LEXANA, Kan.--When Gerald Sloan saw the new oxygen allowable under round one of competitive bidding, he knew he was out of the oxygen business with Medicare.
Sloan, the owner of Progressive Medical Equipment in Lenexa, Kan., had bid on oxygen in the Kansas City CBA but was not awarded a contract. And the new rate under competitive bidding--$149.40 in Kansas City--sealed the deal. There would be no grandfathered patients for his company, no subcontracting for a bid winner.
“When I saw what the allowable was for O2 … we were $20 above the allowable. And to me, that was our bottom dollar to do it efficiently, effectively and still make money and provide the kind of service we are accustomed to providing for our customers,” Sloan said. “So come July, we are going to drop all of our Medicare [oxygen] patients. We are going to tell them they are done with us and need to find a new supplier.”
He is not the only provider poised to pull out of the Medicare oxygen program. Rose Schafhauser, executive director of the Midwest Association of Medical Equipment Services, said she has talked to providers across the United States since CMS released the round one contract rates in March. (See HomeCare Monday, March 24.)
“Every single one who did not win a bid has said they do not want to continue servicing those oxygen patients,” Schafhauser said, adding that the providers were not interested in hanging on to their current oxygen patients who could be grandfathered in, or in subcontracting with another provider to help service oxygen patients.
It isn't just the competitive bidding rates for oxygen that are spawning talk of pulling out of the Medicare oxygen business. It is also the looming 36-month cap. On Jan. 1, 2009, Medicare will stop paying rental fees for those patients using oxygen for 36 months as of that date, and ownership of the equipment will transfer to the Medicare beneficiary.
“It was an economic decision,” said Sloan. While oxygen was not a huge part of Progressive Medical's business, “it was certainly a moneymaker for us,” he said, noting that his decision would affect between 30 and 40 Medicare oxygen patients. “Rather than going ahead and grandfathering these people in and letting them cap out in January, it makes more sense for us to pull in our equipment. Otherwise, it'd just be gone.”
He can use that equipment. Sloan said he services other oxygen patients for payers besides Medicare, and he also services oxygen patients through the company's St. Louis, Mo., branch, which is not in round one and also isn't among round two's 70 MSAs. “It makes sense for us to pull in our resources and regroup and put them where they can make us some money,” he said.
It may have been an economic decision, but it wasn't an easy one. “We felt like every one of our clients was our personal friend,” Sloan said. “They were someone we got to know personally. But that's not the way this business model can be done anymore. It's a very sad day for us and a very sad day for our beneficiaries. But that is what the government wants.”
Tom Pontzius, president of VGM's Nationwide Respiratory in Waterloo, Iowa, believes other providers could, like Sloan, decide to quit the Medicare oxygen business. “There will be a number of providers who choose not to do anything,” he said. “It depends on what percentage Medicare is of their business. I think that you will find companies that do not want anything to do with Medicare oxygen. However, we are still in a decision process ... does it make sense to subcontract and does it make sense to grandfather?”
Pontzius said he hasn't yet heard of too many oxygen providers opting out of Medicare. “I believe that is yet to come out in the wash,” he said. “I think we have a number of people that are holding on to the hope that CMS will do something to rectify the problems that came out surrounding the [round one] bid submission paperwork. In addition, there are some strong possibilities with regard to legislation that I believe people are holding out hope for. One of those things is the elimination of the 36-month cap and the other is the 'any-willing-provider' legislation.”
The latter, H.R. 1845, the Tanner-Hobson bill, includes a provision that would allow any qualified provider that bid and was not awarded a contract to continue service to Medicare patients under the prevailing bid rates.
“We are finding more people who are looking at different delivery models that will help them stay in business for as long as they are able,” Pontzius said.
Sloan believes he has identified such a business model, and it doesn't include the Medicare oxygen business in Kansas City. Progressive Medical is primarily a rehab company, and it was offered that contract. Even though the rehab allowable is “way below what we already deemed our bottom dollar,” Sloan said he has positioned his company to remain successful.
“We have been looking at this for several years,” he said. He and his staff have calculated how much business Progressive Medical does with Medicare in the competitive bidding categories. “All of the categories added up to only 11 percent of our total business,” Sloan said, “so we have other options.
“I think we will prevail. We're planning on it.”