Industry braces for new neb-med dispensing fee

Sunday, July 31, 2005

WASHINGTON -- The HME industry held its collective breath Friday as CMS prepared to propose what it believes the dispensing fee for respiratory meds should be in 2006.

While there's no evidence CMS plans to reduce the $57 dispensing fee, rumors have run rampant that a cut of $20 to $25 could be in the works.

"I've heard rumors that it could go down a few bucks, $20 or, absurdly enough, eliminated," said one industry watcher. "The same distortion gets spread around and pretty soon someone who you think knows what they're talking about is saying it."

CMS's recommendation on the dispensing fee will be part of its Physician Fee Schedule for 2006. Whatever CMS proposes will be subject to public comment. The final amount will go into effect Jan. 1 2006. CMS was scheduled to release the Physician Fee Schedule Friday, as of late Friday afternoon had yet to do so.

Former AAHomecare Chairman Tim Pontius said he's heard speculation that CMS officials believe the dispensing fee is too high. AAHomecare President Kay Cox, however, said "we have not seen or heard that. There are lots of rumors but no evidence that indicates they will drop the dispensing fee."

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 $57 dispensing fee, which pleasantly surprised industry watchers who expected the fee to be much less.

At that price, 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 CMS reduces reimbursement into the $35 range, 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.

"We'll have to see what number they come out with," Letson said. "For me, $45 is the pivotal number. 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."