BALTIMORE--CMS announced last week the 2006 dispensing fee for inhalation drugs will likely drop below the current $57 per month fee, but the industry isn't taking the news lying down. The American Association for Homecare is campaigning to convince the agency otherwise before the 2006 Medicare physician fee schedule is finalized.

"This is critical," said Kay Cox, president and CEO of AAHomecare. "It's a reimbursement issue that could really affect a great number of [home care companies]. I think it will definitely be an acute problem for the patients being served."

Medicare payments for inhalation medications have undergone a number of changes in the past several years. In the most recent move, CMS replaced its average wholesale price formula with a formula based on average sales price plus 6 percent, as required by the Medicare Modernization Act. To compensate for the cost of delivering these therapies, the agency added a $57 monthly dispensing fee, or $80 per 90-day supply for 2005. Some of the nation's largest providers had threatened to exit the business if CMS did not add the fee.

Proposed changes to the 2006 physician fee schedule released Aug. 1, however, indicate CMS thinks the current service fee is too generous, noting, "the 2005 dispensing fee substantially exceeded some providers' costs as reflected in a few comments on last year's proposed rule and the [Government Accountability Office] study." A 2004 GAO report found that the cost of dispensing inhalation drugs ranged from $7 to $204 among 12 companies surveyed.

Cox contends the $57 a month fee is already inadequate, especially when factoring in inflation, rising gas prices and other costs associated with providing respiratory medications. Last year, a Muse & Assoc. study commissioned by AAHomecare found that the 2005 ASP-based formula would under-reimburse the actual cost of providing two key drug therapies by $68.10 per monthly supply. Some of the service costs cited in the study include clinical intake, establishing and revising a care plan, care coordination, patient education, caregiver training, compliance monitoring/refill calls, in-home visits, delivery of services, billing/collections and other patient management and administrative costs. The association is now in the process of gathering additional data to support its case, Cox said.

"We're just puzzled why CMS would even think of going lower than $57," she said. "What we have to do is work through those questions [about an appropriate dispensing fee] to make sure CMS understands it is not too high."

Jacki McClure, director of the National Respiratory Network for Lubbock, Texas-based The MED Group, said she is hopeful the industry will prevent the dispensing fee from undergoing a drastic cut. "Any further decrease is going to threaten patient access to care, and there's no data to support such a cut," she said. "When we first faced the threat of reduction we gathered data and showed it would affect patient access ... this time there is certainly time to come up with a plan to react to this."

During the comment period on the proposed fee schedule revisions, which ends Sept. 30, CMS is seeking feedback on an appropriate dispensing fee level, including specific comments on issues such as the potential impact on beneficiaries and providers and the cost of providing services to inhalation drug patients. To comment, click here.

To view the proposed revisions to payment policies under the 2006 physician fee schedule, click here.