Business Solutions

Oxygen Out of the Box

Providers can tap into a variety of oxygen care opportunities outside of the traditional Medicare model. The key is to think differently.

• By David Kopf
• Dec 01, 2018

The business of providing oxygen equipment and services to patients has suffered a number of blows in recent years, leaving many providers to wonder if there’s any business left at all. There is. The key lies in reaching out and finding new opportunities.

Sure, the bidding gap that will open up Jan. 1 offers considerable temptation to stick with the Medicare model, but there are other business models providers can pursue. And, there’s strong reason that they should, says Joe Lewarski, vice president of global respiratory and sleep for Drive Devilbiss.

“Ironically, as payment has decreased, the cost to serve home oxygen patients has continued to increase,” he explains. “This includes cost of labor, operations, delivery and technology. For example, many providers believe they cannot afford to dispense and support new technologies, such as portable oxygen concentrators (POC) and accept Medicare assignment or other insurance allowed amounts.

“Other drivers may include the complexity and risk of billing thirds parties (audits, etc.), which may encourage providers to seek more business to business models, such as hospice and long-term care,” he adds.

And it’s important to note that declines in reimbursements and the fee-for-service arrangement from Medicare are resulting in hits to care, not just the bottom line, notes Laura Williard, vice president of payer relations for the American Association for Homecare.

“A lot of providers have had to reduce some of the clinical services that they were able to provide,” she says. “I think this offers an opportunity for them to provide a service for many different cases and scenarios, for different payers, for different employer groups, potentially different physician offices maybe. So, there are a lot of opportunities out there that they can look at to be able to offer an entire package of services from a clinical perspective all the way through the equipment for providing oxygen services.”

Getting Creative

And when providers see those declines in both care and revenue, but also see the increased need for clinical services in the home versus in a skilled setting like a hospital or skilled facility, it’s hard not to start thinking about new possibilities.

“There are and, actually, there’s several providers out there in the HME industry that have been very forward-thinking and have been doing this for quite some time,” Williard says. “They’ve gone and marketed themselves and created models for value-based purchasing and alternative payment methods with specific payers. They’re going out marketing it to a lot of the commercial plans is what I’m seeing, mostly. I’ve seen some Blues. It’s been a trend from a BlueCross BlueShield perspective, but they’ve been very successful in going in and showing the B model and what the outcomes could be and actually creating that model for an insurance company and payer.”

And in working with private payer funding sources and similar entities, it’s important to note that the territory will still seem somewhat familiar, because most payers look to CMS as a guideline.

“Based on my experience and information, the majority of third-party payers follow the Medicare template for coverage, and rentals are most common,” Lewarski says. “Regarding duration of use, this can vary greatly; the best published source of oxygen length of use comes from the OIG oxygen study from September 2006 that examined oxygen patient lengths of use and determined the median length of use was less than 11 months, and less than 22 percent remained on service after the 36-month cap.

So, providers are looking beyond the commercial payer, and finding new opportunities in places like the aforementioned hospitals and clinics. The key is to get creative.

“You got to kind of think outside the box on this,” Williard says. “It is the way healthcare is going — away from a fee-for-service model or to a value-based purchasing. … I’ve seen a lot around COPD because it’s a big driver for the hospital to reduce readmissions around COPD so there’s a chance to partner with them or with skilled facilities or even homecare agencies to work on a plan or program for COPD.”

And retail factors heavily into that out of the box, Lewarski notes.

“Aside from Medicaid, traditional private insurance plans (including Medicare Advantage), which operate and pay for home oxygen similar or identical to Medicare, there are other potential funding sources, such as serving the oxygen patient needs in the long-term care market, hospice, and accountable care organizations (ACO),” he explains. “However, the discussed and sought funding source is the cash/self-pay scenario. While data sources may vary, it is estimated that 30 to 35 percent of all POCs sold are cash sales to end-users.”

In terms of the sorts of devices that lend themselves to non-Medicare funding, there are a variety of items that fit these models, but portability has definitely come to the fore. Patients want to get out and enjoy life.

“The most commonly discussed are the POCs but products also include stationary oxygen concentrators, transfill systems and oxygen conserving devices,” Lewarski says. “Growing consumer and prescriber awareness has created demand for POCs. This has accelerated significantly over the last couple of years due to the increasing direct to consumer marketing and sales efforts of a number of oxygen device manufacturers.”

Episodic Care

As the oxygen care industry gets creative, some of those out-of-the-box ideas can be very different indeed. Roughly 18 months ago, the American Association for Homecare began studying alternative business models for oxygen care, and wound up developing a model based on an episodic payment method for COPD patients that creates a clinical plan or care that would be followed and would involve outcomes tracking. The idea was to create a pilot for the industry in order to generate data so that other providers could look at the model, study it, and then sell it or a similar model to new referral partners.

The effort was inspired by a Bailit Health study, “The Role of State Medicaid Programs in Improving the Value of the Healthcare System,” that examined different models being used by large Medicaid programs and one was based on episodic care, rather than ongoing care. (The report can be found by searching the medicaiddirectors.org site, or by visiting bit. ly/2TdZakb.) AAHomecare enlisted various experts from organizations such as The MED Group and the American Association for Respiratory Care as well as various oxygen providers who worked for approximately a year to see if a similar concept could be applied to HME.

“When we looked at episodic care, it’s kind of kindred to the home health world,” Williard says. “In home health, you may have a long-term condition, but providers get paid for episodes of care, and in the home health world that is 60 days. So, with Medicare, you get paid for a 60-day episode of care and everything is included in that.

“That’s kind of our theory around episodic care,” she continues. “Obviously, when I take it to payers, they have different ways of reimbursing, so you really have to listen to them on what they want to do and partner with them and be willing to modify your program to fit their needs. But that’s where we’re starting the conversations.”

Per-Member Payment

Another alternative respiratory model that is coming to the fore is permember/per-month payment.

“I think a lot of what I’m seeing from providers now is they are getting paid similar to what a, for example, a Medicaid plan that has an ACO,” Williards says. “It’s a per-member/per-month payment to take care of that patient, so I’m seeing quite a few of the per-member/per-month payments for patients out there. They’re specific to specific diagnoses or specific services or types of items, too.

“It’s probably a little bit earlier to sell, too, because a lot of commercial plans also have a Medicaid business line as well,” she notes. “They’re kind of used to that.”

That said, while health plans might be used to that model, HME providers might have a little trepidation upon approach, because like the episodic care model, it’s very new territory for any business that has depended on a Medicare-style model for a long time.

“From an HME perspective because it is very different from what we are used to and we need to be leading the way,” Williard explains. “We don’t want to just be part of someone else’s value-based model and providing an add-on service. I mean, we are trying to get away from being labeled as a commodity provider; that we are a service industry. … There’s been a real hesitancy, but people are starting to come around on that.”

The key in being successful with this model lies in establishing what outcomes the provider wants to deliver to the payer, the patient, the health system, or whoever winds up being the final client, according to Williard. Expectations have to be set and met.

“[Providers] need to figure out how to track those outcomes, and they also need to know the cost,” she advises. “You want to make sure you look at every avenue of cost every step of the way — if they want to add a clinical services, if they’re going to add an additional RTD or staff, if they want to add any type of data outcome tracking, or use an outsourcing agency that might incur additional cost. … You don’t want to put yourself out, put yourself in a situation where you’re getting reimbursed less than what you’re actually putting in.”

This article originally appeared in the Nov/Dec 2018 issue of HME Business.