Business Solutions

Is the Grass Really Greener?

For the past few years, providers have eyed O&P as a fertile expansion opportunity, but what is the funding and regulatory reality?

• By David Kopf
• Oct 01, 2013

For the past few years, many home medical equipment providers have looked toward orthotics and prosthetics with considerable interest. While the home medical equipment business has been besieged by a number of funding and regulatory threats — competitive bidding and audits chief among them — that have promised to all but decimate their reimbursement, the O&P market has seemingly been operating in carefree conditions and reaping what looked from the HME perspective to be reimbursement rates that seemed on par with the fabled age of the “golden commode.”

And O&P offers a not necessarily easy, but at least manageable and feasible migration path for providers looking to expand their businesses. There are similar patient groups; they are working with essentially the same funding sources; the referral sources are the same or at least similar. What would be required of HME providers is to gain new knowledge and new certifications, and put into place the sorts of facilities that would be necessary for sizing patients, custom-building prostheses, and fitting and re-fitting. O&P isn’t the best fit for all providers, but it does make sense for many providers of more complex medical equipment offerings, such as rehab power chairs, for example. In other words, there is a good deal of staff-development and resource investment involved, but the business fundamentals are solid.

But does O&P truly enjoy far greener pastures than HME, or is this a case of the grass always being greener? It’s a question well worth asking because while O&P offers providers considerable opportunities, it is a market that is experiencing a good deal of funding-related change as well. Understanding those changes is crucial for any provider examining the O&P space.

Speaking as someone who helps HMEs interested in O&P, Dennis Clark, CPO, president of the Orthotic and Prosthetic Group of America (www.opga.com), says the O&P sector offers opportunity, but isn’t necessarily as different from HME as some providers might hope or dream. A division of the VGM Group, the OPGA helps providers explore and expand into O&P via services such as education; leasing and financial programs; liability and property insurance; graphic design and print marketing; and website development and hosting for its members, which gives Clark a clear perspective on the issue. “It’s still a good option, but it’s not for everybody,” he says. “It the kind of option that you need to understand has regulatory constraints just like the regulatory constraints on the HME providers.

“We have the same RAC audits and pre-payment audits going on, just like the high-end rehab providers going on right now,” he continues. “So the cash flow with respect to Medicare patients is still challenging, and being impacted by regulatory change.”

Like a lot of expansion opportunities that natural branch off from HME, such as home access, for example, O&P is a matter of degrees. There are different levels that providers can approach the sector. At one end would be providing fully fledged prosthetic limbs that must be custom-built and tailored to each specific patient. At the other end would be providing more simple orthotic solutions that don’t require as much infrastructure and investment. The former offers more funding and more expense, the latter might offer an easier entry point.

“It really depends on the level they want to get involved,” Clarks says. “If they want to get involved with the off-the-shelf level, then there are fewer barriers on there, on the orthotics side.

“But, we’ve just heard that competitive bidding may expand to the 100 or so L codes that we use for billing in that area,” he warns. “So the challenges are there.”

Expect Future Funding Cuts

That mention of competitive bidding is a good opportunity to look at the future of O&P funding. Could the less “off the shelf,” more complex portions of that arena see any sort of bid program? There will be cuts, Clark says.

“It may not be called competitive bidding, and it may not be the exact same formula, but the idea with CMS for competitive bidding and with the audit situation has nothing to do with fraud,” he says. “It has to do with money, and reducing the amount of money that is being spent, and I believe that CMS will try come up with programs that help to reduce the amount of money that is being spent.

“And they need to try and do that without denying access to beneficiaries,” Clark continues. “So if the beneficiary needs the product, and this is the appropriate care model for that, then the only option they have is to reduce what they pay for that care model.”

So if CMS has its sights set on reducing O&P funding, how will it go about doing that? It’s not a simple answer, but Clark says providers can expect something to happen in the way of funding reduction.

“Will it be like competitive bidding?” he poses. “That’s a little tougher to do considering that everything we do is custom. But, it’s not impossible. They [CMS] have a lot of people who are working day and night trying to figure out ways to reduce by a significant percentage what O&P professionals get paid.”

At this point, anyone familiar with competitive bidding and customized medical equipment might recall the complex rehab wheelchair carve-out from competitive bidding. That segment of the DMEPOS benefit was able to protect itself by convincing lawmakers that their care and equipment was so specialized and so customized on a per-patient basis, that the notion of competitively bidding such chairs didn’t make sense. Could the same be done for O&P, since so much of it is specifically designed for individually patients?

“I think that is why we’ve stay out of the competitive bidding realm today,” Clark says. “High-end complex rehab and O&P are very much the same in the eyes of Medicare. O&P actually has our own category; we get paid not just for the product, but for the service and the time, all bundled into our payment. So that’s sort of a separate benefit category, if you will.”

Reinforcing that care element will be crucial in protecting O&P’s funding, Clark says.

“We have to understand as orthotists and prosthetists that our job is not just to provide that orthoses or prostheses; our jobs is to provide care that improves the function and the health of the product,” he explains. “If we zero down on the product or the item, then we’re going to get commoditized just like DME got commoditized with competitive bidding.”

And that is a fundamental lesson that providers must keep in mind as they consider the O&P opportunity. Simply put, O&P hinges on patient care.

“HME business that want to expand into O&P have to understand that we’re healthcare providers, professional, trained, credentialed healthcare providers,” he says. “We’re not limb-makers. We’re not bracemakers. That’s not what we do.

“We provide and manage care for orthotics, prosthetic and pedorthic patients in an effort to increase their function and improve their health,” Clark continues. “As long as we continue to sing that song, and as long as we continue to prove that’s what we’re doing with out business, then we’ll stay the realm of competitive bidding and we’ll stay outside of the constraints of that come along with that.”

What Was That About Audits?

In the same way CMS is eyeing O&P for funding cuts (however they mightfinally come into focus) it has already begun auditing O&P claims. In fact, audit expert Wayne van Halem, president of The van Halem Group LLC, a consulting firm that helps providers prepare for and appeal audits says roughly half his clients are O&P providers. And those audits can swell to significant sums.

That’s a troubling prospect because in some respects that could mean that expanding into the O&P sector poses more risk for HME providers than what they currently deal with in the DME arena.

“They [O&P] providers are getting hit very, very hard,” he says. “They are getting hit in several different areas. The MACs have identified O&P. The MACs have also implemented edits on high dollar volume claims, which they have defined as being over $1,000. The [Health and Human Services Office of Inspector General] has identified prosthetics as an area of special focus in their workplace. And the RACs have identified it for complex review. So they’re getting hit from all ends.

“And their audits are no joke, because a prostheses costs in some instances between $20,000 and $40,000,” van Halem continues. “They [O&P providers] have to go out and buy all that equipment to build the items. So you have to refund all that money, and then you’re also out the $35,000 to $50,000 that you paid for the items. … If you get recouped on a couple of claims, you could be looking at $100,000.” And the hard costs are in addition to the staff time and expertise involved, which can quickly mount in a business that, as Clark mentioned, is service-intensive.

“They have visits with the patient for casting; measurements; they have trials,” van Halem explains. “They’re meeting with those patients three or four times before they give them the product and they don’t get paid for any of that.”

Like HME, this ramp-up in audits for O&P is a recent development, and if anything CMS is playing catchup to ensure O&P providers adhere to the rules they always should have been following.

“It really has expanded significantly just in the last year,” van Halem says. “These guys were taken by storm by Medicare audits, because Medicare had always expected them to be doing things a certain way; documenting in a certain way and relying on physician’s notes.

“CMS has in the past never done a good job enforcing the rules in O&P,” van Halem adds, speaking as a veteran claims investigator for CMS. “In the case of prosthetics, I don’t think they really understand the business. I know when I was a fraud investigator I shied away from prosthetic limb cases because I didn’t understand it.

“Now, they’re enforcing it, and they’re enforcing rules that have always been in place, but have never been followed by folks that are in that profession,” he continues. “So it has really sent shockwaves through that industry with the amount of, intensity and the focus of these audits. And so many of them are having problems because they’ve been doing things the way they think it should be done, but not the way Medicare always expected it to be.”

Credentials Are Key

One of the things that will help providers ensure that they are doing things the right way is having credentialed staff on-board. To Clark’s earlier point, credentialing staff properly is essentially because O&P providers are providing a deep level of care, not just product. And, it will also help ensure the right processes are followed which will save time and money while ensuring the best outcomes. For example, these professionals will be able to track a patient’s progress and know the warning signs for problems such as an ulceration.

“Anyone who wants to get involved in O&P as a means of expanding their HME business needs to understands that it is critical that they have credentialed practitioners involved,” says Clark, who once served as president of the American Board for Certification in Orthotics and Prosthetics. “It’s the best way to save money and the best way to provide care.

“You have to hire a little higher paid, credentialed clinicians not unlike the people that do the high-end rehab stuff are a little more higher paid and work on higher dollar items,” he says.

When it comes to ensuring staff have the right education and expertise, there are three key credentials: Certified Prosthetist, Certified Orthotist, and the combination Certified Prosthetist-Orthotist. There is also a certification for Certified Orthotic Fitter.

To obtain the right credentials, there are two main deemed authorities for credentialing in O&P that truly specialize in the space: the American Board for Certification in Orthotics and Prosthetics, and the Board of Certification/Accreditation International (BOC). Each authority has a national board exam, and both have educational requirements in accredited educational facilities from universities and colleges, followed by a residency program, as well as ongoing continuing educational requirements of roughly 15 hours’ approved education per discipline.

So What if the Grass Isn’t As Green?

Ultimately, O&P is a segment in flux, just like HME, a fact providers must keep in mind. And in a strange way, those changes might actually put providers in a good position. HMEs have become battle hardened when it comes to dealing with a constant barrage of change coming from the Centers for Medicare and Medicaid. Where a tradition O&P business might be frazzled by changes, a HME would see it as familiar territory.

For instance, given that providers have been slugging it out with RAC, CERT and ZPIC audits for some time now, perhaps they have developed the skills and business processes necessary to help diminish the blow they’d encounter when expanding into O&P.

“We’re all in the same pond, there,” Clark says. “CMS does look at it as DMEPOS, so the regulatory activities that are there, many HME dealers are used to that and have standards and personnel and compliance people in place to live in that sort of environment.”

But at the end of the day, for many providers, O&P can offer a solid expansion opportunity — it just might not be the green and pleasant land of trouble-free funding they might have initially expected it to be. Then again, what is these days?

“The margins are not the same as they used to be; there’s no question about that,” Clark explains. “There is more administrative expense involved in getting paid and gathering appropriate information from referral sources on the front end.

“But it still is an opportunity, because the patient population and in many cases the referring clinicians are the same people,” he continues. “Orthotics and prosthetics is, like HME, a relationship business, and if you have relationships with the referring physicians and the other networks that are involved in referring patients, then be able to expand yourself into those markets is a good option.”

This article originally appeared in the October 2013 issue of HME Business.