ATLANTA--First, respiratory providers were dealt an unexpected blow when Congress passed legislation that caps Medicare oxygen rental at 36 months. But they got an even bigger surprise late last month when, without notice, CMS announced its plans to overhaul oxygen categories and fees.

Provider Janice Petsch said this latest change, combined with the oxygen cap, could make it impossible to maintain her company's current business model. For starters, the company will no longer be able to send therapists out to patients, she said, and other cost-saving measures will follow.

"I think we could handle a lot more if it was just one thing at a time," said Petsch, who runs six-year-old Petsch Respiratory Services with her husband in Martinez, Ga. "I don't have a problem with the fee cuts and new regulations, but to do everything at one time now is incorrigible."

CMS' proposed rule would set new classifications and payments for all home oxygen therapies, including the creation of a new category for oxygen-generating portable equipment, such as portable concentrators and home transfilling systems. Payment for portable oxygen contents would be set at $55, while the monthly payment amount for stationary equipment would drop to $177 (see HomeCare Monday, July 31).

The proposal implements a provision in the Deficit Reduction Act that caps rental of oxygen equipment at 36 months, then transfers equipment title to the beneficiary. The new rule also includes additional business and service requirements for oxygen suppliers.

If given the choice, Petsch said, "I'd much rather take the cut than the 36-month [oxygen cap]."

Bill Baker, president of Rx02, Tucson, Ariz., agreed that making such changes now is poor timing on CMS' part, especially with Medicare competitive bidding on the horizon.

"Why do this now? What was the rush to get this [pricing] changed? Bidding is just down the street. Why change all this just before it's supposed to be bid?" he questioned. And, Baker added, "So we're supposed to deliver all the portable oxygen a patient can use for $55? If this is what [CMS is] thinking, they are very wrong."

Last week, the American Association for Homecare said it was concerned that CMS did not consult providers, patients or pulmonary physician groups about the proposed rule.

"Policy for medical oxygen under Medicare deserves review to ensure that the payment system is appropriately aligned with the actual clinical and lifestyle needs of the oxygen patient," said Tom Ryan, AAHomecare chairman and CEO of Homecare Concepts, Farmingdale, N.Y. "But the changes proposed in this rule do nothing to address the needs of the approximately one million Medicare beneficiaries receiving oxygen therapy at home.

"The logic behind this new rule is still driven by the idea that the chief cost component of oxygen therapy in the home is equipment. The reality is oxygen therapy requires many services that CMS does not account for in its reimbursement."

A recent study commissioned by AAHomecare showed that services, delivery and other operational expenses account for 72 percent of the costs of providing home oxygen, while only 28 percent of the cost represents oxygen equipment (see HomeCare Monday, July 10).

To view the proposed rule, click here.

For backgrounder on the DME portion of the rule, click here.

CMS is accepting comments on the rule until Sept. 25. To comment, visit www.cms.hhs.gov/eRulemaking.