CMS lowers O2 payments by 8.6%

Sunday, April 3, 2005

BALTIMORE - CMS announced last week that it will lower oxygen payment rates by an average of 8.6% for stationary oxygen and 8.1% for portable oxygen. The new rates, which vary from state to state, will take effect as soon as possible and no later than April 8.

CMS posted the new rates March 30 after a re-analysis of payment rates between the Medicare program and more than 50 Federal Employee Health Benefit Plans.

CMS has no plans to retroactively adjust payment rates for 2005 claims that were filed using the 2004 rates. But there's still some question about whether claims filed before April 8 will be reimbursed at the old rate or the new lower rate.

"The smoothest way to transition this moving forward is to make those rates apply after April 8," said Asela Cuervo, a Washington-based attorney and AA-Homecare consultant.

Relieved but hardly happy, suppliers greeted the news with resignation and plans to mitigate the impact to their bottom line.

"Obviously, we're not going to be hiring anybody this year," said Mark Sheehan, president of Cape Medical Supply in Sandwich, Mass.

Compounding the pain of the upcoming oxygen pinch is the price of gasoline. Sheehan's gas costs have surged by about $1,000 per month in recent weeks, and he's frustrated by his inability to do much about it.

"UPS and the medical gas delivery guys are adding fuel service fees," he said. "But we can't do that. Everybody's trying to recoup fuel costs somewhere. We can't."

Ironically, one of the leaders of HME opposition to the nationwide oxygen cut, Jeff Wills, the president of El Reno-Okla.-based CV Medical, Jeff Wills, who chairs the AAHomecare HME/RT Council, found himself an unwitting beneficiary of the payment rate adjustment.

"Our portable went up a couple of cents, and our stationary stayed the same," said Wills. "Selfishly, I am relieved. I was expecting a 7-8% cut, like everyone else."

Congress called for cuts to home oxygen in the landmark Medicare Modernization Act in 2003 and directed CMS to use the FEHB plans as benchmarks for adjusting payment rates.

Last September, the OIG issued a report that compared FEHB rates to Medicare rates. That analysis, which pointed toward cuts of 12% for stationary oxygen and 10% for portable oxygen, was released on the same day a similar AAHomecare study showed little difference between rates for Medicare and FEHB plans.

Reeling from other, unwelcome provisions of the MMA, HME suppliers balked. In mid-December, CMS told the OIG to re-examine payment rates. That news buoyed suppliers and Wall Street where two analysts believed the cuts would come in closer to 5% than 10%.

"But I think those expectations were tempered going into this release," said another analyst. "Some analysts were saying we'd see a 200-400 basis point improvement. We think that's what people were expecting, and that's pretty much what they got."