Observation Deck

Uncertainty and Opportunity

Homecare’s industry outlook for 2010.

• By Seth Johnson
• Mar 01, 2010

Last year healthcare reform was a major focus for policy makers in Washington, DC. Two separate bills were passed by the House and Senate. Typically two bills are reconciled in order to develop a final bill, so, at the time of writing this article, the final outcome on a comprehensive healthcare reform bill remains in doubt. However, the opportunities and threats that resulted from the ongoing debate in 2009 provide an excellent road map to where theindustry must focus in 2010.

Whether healthcare reform advances in a comprehensive package or a series of smaller bills, the issues debated and included in healthcare reform legislation are the radar of Congress and will likely reappear. So, what are these issues, how should the industry address them, and what other priorities will the industry look to advance in 2010?

Competitive bidding. In 2009, a provision included in the Senate’s passed legislation would require round two of the Competitive Bidding (CB) Program to be expanded from 79 to 100 of the largest areas. It also calls for the national expansion of the competitive bidding program or the national application of competitively bid rates by 2016.

In the House, Representative Kendrick Meek (D-FL) introduced legislation (H.R. 3790) that would repeal the DME competitive bidding program. The legislation has over 140 cosponsors and the industry’s goal is to secure over 200 cosponsors and get a Senate companion bill introduced. The legislation does include a budget neutral “pay for” with changes to the Consumer Price Index (CPI) update:

• No CPI updates in 2010, 2011, 2012 and 2015.
• No 2 percent additional increase in 2014 as provided for in MIPPA.
• Reductions of .25 percent in 2010-2013.
• Reduction of .50 percent in 2015.

In addition, efforts will continue on the regulatory front to fix one of the most fundamental errors of the CB Program which deals with how the CMS calculated capacity. In 2008, the industry identified that CMS confused “market share” and “supplier growth capacity” in their calculations, which likely resulted in fewer contracts being offered and a lower single payment amount.

Preservation of first month purchase option for standard power wheelchairs. Another industry threat included in both healthcare reform bills is the elimination of the first month purchase option for standard power wheelchairs (complex rehab power wheelchairs are exempt from the change in both bills). This issue consumed a significant amount of time for industry last year as AAHomecare and others looked for a budget neutral alternative to replace the estimated $800 million in savings over 10 years that the Congressional Budget Office projects for the provision. Senator Arlen Specter (D-Pa.), the industry champion on this issue, worked closely with Senator Ron Wyden (D-Ore.) and the Senate Finance Committee to help the industry develop a budget neutral rate reduction alternative.

While the alternative is supported by the Senate Finance Committee, it can only be inserted in the bill if the House and Senate bills are blended through the conference process or if Congress decides to scrap the initial bills and work on the development of scaled back legislation. If the House simply passes the bill the Senate passed in December and Congress agrees to fix other changes through the reconciliation process, the purchase option alternative would most likely be omitted since it doesn’t impact the budget as required for changes via reconciliation.

Medical device excise tax. The medical device excise tax provision was initially designed to save $40 billion over 10 years, but was cut to $20 billion due to strong opposition among Democrats and Republicans. There are two different provisions in the Senate and House legislation. The Senate legislation applies the tax based on an apportionment of each medical device manufacturer’s relative market share of covered domestic sales, while the House provision would apply a straight 2.5 percent tax on the first sale other than for resale. The Senate provision is effective retroactive to sales on/after Jan. 1, 2010, payable in 2011, and is not deductible, while the House provision is effective in January 2013 and is deductible. Our industry is largely lined up in support of the House provision if a tax has is included the legislation.

Documentation. This issue is going to grow in importance throughout 2010 as audit activity continues. In 2009, Congress and the administration allocated $19 billion for Health Information Technology (HIT) and transition to electronic medical records. This provides an opportunity to work with the government to develop a standardized electronic process for the collection and evaluation of medical records including DME claims.

Manufacturer competitive bidding. The House reform legislation included a provision that requires the Government Accountability Office to evaluate creating a CB Program for DME manufacturers. The study is expected one year following passage of the bill. The House committee staff indicated that the impetus was to have a “plan B” if the provider CB Bidding program is stopped due to significant procedural or operation problems. Industry stakeholders are working to educate committee staff on why this is not a realistic solution.

Separate benefit for complex rehab. A proactive issue that the complex rehab segment of the industry started working on last fall is the initiative to create a separate benefit category for complex rehab technology. The over arching goal for the initiative is to improve and protect access to complex rehab technology for individuals with significant disabilities and medical conditions. The anticipated outcomes from this effort include:

• Clearer and more consistent coverage policies;
• Tighter provider standards to promote better clinical outcomes and consumer protection;
• Recognition of depth and cost of products and clinical services;
• Future payment stability to ensure access; and
• An improved model for Medicaid and other payers to follow.

Oxygen reform. Various segments of the industry will continue to work on the development of oxygen reform to address the 36 month cap issues and provide long term stability to the oxygen benefit. The stakeholders heavily involved in this issue last year are continuing to refine their proposals and work to build consensus.

This article originally appeared in the March 2010 issue of HME Business.