˜This is terrible"

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Wednesday, December 31, 2003

WASHINGTON - The new Medicare Prescription Drug Act hit the HME industry with a sucker punch, and then hit it again and again and again, leaving providers and leaders woozy, angry, dismayed and wondering what to do next.
President George Bush, flanked by Republican lawmakers, signs into law the Medicare Prescription Drug, Improvement and Modernization Act of 2003, which imposes deep cuts on DME. “I wish I could tell you that the future of home care is going to be X. I really don’t know. But the way we do business in 2005 is going to be a lot different than how we do it in 2003,” said Don White of Associated Healthcare.

“I don’t think the industry has ever seen anything like this,” said healthcare attorney Tom Antone. “It imposes huge reimbursement reductions at the outset with the promise of more with competitive bidding.”

Until lawmakers crafted the final bill in November, HME leaders had hoped the industry might squeeze by with a multi-year CPI freeze and mandatory accreditation. They got that and more. The bill also includes competitive bidding; a cut of 60% to 80% for respiratory drugs; and cuts as high as 22% for eight top items and services based on the Federal Employee Health Benefit Plan, which typically pays less for DME than does Medicare. The FEHB cuts were inserted into the bill at the 11th hour and took industry leaders by surprise.

Compared to the Medicare Prescription Drug Act, past reimbursement cuts, while hardly pleasant, seem almost benign. The Six Point Plan of the late 1980s introduced the current Medicare fee schedule and capped rental reimbursement on select items. In doing so, it closed the book on the now nostalgic days of the golden commode. BBA ’97 slashed reimbursement on home respiratory services by 30% and implemented an across-the-board CPI freeze. By most accounts, providers coped just fine with those cuts, implementing new technology and other past due efficiencies that remade them as leaner, meaner, better run and still very profitable businesses.

The Medicare Prescription Drug Act is a different animal. So deep are its cuts that it may require providers to develop an entirely new way of delivering equipment and services, said a downtrodden Don White, president of Associate Healthcare Systems in Amherst, N.Y.

“What we are faced with here may require a paradigm shift, but I’m not sure what it is,” said White, a former AAHomecare chairman. “I wish I could tell you that the future of home care is going to be X. I really don’t know. But the way we do business in 2005 is going to be a lot different than how we do it in 2003.”

The reasons the industry got hit so hard appear to be many. Certainly, September’s Wheeler Dealer power wheelchair scandal, which landed the industry a spot on NBC’s Fleecing of America, didn’t help an already tarnished reputation. The pharmaceutical industry, American Medical Association and other special interests spent tens of millions of dollars influencing lawmakers, probably drowning out the HME’s lobbying efforts. Arch nemesis Bill Thomas, R-Calif., chairman of the powerful Ways and Means committee and a strong proponent of competitive bidding, most likely did some last minute bullying, arm twisting and horse trading to win the votes necessary to pass the bill.

“Without a doubt, this proves to us that we need to be a bigger player on Capital Hill,” said AAHomecare Chairman Joel Mills. “We have upgraded our image and upgraded our noise level and grassroots participation through this process. Now we need to develop some champions on Capital Hill and one way to do that is to improve or political action committee funds so we can have a little bit more of war chest when it comes to cultivating relationships with key players.”

Indeed, if the bill includes a bright spot for the HME industry, it’s that the reimbursement cuts are phased in over the next five years. That gives providers time to adjust to the cuts, if they can. It also gives AAHomecare and other industry groups time to make the cuts more palatable or scuttle them altogether.

“I think the industry needs to take a deep breath,” said John Gallagher, The VGM Group’s vice president of government relations. “All this is terrible news, but the fight continues. (Providers) should take pride in the fact that although we are a small piece of the Medicare pie, we were in the fight until the end.”