2016 Respiratory Market Outlook

Moving on, Moving up

An aging population promises growth while new rules, audits, cuts and competitive bidding push providers to operate efficiently.

• By Joseph Duffy
• Oct 01, 2015

Like most of the DME industry, respiratory providers continue to negotiate the ongoing struggles of an industry in flux. Some have adapted to extensive change, become operationally lean and found a way to keep moving forward. Many providers have not been as fortunate.

According to our experts, the industry will continue to test provider resolve, as growth will remain a marathon and winning most likely determined by the number of little victories you can accumulate along the way.

“Home respiratory continues to be challenged with the impact of NCB, the myriad audits, continued operational cost challenges, and new rules of engagement as health systems see improved outcomes and reduced readmissions,” says Joe Lewarski, vice president of global respiratory & sleep for Drive-DeVilbiss Healthcare. “This is compounded by the pending expansion of the NCB rates into the smaller, non-NCB markets, which is essentially a new fee DME schedule for the core items. Other key policy issues facing providers include bundling payments for sleep therapy and changing the coding and coverage rules for mechanical ventilation.”

But despite the competitive bid rates for oxygen and the compliance requirements for CPAP, the respiratory industry is still a growing business for many providers, says Bob Hoffman, vice president of VGM Group Inc.’s Nationwide Respiratory.

“Providers have had to adapt their business practices to capture efficiencies in staffing and operations,” he says. “It has been a difficult transition for some but opportunity still exists as the Medicare population increases and pressures to reduce hospital admissions grows.”

George Coppola, director of marketing for oxygen equipment maker Caire, says home medical equipment is currently progressing through a typical market life cycle, similar to what has transpired in other industries. In short, the industry is transitioning from a high-growth market to a low-growth market. And to successfully transition to a low-growth market, Coppola suggested that providers:

• Increase revenues by generating more oxygen referrals from referral sources.
• Improve patient outcomes and reduce re-admittances for ACOs and hospitals.
• Partner with financially stable and reliable manufacturers that will survive for the long term.

For many providers trying to survive by becoming more efficient, Dave Marquard, owner and CEO of OxyGo LLC and Applied Home Healthcare Equipment LLC, says more providers are adopting a non-delivery model for their oxygen business to reduce costs and increase their patient service area.

“For example,” he says, “Instead of serving patients in a 20-mile radius of their business, providers can serve patients hundreds of miles away using portable oxygen concentrators along with a stationary unit. With competitive bidding, providers can bid additional MSAs.”

What Will Be Trending?

Looking onward and into 2016, Lewarski says that one trend to watch is the continued and growing focus on reducing and preventing readmission and improving post-hospitalization outcomes of patients with COPD and CHF.

“As health systems, payors and ACOs continue to expand and take on more financial risk, and CMS continues to expand other demonstration projects, such as the post-acute care 90-day bundle, the management of high-risk patients in the home becomes even more relevant and essential,” he says. “Solutions will come in the form of both technology and clinical interventions.

“The irony of the current market is that more now than ever, homecare clinicians are needed to assess, educate and manage patients in the home, yet the reimbursement for home respiratory therapy technologies and service is the lowest in history,” Lewarski adds. “Providers need to become integrated partners with payors, health systems, and ideally, those entities challenged with carrying the risk. This means getting more upstream in the transitional care process, which for many years has been more transactional for HME. Calculated, meaningful interventions with data tracking and analysis supporting clinical and economic outcomes are essential in such relationships. Healthcare data and analytics are new buzzwords in homecare.”

Lewarski also says to pay attention to the changing consumer market.

“Although we have referred to retail as a savior for the thirdparty system, in today’s market this is much more complex than simply a good location and point-of-sale displays,” he explains “As health insurance plans shift more cost to the patient, co-pays and deductibles are sending patients looking for better solutions and values, as they now have more skin in the game. Ecommerce and direct-to-consumer sales are growing in healthcare with millions of dollars already transacting. Understanding this space and the rules of engagement is essential. This is a complex and highly competitive environment that requires significant investment, and different skill sets compared to traditional HME.”

Finally, Lewarski says strategic relationships will be increasingly more important in 2016.

“This applies to both directions in an organization’s value stream,” he says. “Providers need to pick partners and drive strategic, long-term relationships that deliver value to all of the stakeholders, including healthcare providers, payors and their manufacturer/supplier partners.”

Hoffman says 2016 will see a hospital emphasis on readmissions.

“Providers who have built strong relationships with discharge planners are able to differentiate themselves from their competition,” he says. “Working together to ensure that patients are well educated as to their medications and that they have a dependable support team at home is vital to keeping the patients at home.”

Hoffman also says that seniors do have cash and families are more willing now than ever before to spend money on medical accessories. The POC market, travel CPAPs and any items that make their in-home care easier and more convenient present opportunities to create cash flow, he says.

The 2016 trends Coppola sees include improving the overall management of COPD patients through the use and application of telemedicine/monitoring and selecting the best oxygen delivery technology to match patient needs at rest and during exercise.

He suggested partnering with pulmonary rehab centers and physicians to create effective programs that reduce re-admissions of COPD patients and improve the quality of life. Also, identify patients earlier in their disease process who could benefit from using oxygen nocturnally, which would reduce hypoxic events during sleep.

Re-compete of Round Two

According to Ronda Buhrmester, Reimbursement Specialist, VGM Group, with the change in the product categories going from oxygen supplies and equipment being a separate category from the CPAP and RAD devices to now all being under one product category changes the game for suppliers. The contracted supplier under Round 2 that didn’t win the oxygen or didn’t win the CPAP/RAD category changed their daily processes, accreditation information, and licensure/certificates. Now if they want to do a bid for Round 2 re-compete, they have to consider if they want to bid for the respiratory category. If so, they have to update the accreditation policies, internal processes, and update or change certificates or licensures. All this costs money to the supplier, who will already be getting a lower reimbursement with the SPA.

Lewarski says if history is an indicator, respiratory providers will likely see additional reductions in the rates.

“The same challenges and concerns exist in the re-compete,” he says. “Do providers submit a bid reflective of their true cost to serve or do they bid down to just gain the additional business? Also, many bidders are experiencing a substantial pinch in their profits due to the low Medicare reimbursements, and previous bid winners may not qualify now based on their most recent tax submissions. For manufacturers the challenge is simple, take cost out of the product in exchange for performance that could potentially impact patient treatment or focus on the delivery of quality treatment options. It is imperative that quality care options be provided to patients and the re-compete may adversely affect this.”

More Audits in 2016?

Buhrmester says 2016 could see more audits due to the fact the RAC auditors will be back in the game.

“We are seeing non-invasive ventilation (NIV) being audited heavily, as well as oxygen,” she says. “Due to the dollar amounts involved, the NIV audits could potentially create a serious financial burden on companies. The challenges that suppliers are facing, in general, are that the reviewers are looking at the technical aspect of the claim and not just the medical necessity.

“If a date is missing or the NPI is omitted on the order or the supplier failed to date stamp that the order was received, the supplier risks getting the claim or audit denied,” Buhrmester explains. “Thus, the supplier could possibly lose the patient to another supplier even though medical necessity was established. The cost of staff resources to work on audits continues to take a toll as suppliers who are already dealing with reductions in reimbursement and aging accounts. Providers must continue to work with their referral sources by educating them on the requirements.”

According to Coppola, the best approach for providers is to develop and implement a compliance program and constantly work with an internal audit team to ensure compliance. A major challenge with this is that it adds cost to providers and further pinches their profitability, but in the long run they should see greater billing accuracy and faster payment, he says.

Hoffman says there is no quick and easy answer to building your respiratory business. “Everybody has access to all the products and everybody can deliver them to the home but you can go broke pretty quick if you neglect the documentation it takes to get paid,” he says. “Keeping all of the intake personnel, sales force and delivery teams updated as to all the rules and regulations governing compliance requirements and educating your referral sources so they too understand the documentation complexities is key. It takes time and effort to get the referral sources on board but once they become your partner in understanding the reimbursement requirements then you become the provider of choice.”

This article originally appeared in the Respiratory Management October 2015 issue of HME Business.