FLASHBACK TO 1980: Ronald Reagan sits behind the big, wooden desk in the Oval Office declaring a war on drugs. Sandra Day O'Connor has broken the glass ceiling of the Supreme Court. Milk costs $2.02 a gallon. AIDS is only a year away from being identified by the national scientific community. And the issue with home health care: It isn't an issue.

Return to 2001: The Patient Bill of Rights and Medicare prescription drug benefits are on the forefront of the nation's political agenda. Justice Ruth Bader Ginsburg has joined O'Connor on the bench. Milk costs $2.93 a gallon. There are at least 14,000 home medical equipment providers servicing patients across the nation, providing them with everything from semi-electric beds to infusion pumps. And the issue with home health care: reimbursement.

Though rising hospital costs in 1980 were planting the seed for change in the nation's health care system, HME providers were largely a thing of the future. In the two decades since, HME has flourished into a far-reaching industry with major players in all 50 states. It has evolved from an unregulated, free-for-all establishment with its share of fraudulent providers to an industry that provider Wayne Sales, president of Richmond, Va.-based Health First, calls “the red-headed stepchild” of Congress.

Has the HME industry cleaned up its act? Providers say yes, and argue that despite drastic improvements, the industry operates in the shadow of the bad reputation set in its earliest learning years.

A Bad Rap

THE “GOLDEN COMMODE” was a symbol of corruption in the HME industry in the 1980s. The euphemism underscored the hefty profits fraudulent providers were pocketing from the reimbursement practices of that decade. Without much legislation to regulate or foster its growth spurt after 1983, the industry spawned providers who abused reimbursement — and that led to a poor image that has remained with the industry for almost 20 years.

Velma Goertzen says when she first started in the industry in 1987, she “really questioned why we'd rent a commode forever and ever and ever and Medicare would still pay for it.” Goertzen, general manager for Hutchinson, Kan.-based Health E-Quip, says that commodes were not the only equipment overlooked by lax reimbursement regulations. “When I started, oxygen was still being paid no matter what the prescription said. The criteria were very loose.”

Other HME leaders concede that the early industry years were awash with fraud and abuse. “There wasn't a lot of criteria put in place for reimbursement,” says Butch Vanderpool, president of Auburndale, Fla.-based Health Care Diagnostics. “Shady providers would find a niche where they could make a lot of money and stay there. They put a black eye on the entire industry.”

Looking back, Jim Liken, president and chief executive officer of Pittsburgh,-based Respironics, says that reimbursement itself was not flawed. Liken, who founded Liken Home Medical in 1977 and sold it to Lincare Holdings in 1998, says although reimbursement may have seemed high, it covered the generous services that legitimate providers included with the purchase of equipment. Critics of reimbursement at that time overlooked the free delivery, free 24-hour service, free billing to insurance and the free maintenance that came with renting the equipment, he says.

But Congress viewed the situation differently, and passed legislation to combat the rampant abuse in the industry. The Health Insurance Portability and Accountability Act of 1996 and the Balanced Budget Act of 1997 cut Medicare funding and implemented site visits and audits of HME providers. Although an upsurge in site visits was necessary to curb fraudulent providers, says Vanderpool, these legislative actions turned the reimbursement climate hostile for lawful providers.

Serving Time

NEARLY FIVE YEARS after the BBA, HME providers face a situation where “the industry is guilty until proven innocent,” says Vanderpool. Providers say that an easing up by Congress is long overdue. As Congress tightened its reigns on the industry in the mid-1990s, HME providers struggled to comply by cutting back on services. Fraudulent providers were forced out of the industry as intended, and those providers that survived have done so under a level of scrutiny most consider an insult.

Current legislation is outdated when the levels of present fraud and abuse are considered, providers say. Evidence demonstrates that the HME industry has cleaned up its act. The Office of the Inspector General in its 1999 Semi-Annual Report reported a 45 percent reduction in overpayments in the two years ending March 31, 1999. The “intensified crackdown” pursued by the OIG and the Centers for Medicare and Medicaid Services resulted in a drop in the estimated rate of improper payments from 14 percent in 1996 to less than 8 percent in 1999, according to the report's foreword written by former Inspector General June Gibbs Brown. In November 2000, HomeCare reported that between 1997 and 1999, “the OIG excluded 8,679 individuals and companies from doing business with Medicare, Medicaid, and other federal and state health programs.”

According to industry leaders, HME providers in the past five years have shown a new side of HME. “We are a great value,” says Sales, “a terrific bang for the buck. On the other side of the coin, we are unappreciated, looked at as fraudulent and abusive when in fact we're probably … the most effective and honest portion of the entire health care sector.”

Saving a Dime

IN ADDITION TO the demonstrated decline in fraudulent providers, says Sales, additional proof of improvements in the industry is right in front of Congress. “More and more money is spent on medical equipment at home,” he says. “This should represent how many people we care for, and that should be reflected in how much is spent on us.”

Data from the Health Care Financing Administration Web site confirms Sales' comment. Between 1997 and 1999, consumer spending increased in HME. In 1999, projected sales of HME were $858 million, up from $699 million projected for 1997, and continuing a trend of an annual growth rate of more than 10 percent.

Despite the increase in consumer spending on HME, Washington has continued to cut Medicare funding. The stringent legislation resulted in a consistently low annual growth rate in Medicare spending on home health care — only 1 percent in 1999 — according to reports from CMS. CMS reports attribute “the dramatic two-year slowdown [between 1996 and 1998] primarily to the effects of changing payment systems for home health care facilities and nursing homes … and continuing federal government efforts to detect and reduce fraud and abuse.” Health Affairs, recommended as a source by CMS for in-depth information on health spending, reported that “renewed government efforts to detect fraud and abuse in Medicare began to slow growth in home health spending from 10.1 percent in 1996 to 2.8 percent in 1997.”

The purpose of the legislation has been to save money in Washington, not to eliminate fraud and abuse, says Liken. A member of the National Association for Medical Equipment Services beginning in 1984, Liken says that over the years NAMES — the predecessor to the American Association for Homecare — would go to Congress and propose bills to reveal fraud and abuse in the industry, only to be rebuffed. “We had a bill once that we were fighting for about high ethical standards. Something like 200 congressmen signed on, and the bill went nowhere,” he says. “The legislation has had nothing to do with fraud and abuse. It is absolutely economic — to cut money out of the budget.

“If the OIG wanted to end fraud and abuse, they could,” Liken continues. “The handful of scam artists could be readily found and put out.” Instead, he says, Medicare has continued to cut funding to home health care. “Congress sees spikes in Medicare and wants to cut,” he says. “But they have no business slicing when they're not understanding what they're hurting.”

Vanderpool suggests that there have not been enough providers on board with NAMES and its successor, resulting in the current reimbursement climate. “We brought it on ourselves because we lacked self-regulation,” he says. “At one point, there was a proposal for cleaning ourselves up — NAMES was at the helm — but everybody kind of ‘pooh-poohed’ the idea.” Now, says Vanderpool, providers regret their inaction. “Everybody's saying we'd be glad to have that plan back now,” he says.

Does CMS Spell Relief?

SALES EQUATES CONGRESSIONAL demands on the HME industry to the old adage: “You've asked us to do so much with so little; now we can do everything with nothing.” But the industry cannot survive on this track for long, he says, and providers are pressing for relief in reimbursement. “We're getting ready for some significant social change,” says Sales.

Recent political developments in Washington may prove beneficial for providers seeking reimbursement reform. “With new people coming into Washington,” says Sales, “I see a break in the clouds.”

Other providers aren't so assured that changes such as new leadership and HCFA's name change promise a newer, friendlier face in Washington. “Whether it's friendlier or not, time will tell,” says Goertzen. “We've not been the most significant priority of the new administration.”

Vanderpool shares that reluctant outlook. “I'm not going to take a change in HCFA's name or a friendlier face in Washington as change until I see the rules change,” he says.

In order for those rules to change, says Vanderpool, providers need to let go of the tainted history of the industry and start with a fresh, new voice. “Instead of crying to Washington about reimbursement cuts and what's happened in the past,” says Vanderpool, “we need to be proactive, to get them to look at the increases, to look at the money we're saving them.”

According to Vanderpool, a focus on the future is necessary to drive this change. “I understand why we as an industry are doing what we're doing,” he says, “but I'd like to see us get out of that mode and have a more positive message to take to the hill.”

The Face of Change

MUCH OF THE current frustrations regarding reimbursement stem from the knowledge gap between providers and government officials, providers say. “Home care has grown so quickly over the years that Congress doesn't know about us,” says Vanderpool. “They think we're equipment peddlers who don't provide a service.”

State and national associations may offer a starting point for closing this gap between providers and Washington, he says. “I think we need to start with state and national groups,” he says, “and try to get together to go to the hill with a positive measure.”

Involvement in the durable medical equipment regional carriers' advisory committees is an outlet for raising awareness in Congress, says Goertzen, and for keeping the dialogue going between providers and their state and national representatives. Goertzen attests to the positive impact she has witnessed in her own interactions with representatives from Kansas, and says that change will come through “pure education of our senators and congressmen.”

“They need to understand what CMS is doing with the laws they write with good intentions,” she says. “There's often a discrepancy between what they thought they voted for and what happened.”

Says Liken: “Everyone should be a member of AAHomecare and play a part in communicating early and often, taking messages to Congress.”

Sales would like to see an emphasis on patients incite a revolution in reimbursement. “I'd like to see HomeCare magazine or [AAHomecare] hold a photo contest for dealers to send in photos of their patients at home with their equipment. When we go to Washington to lobby,” he says, “I'd like to see the top five, most moving [photos] enlarged and put in the rotunda of the capital building. It's about the human spirit. [The government has] got to see the reality, not just the budgetary.

“When you look into the eyes of someone who's suffering,” he adds, “it's harder to say no. And that's what we have to do that Washington doesn't.”

For more information on the reports referenced in this article, visit http://www.hcfa.gov/stats/nhe-oact/hilites. htm; www.healthaffairs.org; www.nara.gov/ig/reports/prevsemirpts.html.

Moving Away from Medicare

REIMBURSEMENT has had an adverse effect on the daily practices of most providers. Service levels are one area where dramatic impact is evident. “Service levels have had to be trimmed back and streamlined to meet the dropping reimbursement levels,” says Velma Goertzen of Health-E-Quip. “We're no longer providing the ‘Cadillac’ service we used to.”

To compensate for insufficient reimbursement levels, providers are moving away from Medicare and into managed care and hospice. “We used to be 75-85 percent Medicare,” says Butch Vanderpool of Health Care Diagnostics. “Now we're only 40 percent Medicare. We're 40 percent managed care and 8 to 9 percent hospice business. We've put our eggs in other baskets.”

Goertzen says that Health-E-Quip has chosen a similar path. “Health-E-Quip has definitely moved into retail,” she says. “We used to be 90-95 percent Medicare. We've dropped down to 48-52 percent, and this was definitely by design. We've increased our retail revenue — it now represents 25 percent of our total revenue — because we needed cash to support the Medicare end.”

The migration of the HME community towards retail has resulted from the rising cost of business, according to Health First's Wayne Sales, who says that as the cost of business has been on the rise, reimbursement has been frozen in time. He says that the process “lends itself towards a depression in the business rather than growth and integrity.

“We want cash and carry,” he says. “We don't want to wait to be paid. The national average for day sales outstanding in this industry is 92. I have to pay my employees every 14 days … That means I have to keep three months' worth of cash flow in the bank at all times. Any Harvard business student would look at that and say anything over 60 is a high risk, over 90 is unheard of … We don't want to subsidize the government for three months..”
— M.G.

Buried Under Paperwork

THE DENSE paperwork required for compliance with current home health care legislation is a source of headaches for most providers. Velma Goertzen of Health-E-Quip says she and other providers are fed up with going through the reimbursement process and being rejected “because we failed to cross a ‘t’ or dot an ‘i’.” Current regulations make running a profitable home medical equipment business a challenge, she says, and the onslaught of paperwork means errors are inevitable.

The difference between her view and that of Congress: Goertzen attributes these errors to honest mistakes. “The restrictions are so tight and tough that it's hard to remember everything,” she says.

“There's not a school you can go to, to learn how to do this,” says Butch Vanderpool of Health Care Diagnostics. “There's nowhere you can go to learn how to bill Medicare. The manual is still not clear on everything, so you start by the Braille method and there are mistakes you make just out of ignorance. But not knowing is still not an excuse for them.”

Providers have had enough. Jim Liken, president and chief executive officer of Pittsburgh-based Respironics and former president and founder of Liken Home Medical, says the time has come to “eliminate the bureaucracy.” The paperwork and demands of Congress amount to “nonsense,” says Liken, and he says the recent proposal for retesting oxygen patients is a good example. “Retesting oxygen patients is an onerous position with very little gain,” he says.

The dense paperwork has also led to stumbling blocks in the relationship between providers and physicians. Over the past 20 years, it has become much more difficult to qualify patients for the equipment they need, says Goertzen. “The doctor's prescription used to be enough, and then the certificate of medical necessity was enough. Now you need even more supporting documentation.”

Doctors don't understand why their order isn't good enough, she says, and Medicare doesn't recognize that the doctor has no incentive to help providers.

In rural areas, says Goertzen, “providers can't just write a physician off because he hates paperwork and doesn't understand the necessity of it, because he may be the only act in town,” she says. “But doctors do hate it. They don't understand why Medicare doesn't take their prescription for what it's worth.”

“The time has come for a new working relationship between the field workers of HME and the payers of HME who sit in Washington and say retrospectively what the right thing would have been to do,” says Wayne Sales of Health First.
— M.G.