CMS slashes dispensing fee

Wednesday, November 30, 2005

WASHINGTON - CMS slashed the respiratory-med dispensing fee from $57 to $33 a month Nov. 2, sending shock waves through the industry, which had hoped for a less drastic cut.
"It's terribly bad news for an industry that's been hit over and over again," said AAHomecare Chairman Tom Ryan. "I had hoped for a better outcome, but nothing surprises me of late."
"Can you actually dispense and ship and follow up for $33?" asked one industry insider. "Maybe somebody running really efficiently with volume could. You'd have to cut an awful lot of fluff. You'd be past fat and into the bone at $33."
In explaining the cut, CMS concluded that the 2005 dispensing fee was based on costs that included care management services, such as in-home visits, education and training -- services not covered under the dispensing fee.
The new monthly dispensing fee for 2006 will be $57 for the first month, then drop to $33 for succeeding months. The fee for a 90-day supply would drop from the current $80 to $66.
With the industry collectively weighing the news, many agree the draconian cut will shake up the market.
"It's getting to a level where profits are so small these independent pharmacies will now get out of it," said Marcus Kruk, who left the respiratory business last year. "They're buying power won't be as good."
Ramifications of the cuts began to surface immediately. On Friday, Rotech estimated that the cut would reduce its 2006 revenue by $15 million. American HomePatient stated that the new dispensing fee would reduce its revenue by about $4.1 million.
According to a survey released by AAHomecare in late September, 44% of providers reported that they would stop dispensing respiratory meds to Medicare beneficiaries if their fee was reduced by more than a nominal amount in 2006.
The results of the survey, conducted in August, were based on responses from 89 providers that serve between 55%-60% of all Medicare inhalation drug therapy patients.
Respondents reported that an appropriate dispensing fee is $66.55 for a 30-day supply schedule and $138.80 for 90 days.
In a study it commissioned last year, AAHomecare identified a number of services involved in dispensing neb-meds, including clinical intake, establishing and revising a care plan, care coordination, patient education, caregiver training, compliance monitoring/refill calls, in-home visits, delivery of services, billing/collections and other unspecified costs.
The reimbursement amount for respiratory meds was developed on the assumption that the services were integral to providing the product and part of the submitted charges, said Cara Bachenhiemer, vice president of government relations for Invacare.
"It's been this long-standing conversation back and forth, and CMS has consistently taken inconsistent positions depending upon what serves their purpose at the moment," Bachenheimer said. "Now they are saying they are not covered services and they don't have to account for them in reimbursement and that is absurd."
Mickey Letson, president of the Letco Companies, a respiratory drug distributor, estimated the industry could see a 30% to 40% exodus from the market, raising the question of access for patients.
Small independent mom-and-pops folding could open the door for retail to step in, possibly dispensing respiratory meds as part of the Part D program.
"That's an unknown," said one insider. "But, if a pharmacy that has 300-400 patients decides to close somebody will pick them up. Somebody always does."