Home medical equipment providers are literally on the edge of their seats this year. As the drama unfolds in Washington, and a captive provider audience
Thursday, July 1, 2004

Home medical equipment providers are literally on the edge of their seats this year. As the drama unfolds in Washington, and a captive provider audience braces for reimbursement cuts and competitive bidding, customers are still knocking on providers' doors to serve their needs for HME.

Following this industry's plot twists and turns is a full-time job. Surpassing their roles as businesspeople, providers are becoming Washington watchdogs, continuously called upon to make their voices heard and regain credibility lost in the headlines of Medicare fraud to help reshape public policy.

This year's presentation of Facts & Figures brings some hard evidence into the spotlight: Medicare's rising expenditures for K0011 wheelchairs and a sharp decrease in the issuance of new supplier numbers show both the partial cause and effect of CMS' Operation Wheeler Dealer. Market demand, however, continues upward. The government's most recent forecasts predict Medicare enrollment will climb to almost 50 million people by 2010, and to 77 million — or 22 percent of the nation's population — by 2030.

As the HME show goes on and providers learn to deal with a burgeoning customer base and toughening business conditions, the industry, like a gracefully aging film star, must find new ways to reinvent itself. Let's face it. There may always be a bit of drama in HME, but in the end, if patients are well served, the results will always be worth it.

NUMBER OF DURABLE MEDICAL EQUIPMENT SUPPLIER NUMBERS ISSUED, 1999-2003
Year Total
1999 11,400
2000 10,706
2001 11,450
2002 14,334
2003* 9,474
NUMBER OF DURABLE MEDICAL EQUIPMENT SUPPLIER NUMBERS ISSUED BY DMERCS IN 2003
DMERC Total
Region A 1,674
Region B 2,248
Region C 3,634
Region D 1,918
TOTAL 9,474
*On Sept. 9, 2003, CMS implemented a moratorium on the issuance of new supplier numbers as part of its Operation Wheeler Dealer initiative to curb fraud and abuse of the Medicare power wheelchair benefit. The moratorium was eased on Nov.1, with some applications reviewed on a case-by-case basis. As of February 2004, a backlog of about 3,500 supplier number applications remained.
Source: Palmetto GBA, Columbia, S.C., National Supplier Clearinghouse

ACCREDITATION BY JCAHO, CHAP OR ACHC*

Overall, 75% of respondents to AAHomecare's 2003 Financial Performance Survey are accredited by JCAHO, CHAP or ACHC. Accreditation is generally related to company size, with all firms above $10 million in revenue being accredited or seeking accreditation.

Size of Firm Percent of Firms in Survey
Less than $3,000,000 51%
$3,000,000 - $4,999,999 91%
$5,000,000 - $10,000,000 71%
More than $10,000,000 95%
*Based on data from firms that responded to AAHomecare's 2003 Financial Performance Survey.
Reprinted by permission of the American Association for Homecare (AAHomecare). Based on fiscal year 2002 information provided by 120 firms of varying sizes and home care services. Visit www.aahomecare.org for more details.
NUMBER OF MEDICARE BENEFICIARIES, 2002
Category Total
Aged Persons 34,668,073
65 to 74 17,758,208
75 to 84 12,464,716
85 and over 4,445,149
Disabled Persons 5,820,798
Under 45 1,679,135
45 to 54 1,798,469
55 to 64 2,343,194
All Persons 40,488,871
Source: Centers for Medicare and Medicaid Services
MEDICARE DSO (DAYS SALES OUTSTANDING) BY PRODUCT CATEGORY* IN 2003**
Respiratory Drugs 41
Respiratory 56
DME 69
Rehab 76
Enteral 110
*DSOs within each category weighted toward products with higher dollar totals paid in that category. Figures show average length of time elapsed from date of service to Medicare check issue date.
**Data represents a categorized and weighted analysis of more than five million Medicare remittances processed for RemitDATA customers.
Source: RemitDATA, 866/885-2974, www.remitdata.com
NUMBER OF HOME HEALTH CARE PATIENTS BY TYPE OF AIDS, DEVICES USED, AND AGE, 2000*
Selected Aids and Devices2 Number Age1: Under 18 years Age: 18-44 years Age: 45-64 years Age: 65-74 years Age: 75-84 years Age: 85 years and Over
All patients3 1,355,300 64,200 124,400 211,500 234,200 424,600 296,300
Mobility
Total with mobility aids 842,600 13,200 53,600 113,500 144,600 287,400 230,300
Cane or crutches 306,200 * *9,000 39,800 55,400 114,300 86,400
Orthotics, including braces 33,700 * *6,500 *9,400 * *8,700 *
Transfer equipment 69,600 * *7,100 15,700 *14,100 18,000 *13,200
Walker 522,200 * 19,400 49,300 92,500 198,900 158,800
Wheelchair4 326,900 *11,200 30,800 57,700 56,600 86,500 84,100
Self-Care
Total with self-care devices 558,800 9,300 41,100 82,000 95,300 176,900 153,900
Beside commode 210,200 * *9,100 35,600 40,400 65,400 58,500
Elevated or raised toilet seat 98,100 * * *9,600 *11,900 34,800 36,600
Chairs5 49,900 * * *11,000 * 12,600 19,100
Grab bars 146,200 * *8,200 16,300 27,600 50,700 40,700
Hospital bed 214,800 * 25,900 40,700 28,800 54,500 57,900
Mattress, special 57,000 * *10,600 *13,100 *7,500 13,500 10,800
Overbed table 24,600 * * * * * *
Shower chair or bath bench 230,100 * 9,600 28,400 36,200 77,900 76,200
Medical
Total with medical devices 317,600 15,900 31,700 58,300 74,300 84,800 52,600
Blood glucose monitor 132,500 * 11,800 19,200 38,600 37,300 25,000
Enteral feeding 30,700 * * * * * *
Intravenous therapy 52,300 * 17,100 * * * *
Oxygen6 114,600 * * 18,200 25,700 43,400 19,900
Other respiratory therapy 45,300 * * *15,000 * * *
Other aids 187,500 11,600 23,600 33,100 28,200 58,600 32,400
*Figure does not meet standard of reliability or precision because the sample size is less than 30 if shown without an estimate. If shown with an estimate, the sample size is between 30 and 59, or the sample size is greater than 59 but has a relative standard error of 30 percent or more.
1Age is the patient's age at the time of survey
2Numbers will not add to totals because a patient may be included in more than one category
3Total number of home health care patients		 4Includes manual and motorized wheelchairs
5Includes geri-chairs, lift chairs and other specialized chairs
6Includes oxygen concentrator
Source: Centers for Disease Control and Prevention, National Home and Hospice Care Survey, February 2004
NATIONAL EXPENDITURES IN 2003 FOR THE TOP 20 HME MEDICARE CODES
2003 Rank 2002 Rank Code Description Allowed Charges
1 1 E1390 Oxygen Concentrator $2,000,138,973
2 2 K0011 Power Wheelchair $1,165,651,869
3 3 A4253 Test Strips $773,621,139
4 4 J7644 Ipratropium Bromide $708,251,332
5 5 J7619 Albuterol $478,764,024
6 6 E0260 Hospital Bed $323,578,179
7 8 E0431 Portable Gaseous Oxygen $224,138,878
8 7 B4150 Enteral Formula I $200,260,211
9 9 B4035 Enteral Feeding Kit $190,107,087
10 10 E0277 Powered Mattress $152,661,733
11 11 E0439 Stationary Liquid Oxygen $138,894,830
12 14 E0601 CPAP $120,934,301
13 12 K0001 Standard Wheelchair $100,413,187
14 13 K0004 Lightweight Wheelchair $85,231,502
15 17 A4259 Lancets $78,920,040
16 19 E0570 Nebulizer $75,567,658
17 20 E0143 Folding Walker $73,705,558
18 16 B4154 Enteral Formula IV $73,158,294
19 30 A5509 Direct Heat Form Shoe Insert $72,717,629
20 15 K0533 Noninvasive Assist Device $72,509,511
Source: Centers for Medicare and Medicaid Services
REGIONAL PAYMENTS IN 2003 FOR TOP 10 HME MEDICARE CODES
Code Description Region A Payment Region B Payment Region C Payment Region D Payment
E1390 Oxygen Concentrator $217,649,389 $370,203,536 $655,876,250 $326,508,024
K0011 Power Wheelchair $74,801,822 $120,337,559 $556,377,978 $177,397,427
A4253 Test Strips $88,964,116 $154,179,875 $247,850,451 *
J7644 Ipratropium Bromide $58,223,458 $111,853,359 $297,081,289 $94,991,272
J7619 Albuterol $38,099,688 $75,656,043 $205,986,293 $54,323,997
E0260 Hospital Bed $42,464,607 $45,493,211 $121,060,399 $42,161,395
E0431 Portable Gaseous Oxygen $25,133,903 $42,235,889 $73,541,576 $36,322,653
B4150 Enteral Formula I $25,720,955 $28,405,021 $52,708,807 *
B4035 Enteral Feeding Kit $33,106,955 $28,357,617 $62,547,703 *
E0277 Powered Mattress $16,139,145 $17,560,808 $63,090,855 $24,760,485
*Data not provided. Source: Centers for Medicare and Medicaid Services
PUBLIC HME-RELATED COMPANIES 2003 FINANCIAL PROFILES
Company Name NYSE/Nasdaq Symbol Fiscal Year-End 2003 Net Income in Millions 1-Year Net Income Growth 2003 Net Revenue in Millions 1-Year Net Revenue Growth No. of Employees 1-Year Employee Growth
Abbott Laboratories ABT December $2,753.2 (1.4%) $19,680.6 11.3% 72,200 0.5%
American HomePatient AHOM December $14 N/A $336.2 5.1% 3,451 (0.3%)
AmerisourceBergen ABC September $441.2 27.9% $49,657.3 9.8% 14,800 8%
Apria Healthcare Group AHG December $116 0.3% $1,380.9 10.3% 10,582 0.3%
Cardinal Health CAH June $1,405.8 33.1% $50,466.6 (1.3%) 50,000 0%
Chad Therapeutics CTU March $1 N/A $21.5 10.3% 110 2.8%
Gentiva Health Services GTIV December $56.8 N/A $814 5.9% 15,100 (7.9%)
Invacare IVC December $71.4 10.2% $1,247.2 14.5% 5,300 0%
Johnson & Johnson JNJ December $7,197 9.1% $41,862 15.3% 110,600 2.1%
Lincare Holdings LNCR December $232.1 21.9% $1,147.4 19.4% 7,375 10.1%
Matria Healthcare MATR December $7.3 N/A $326.8 17.7% 1,452 (34.4%)
McKesson MCK March $646.5 16.4% $69,506.1 21.7% 24,500 2.1%
National Home Health Care NHHC July $5.8 9.4% $97.2 18.2% 3,350 (4.3%)
Option Care OPTN December $8.7 (38.3%) $355.4 10.9% 1,792 (3.6%)
Pediatric Services of America PSAI September $5.1 (63.8%) $215.6 9.2% 4,800 17%
Praxair PX December $585 43% $5,613 9.5% 25,438 1.7%
ResMed RMD June $45.7 21.9% $273.6 34.1% 1,464 17.1%
Respironics RESP June $46.6 21.4% $629.8 27.3% 2,700 3.8%
Rotech Healthcare ROHI December $8.4 N/A $581.2 (5.9%) 4,400 (15.4%)
Tyco International TYC September $979.6 N/A $36,801.3 3.2% 258,600 (3.3%)
Walgreen WAG August $1,175.7 15.4% $32,505.4 13.3% 154,000 9.2%
Parentheses indicate a loss. Source: Hoovers.com
CODE DESCRIPTION
CO18 Duplicate claim/service
CO/PRB17 Payment adjusted because this service was not prescribed by a physician, not prescribed prior to delivery, the prescription is incomplete, or the prescription is not current.
CO16 Claim/service lacks information which is needed for adjudication. Additional information is supplied using remittance advice remarks codes whenever appropriate.
OA109 Claim not covered by this payer/contractor. You must send the claim to the correct payer/contractor.
CO50 These are non-covered services because this is not deemed a “medical necessity” by the payer.
CO57 Payment denied/reduced because the payer deems the information submitted does not support this level of service, this many services, this length of service, this dosage, or this day's supply.
PR96 Non-covered charge(s)
CO13 The date of death precedes the date of service.
CO35 Benefit maximum has been reached.
PR22 Payment adjusted because this care may be covered by another payer per coordination of benefits.
*Data represents an analysis of more than five million Medicare claims across all categories with payment dates from Jan.1, 2003, to Dec. 31, 2003, filed by RemitDATA customers.
Source: RemitDATA, 866/885-2974, www.remitdata.com