Give credit where it's due

We have not been recognized for the savings we bring to health care
Friday, June 22, 2012

Editor’s note: Karyn Estrella sent the following letter to Kathleen Sebelius, secretary of the U.S. Department of Health and Human Services (HHS), on May 2.

The New England Medical Equipment Dealers Association (NEMED) applauds you on the recent announcement of the finalization of the Community First Choice rule; however, we are concerned that the overlapping implementation of DME (HME) national competitive bidding will ultimately hurt the demonstration’s success.

NEMED is the regional trade association representing providers of home medical equipment (HME) and supplies, home oxygen therapy, complex wheelchair/assistive technology, home infusion therapy and related services in the six New England states. We estimate that 80% of Medicare beneficiaries in New England receive their home medical services, equipment and supplies from a NEMED member.

With the advancements that have occurred in technology over the years, many medically necessary services can and are being provided in the patient’s home. NEMED believes that any discussion surrounding the evaluation of the healthcare delivery system with an emphasis on finding innovative, cost-saving solutions must include home medical equipment and related services. Advances in technology and trends are making home care more cost-effective while simultaneously improving patient outcomes. Former U.S. Department of Health and Human Services Secretary Michael Leavitt said that home and community-based care is “radically more efficient” than institutional care. Here are the results of several studies of home care:

• In a 2010 article, the New England Journal of Medicine states, “ultimately, health care organizations that do not adapt to the homecare imperative risk becoming irrelevant. It seems inevitable that health care is going home.”

• An article published in the February 2009 American Journal of Managed Care on long-term oxygen therapy concluded that “continuous oxygen therapy for chronic obstructive pulmonary disease is highly cost-effective.”

• A study described in Clinical Infectious Diseases quantified cost savings of a home intravenous antibiotic program in a Medicare managed care plan. The average cost per day of home therapy was $122, compared to $798 in the hospital and $541 in a skilled nursing facility.

• More than four out of five Americans (82%) surveyed in a national telephone survey of 1,000 Americans by Harris Interactive at the request of the American Association for Homecare expressed a preference for home care over institutional care, agreeing with the statement, “If I required medical services, I would prefer to receive it in my home if possible, rather than in a hospital or nursing home.” When asked specifically do you agree or disagree with the following statement—Because home-based care can reduce time and taxpayer dollars spent in nursing homes and the hospital, the federal government should strengthen access to home medical equipment and services—79% agreed compared to 11% who disagreed.

The home medical services, equipment and supplies sector plays a critical role in the continuum of care in the most cost-effective setting, the home, with positive outcomes. We have placed added emphasis on services because this has been a long overlooked component of the sector. In addition to equipment and supply costs, reimbursement must include the cost of patient and caregiver training and education, delivery and set up, maintenance and repair, and all overhead costs such as billing, regulatory compliance, documentation collection, staff salaries, utilities, lease, etc. A study done by Morrison Informatics at the request of the American Association for Homecare showed that 28% of Medicare’s reimbursement for home oxygen therapy covered the cost of the equipment and 72% covered the cost of the required services to treat the patient safely at home.

The HME sector has not been recognized for the savings it brings to the overall healthcare budget. We are the smallest segment in dollars spent but the return on investment is ten-fold. Yet repeatedly over the past decade, HME has found itself on the budget cut chopping block. The progression of reimbursement cuts that have been implemented by Medicare, Medicaid and the private insurance companies over the past decade is threatening the provider network that currently exists (of which 85% are small, independently-owned businesses).

Home care comes with the added value of free care. According to the National Family Caregivers Association, more than 65 million people, 29% of the U.S. population, provide care for a chronically ill, disabled or aged family member or friend during any given year and spend an average of 20 hours per week providing care for their loved one. The value of the services family caregivers provide for “free,” when caring for older adults, is estimated to be $375 billion a year. That is more than twice as much as is actually spent on home care and nursing home services combined ($158 billion). 

NEMED believes that the HME sector is part of the solution to skyrocketing healthcare costs, yet its very existence is being threatened by the competitive bidding program that is slated to be implemented in July 2013. Since the Community First Choice demonstration is scheduled to begin in June 2012 through May 2015, it is very possible that many HME providers that may be participating at the beginning of the demonstration may not exist by the end. In competitive bidding Round 1, only 10% of the providers that submitted bids were awarded contracts. And of those that were awarded contracts, many had to lay off staff due to the extraordinary low reimbursement rates. Whereas the rules for bidding in Round 2 were similar, we would anticipate similar results. Since Medicare is the largest purchaser of home medical equipment and services, we fear that many of these providers will not be able to remain in business.

If driving more care and services into the home setting is the department’s ultimate goal, then a robust network of healthy, financially viable HME providers will be critical. The competitive bidding program, as it is currently structured, is the death knell for this sector. We understand that you may be aware of the market pricing program (MPP) that was drafted by auction experts. NEMED supports this program and, if it is implemented, we believe that it will keep the provider network intact, which will lead not only to a greater chance of success for the demonstration, but its inevitable expansion. We encourage you to consider this alternative bidding plan.

NEMED thanks you for recognizing our concerns and considering our request. We welcome the opportunity to discuss these issues with you in greater detail.

Karyn Estrella, CAE, is executive director of NEMED. Reach her at 508-993-0700 or