It is no wonder providers of home respiratory care are having trouble catching their breath: the uncertainty of competitive bidding, ramifications of the Deficit Reduction Act, skyrocketing delivery costs. No matter how any of these factors turns out, it is obvious this segment of the HME industry is facing monumental change — and providers must figure out how to deal with it.
NCB'S IMPACT
Whether you call it selective contracting, competitive acquisition or national competitive bidding, the result is the same. The Medicare DMEPOS bidding program will have a significant effect on home respiratory care providers.
“Competitive bidding is changing the fabric of our industry as we speak. Companies are wrestling with how to continue to provide good patient care with a staggering reduction in reimbursement,” says Patrick Clevidence, vice president of respiratory services for Cleveland-based Medical Service Company.
“We were fortunate to have won contracts in each category in which we bid. Unfortunately, with the reduction in reimbursement there is greater pressure to reduce expenses,” he adds. “Companies are going to have to invest in better delivery models and processes to increase productivity and keep costs to a minimum. If they do not, they will be out of business.”
Clevidence and others say the effect on patients also will be significant.
“Sadly, the biggest loser in all of this is the patient. Some companies are reducing their clinical services and staff, and others will provide equipment that is not focused on the patient's needs but on what they feel they can afford,” he says. “We have committed to provide the same clinical support and the best non-delivery oxygen models that will benefit our company and, most importantly, the patient.”
Adds Joe Lewarski, vice president of Elyria, Ohio-based Invacare's respiratory group, “The most obvious impact is the significant reduction in reimbursement — a reduction as draconian as that imposed by the Balanced Budget Act of 1997. Since Medicare is often the benchmark for Medicaid and other payers, this can have a negative ripple effect throughout the industry and extrapolate to non-bid areas and non-Medicare patients.
“The payment reduction raises concerns about patient access to clinically appropriate and ambulatory oxygen technologies, particularly new oxygen technologies, as providers struggle to service patients with such limited revenue,” Lewarski continues. “Clinical support, such as that provided by home respiratory therapists, is also at risk as providers look to reduce non-reimbursed costs from their businesses.”
According to Ralph McBride, vice president of HME/RT for Greensboro, N.C.-based Advanced Home Care, there will be numerous consequences for HME providers who offer home respiratory products and services.
McBride says the oxygen industry will see increased reliance on non-delivery models, increased dependence on manufacturer financing and a continuation of CMS challenging reimbursement rates resulting in providers diversifying their product portfolios.
Aside from limiting choice in providers and access to oxygen equipment, competitive bidding will also limit the number of pro bono services that have been provided unselfishly for years, according to Tom Pontzius, president of Nationwide Respiratory, a division of Waterloo, Iowa-based VGM Group.
“The Medicare benefit for home care has always been limited to ‘in the home.’ Because of the reduction in reimbursement and other legislation, the impact on ‘free’ services will be felt by the beneficiary,” Pontzius says.
Drew Devlin, clinical director of Landauer Metropolitan, Mt. Vernon, N.Y., says the COPD patient population will be significantly impacted as COPD management is a non-reimbursable service.
“Disease management is an area I feel we as an industry will need to work with very closely,” he says. “We need to look at ways to prevent exacerbations of this group of patients which eventually lead to increases in emergency room visits, physician visits and hospital admissions.”
A smaller number of providers servicing the needs of an increasing number of Medicare beneficiaries is another issue.
“This could be a slippery slope for both patients and providers. Providers will be required to ramp up their businesses quickly with limited funds as a result of reduced reimbursements and ever-growing operating costs, which could ultimately result in reduced service to the patient,” says Kristin Mastin, director of marketing for DeVilbiss Healthcare, Somerset, Pa.
Still another effect that troubles many in the industry is the number of companies awarded round one contracts that are either not located in the CBA in which they won or do not have prior experience with respiratory care.
“As long as you were [accredited] and checked all the right boxes, you were approved as a bidder,” notes Ron Richard, vice president of sales and marketing for SeQual Technologies, San Diego.
“You don't need to have previous experience dealing with any of these kinds of conditions — you just need to be able to fill out a lot of forms. I guess that's how we're going to manage our health care system going forward.”
Richard adds that providers who will not participate in DMEPOS bidding — due to opting out because of reduced reimbursements or because they are not successful in bidding — will have a challenge when transitioning their patients over to a contract supplier.
“There is still a lot of debate about the grandfathering of oxygen patients and the legacy of taking care of those people with existing reimbursement rates and codes in place,” he says. “There is quite a bit of dissension about grandfathered patients and how they're going to be taken care of.”
Richard also sees the possibility of patients in the round one CBAs receiving inferior equipment.
“It may be that the providers that bid low are going to look at buying the cheapest oxygen equipment that will fulfill the prescription and allow them to bill the codes appropriately for the patients that are receiving service,” he says. “That's the only way that they can probably continue to look at making a margin.”
Kim Snyder, Murrysville, Pa.-based Respironics' U.S. marketing manager, home respiratory care, says oxygen providers must understand their total costs in providing oxygen so they can make future bids that will allow them to maintain their businesses profitably.
SDB GETS HIT, TOO
In the market for treating sleep-disordered breathing, the rates seen under NCB are also troubling.
“Competitive bidding is an important challenge with 25 percent reductions in reimbursement codes for Medicare beneficiaries, putting them on par with or even ahead of some of the more aggressive HMO insurance companies in terms of reimbursement reduction,” according to Michael J. Farrell, senior vice president of Poway, Calif.-based ResMed's sleep strategic business unit.
“Our challenge will be to objectively and definitively show CMS how $1 spent in Part B of Medicare actually saves $5-plus in Part A of Medicare. These types of data would go a long way to ensuring that competitive bidding is contained.”
Adds Lewarski, “Prior to national competitive bidding, sleep therapy and devices appeared a bit recession-proof, with certain manufacturers still able to command a premium for interesting device features and benefits that have no scientific evidence supporting the use.
“With such a drastic cut, I think providers will start to look past this and seek more value in their sleep product purchases,” Lewarski says.
Competitive bidding will almost certainly limit access to technology that helps increase compliance, points out VGM's Pontzius. “Because of the vast reduction in the amount a provider is reimbursed, access to certain interfaces will also be limited or abandoned altogether,” he says.
Mastin says, like the oxygen market, there will be “fewer providers with slim margins servicing more beneficiaries.”
And Advanced Home Care's McBride is worried about non-grandfathering of sleep supply patients.
“There is data that supports the link between compliance and supply replenishment on a frequent basis,” he explains. “Patients who use suppliers that did not win the bid will be forced to convert to winning bidders. Besides a prescription for supplies, CMS requires suppliers keep a copy of the sleep study, which means winning bidders will be forced to flood physician offices with new prescription requests and the sleep labs for sleep study requests.”
He adds losing bidders that have a proactive supply replenishment program have limited incentives to spend valuable time assisting patients in the transfer to a winning supplier.
“Assuming there are cracks in the system and patients will fall behind on their interface, then compliance will be impacted,” McBride reasons. “When you couple this with the co-morbidity studies, it seems like there is a likelihood we will see a health decline for some patients resulting in increased health care utilization at the physician and hospital level.”
Also as in the oxygen market, there is apprehension among those working in the sleep sector that contracts were awarded to companies that have not previously participated in the treatment of SDB.
“This will contribute to the overall service level and information and education a beneficiary will receive,” says Pontzius. “Competitive bidding's impact on the beneficiary will be significant, leading to more people not being compliant and benefiting from a therapy that increases their quality of life.”
Companies will have to determine what they can afford to provide for the patient while keeping the patient's well-being in mind. That means working toward compliance because it is vital to the patient's success, says Clevidence of Medical Service Company.
“Compliance data gathering can be very expensive, and the more precise information you want to obtain, the more costly it will be,” he says. “High-end CPAP units are expensive, and the cost of harvesting the information and getting it to the physician is expensive.
“Patients need our clinical support and push to use the equipment.”
Provider Brennen Garry, president of Kansas City-based UniMed, sees a two-sided situation. “I would like to think that we are going to be extremely busy since our competition has been greatly reduced,” he says. “Sleep really took a hit in Kansas City, so our biggest concern is replacing the revenue while maintaining our service and technology model.”
At press time, momentum was building in Congress to delay competitive bidding.
“But who knows for sure?” asks Todd Cressler, CEO of CressCare Medical in Harrisburg, Pa. “Even if that happens, reimbursement is going to drop. There still have to be health care savings.”
Cressler also believes the industry needs to look at different coding for varying levels of CPAP therapy. “We need to look at different coding for different technology, just like we did with oxygen,” he says. “But first, let's stop competitive bidding and then address how we're going to save the country and the health care system money.”
DEFINING THE DRA
The Deficit Reduction Act of 2005, which transfers ownership of oxygen equipment to the beneficiary after 36 months of continuous use, is another startling reality with an impact that has not yet been defined.
“The transfer of ownership of oxygen equipment to the beneficiary will put a tremendous amount of pressure on the beneficiary to understand when their equipment is in need of repair and servicing in addition to not having a source for emergency after hours support when needed,” says Pontzius.
“There will be many calls for service and repair that won't be covered by Medicare, and the beneficiary will be responsible for payment of these services. [Beneficiaries will be in] a situation that will ultimately force them into non-compliance or going without therapy altogether.”
According to Advanced Home Care's McBride, “The 36-month cap will devastate many providers this January. When you add the reduced reimbursement rates due to national competitive bidding to the cap, providers are going to experience the perfect storm.”
To date, a number of unanswered questions about exactly how the equipment transfer will work remain.
For example, asks Kelly Riley, director of the National Respiratory Network for Lubbock, Texas-based The MED Group, “If you transfer the piece of equipment to the patient and the patient has ownership, who is the accreditation body going to look at if there is failure of the equipment? Are they going to hold the provider accountable for the safety issues related to the patient management?”
She says some providers want to retain ownership of the equipment while others, citing potential liability and cost, do not, making this “a horribly difficult issue.”
Landauer's Devlin points out “there still are no defined guidelines that outline what will happen to the patient-owned equipment, maintenance, service, cylinder replacements and so forth.”
Another question that bears an answer is what providers will get paid for servicing the beneficiary-owned equipment.
”There's a lot of debate about if providers can even afford to do something, or anything, for a patient after title transfers,” says Richard.
“When we [as a manufacturer] build a product, we have the mindset that it's going to be maintained by a home care provider who has biomedical people on staff. In other words, it's built so the patient can easily use it and that it meets their clinical needs, but most manufacturers build devices with the thought that providers are going to take care of it.”
It gets even more complicated.
“Patients are sick, and who are they going to call? There's not a Geek Squad for the medical industry. It will be a cost that is out of their own pocket, and on top of that, if the devices are not maintained properly, they can produce less than desirable outcome,” Richard continues.
“They will stop working correctly and they will start malfunctioning, and then when patients do pass away, what's the family member going to do with that equipment? CMS and the insurance companies need to get rid of the notion that title transfer is a good idea for oxygen equipment for the future until there are more policies and procedures in place for providers to get paid to do intermittent, interval service-type routine maintenance on devices like that.”
But, as with competitive bidding, the only way to change the DRA is through the legislative process, so providers need to start making preparations now.
“Providers need to continue to have discussions with their beneficiaries and explain the benefit and the legislation that will impact their therapy. They will need to ensure the beneficiaries are well-educated in the matter and the impact on them, and then they will need to ensure the beneficiary contacts their elected officials to voice their concerns,” advises Pontzius.
“Providers will also need to educate elected officials on the benefit, especially the in-the-home rule, and will need to show how they were providing services beyond the benefit they were getting reimbursed for and show the impact the law will have if allowed to continue.”
Clevidence agrees. “We must all get active in writing to our congressional representatives. Competitive bidding has helped to place us in front of our lawmakers to help them understand what we are experiencing and what it means to the sick in our country.
“We are getting support from a growing number of congressional representatives. I think that they are beginning to take note and actually see how it is impacting our industry and their constituents,” he says.
LOOKING TO TECHNOLOGY
Today's respiratory products, however, continue to raise the bar in terms of patient care and providers' bottom lines.
“New technology is allowing providers to rationalize care,” says McBride, adding as an example that a provider using a portable oxygen concentrator can deliver the unit to the hospital and not have to visit the patient for a home delivery. “Also, these patients can bring the unit to the provider for the unit check and preventative maintenance,” he says.
Oxygen providers “are looking at process changes within their organizations just to increase efficiency overall,” adds Respironics' Snyder. “From an equipment standpoint, it may make sense to start moving into a non-delivery direction or simply matching the equipment to patient characteristics as they're bringing a new patient on board.”
The real win about new oxygen technology, says Riley, is that equipment such as lightweight ambulatory oxygen systems provides quality care.
“If you have patients who don't breathe well, you don't want to put additional carrying weight on those patients beyond their limitations. As the systems become more lightweight or more portable, they will obviously increase the quality of care because, quite candidly, those patients are going to be more willing to get up and move beyond their usual boundaries,” she explains.
“The technology that is out there allows providers to lower delivery costs, provide clinical efficacious outcomes and be applicable to all the different environments that a patient potentially can use oxygen in,” says Richard. “It's becoming clearer and clearer these systems … are a good solution and a good answer for the future of where long-term oxygen therapy is going.”
Likewise, modern oxygen technologies that reduce deliveries, along with all of the other back-end oxygen service tasks — cylinder or liquid filling, lot and serialized tracking, routing and customer service time — empower providers to take control over their operations, says Invacare's Lewarski.
“Patients then have access to clinically appropriate technologies that support ambulation and activity without the need for frequent delivery and dozens of cylinders. The modern oxygen technologies … are both empowering and enabling for providers and their patients,” he says.
While these systems are appealing, they are also costly, Devlin points out. “The portable concentrators and home cylinder transfilling systems are just two ways technology [is beneficial]. They are a step in the right direction; however, in order for this to be appealing to the industry, manufacturers need to address their pricing structures.”
According to Pontzius, new technology has helped providers take costs out of their business, but it hasn't increased profitability. “It has merely allowed companies to continue to provide optimum service to the beneficiaries who are receiving therapy … with limited costs to the company,” he says.
For providers of sleep therapy, recent product advances, such as CPAPs with data-gathering features, more comfortable masks and devices that are quieter, also are playing an important role in patient compliance, good outcomes and, therefore, providers' success.
“By having various technologies for sleep therapy, it allows providers the opportunity to help patients become or remain compliant in their therapy while increasing quality of life. There are a number of choices to help ensure a patient is able to be compliant on their therapy,” says Pontzius.
McBride sees a combination of factors that lead to increased compliance.
“We believe compliance is the product of a recipe of good patient education, great interfaces, interface exchange, patient follow-up, humidity administration and pressure relief … Given this, technology is a key component,” he says.
MED Group's Riley challenges providers to raise the bar and begin understanding the science within the medicine to survive and to increase their referrals. She uses complex sleep apnea as an example.
“Do you fully understand what complex sleep apnea is and who is a candidate?” she asks. “The argument may be, ‘Well, that's not my role.’ Yes, it is. If you want to be a trusted partner on the health care team, you need to know those things.”
EFFICIENCY, EFFICIENCY, EFFICIENCY
Riley also notes today's respiratory care market demands that providers become as efficient as possible. For her, this means knowing how to pull data out of software systems to promote efficiency and cost control.
“That is just absolutely critical,” she says. “I think all too often we overlook [the] people within each of our organizations who are the systems ‘gurus’ who know how to pull the data.
“You need to embrace those folks and decide what data you need to look at,” she says.
