Dispensing fee comes under fire

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Wednesday, August 31, 2005

WASHINGTON -- CMS shocked and angered HME providers last month when it proposed lowering the current $57 neb-med dispensing fee in 2006 to an as yet unspecified price.
"We vehemently oppose this," said AAHomecare Chairman Tom Ryan. "We were looking for an increase. This makes no sense. We need some stability, and they are going to toy with this number again."
The proposed reduction would follow a cut providers absorbed this year.
As part of changes mandated by the MMA, CMS reduced reimbursement for respiratory drugs in 2005 to the average sales price plus 6%. To that, CMS added a monthly $57 dispensing fee or $80 for a 90-day supply. Those amounts pleasantly surprised some industry watchers who suspected they would be lower. Even so, an AAHomecare commissioned report stated that providers would lose money on some respiratory drugs if CMS implemented a dispensing fee less than $68.10.
CMS announced Aug. 1 that the 2006 dispensing fee "will likely be lower than the 2005 level." The announcement came as part of Medicare's proposed Physician Fee Schedule for 2006.
The proposal comes with a 60-day public comment period.
In rationalizing a future cut, CMS stated that some of the services now covered "may be outside the scope of a dispensing fee." For example, CMS stated "we are interested in comments that detail the extent to which suppliers have shifted their shipping to ground services" compared to more expensive over-night delivery.
In its study, AAHomecare indentified 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.
Before suggesting a reimbursement change, CMS plans to seek "comments on an appropriate dispensing fee for 2006."
"They are attempting to remove services because it is easiest way for them to lower the dispensing fee," said former AAH Chairman Tim Pontius, who recently sold his company, Young Medical Equipment, to Apria. "But anything they want to take out they are going to have to have some clinical evidence that it will not have a negative impact on the patient."
With the current dispensing fee, low-cost providers who understand how to manage the distribution process, the customer management process and the customer retention process can make a worthwhile profit, said M&A expert Dexter Braff of the Braff Group.
However, if, as has been rumored, CMS desires to reduce reimbursement to about $35, many small providers -- those making less than 250 shipments a month -- will lose money and have to exit the business line, said Mickey Letson, president of drug distributor Letco Medical.
"For me, $45 is the pivotal number," Letson said. "If they come out with a number of $45 or more, I don't think a lot of people will walk away from the market."
In building its argument against lowering the dispensing fee, AAHomecare update its data that supports a higher dispensing fee. It will also rally members, state associations and other industry organizations to get out the word "that this is unacceptable,"
said CEO Kay Cox.
"If you want to provide good quality care and get good outcomes, you have to have good services," Ryan added. "Having someone not take their treatment properly and having them go back into the emergency room because you reduced reimbursement to the point where services are cut back is ludicrous."

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