedule after changing to a 36-month schedule pre-MIPPA (Medicare Improvements for Patients and Providers Act). The effect is that the asset remains on the balance sheet and shows increased value to the company should the organization need to secure funds for various expansion or operational needs.
• Pre-MIPPA, many were struggling with the question of exactly how many cylinders were included in a set. The guidance had required the supplier to transfer a "set" of cylinders to the patient as his or her own. For many, that would have equated to transferring more than 10-12 cylinders per patient! Added to that, was the requirement that the supplier was going to have to store cylinders for patients that wanted them picked up. That would, of course, require additional costs for securing space and an internal mechanism for tracking. Fortunately, this burden has been removed.
• Providers now have the ability to start a new 36-month cap at the end of the useful life of the equipment (after five years), which has added some fresh air to this Draconian policy. Also, to start the new reimbursement period, suppliers will not have to arrange for new testing.
• Another positive is that the Centers for Medicare & Medicaid Services (CMS) has clarified on numerous occasions that the supplier does not have to make a delivery every month to bill for contents. Providers can deliver up to a three-month supply and then continue to bill on the regular monthly cycle bill date.
• One of the biggest hurdles that makes this policy not only unmanageable to suppliers but cruel to elderly and frail patients is that the policy makes it difficult for patients to relocate (at press time). Patients often move due to dire financial or health care issues. It is clear it will take involvement from patients and their families to get any relief. While the supplier is clearly on the hook in the case of patient relocation post-36 months, it has been clarified that the patient continues to be the one responsible for obtaining (and paying extra for) oxygen while traveling.
• The announcement of the 2009 fee schedule brought a bit of "silver threads" as it was quickly noted that certain oxygen codes had been excluded from the 9.5-percent cut. These codes include all equipment classified as oxygen-generating portable equipment (OGPE), i.e. all portable oxygen concentrators and transfilling devices. This should provide yet another indicator to suppliers that it is time to evaluate adding these non-delivery models. Also excluded from the cuts were codes that reflected contents, whether gaseous or liquid. The codes include E1392, K0738, E0441, E0442, E0443 and E0444.
• According to one study, the service component is more than 70 percent of the total cost for providing oxygen to patients. For years, the industry has used the benchmark of $60-85 as the cost to make a single delivery. CMS has repeatedly stated that it does not pay separately for travel to the patient's home, but is of the opinion that those costs are rolled up in the payment of code E1340. The organization will only allow a total of two units (in 2009 only, at press time). Recently, the fee schedule for that code was updated with a modest increase because it had not been increased in a long time. While the increased amount still does not come close to providers’ costs, it is still an increase.

Unless we continue to stay vigilant in our efforts to educate Congress and CMS, we are likely to continue to be subjected to more cuts. The concept of reducing the cap from 36 months to 18 or even 13 is still an option to some. The idea of utilizing the title of provider (as other health care entities do) vs. supplier warrants some further investigation.

This article originally appeared in the Respiratory Management April 2009 issue of HME Business.