An industry under siege

Wednesday, November 30, 2005

WASHINGTON - Senate leaders have proposed eliminating the capped rental option for durable medical equipment as a way to shave about $910 million from the 2006 Medicare/Medicaid budget. If enacted, the change would slash the average provider's annual revenue by 3% to 5%, said an industry consultant.
This amendment would apply to items for which the first rental month occurs on or after January 1, 2006.
In their scramble to find savings, some Senate staffers, relying on a 2002 OIG and CMS report, believe the twice-yearly maintenance fees providers receive for servicing capped items are unnecessary and should be eliminated. Industry leaders believe that shifting the maintenance burden to beneficiaries invites non-compliance and further erodes a provider's ability to stay in business.
"Companies like Lincare and Apria won't be hit too hard because of the amount of oxygen that they do," said Mike Barish, president of Ancor Healthcare Consulting in Coral Springs, Fla. "But for mom and pops that are concentrating on DME and Medicare, because they don't have managed care contracts, it could be a big hit."
Most bread-and-butter items of DME are capped, including hospital beds, wheelchairs, patient lifts, CPAPs and nebulizers.
The Senate proposal to eliminate the cap rental option is not a done deal and could be removed when Senate and House leaders compromise on final Medicare/Medicaid package, probably in mid-November.
Under the Senate proposal, for DME in the capped rental category,
after a 13 month rental period, the supplier would transfer title for the item to the beneficiary. The option for a supplier to retain ownership of the item after a 15-month rental period would be eliminated.
By eliminating the capped rental option, providers would automatically lose two months reimbursement per item (the 14th and 15th months), as well as the twice yearly maintenance-and-service fee they receive for servicing capped items following the 15-month rental. The maintenance fee equals one-month's rental. Providers also would lose the equipment and not be able to integrate it back into their fleet once the patient no longer needs it.
The industry's job now: educate Senate staffers that the capped rental provision serves an important purpose for beneficiaries.
On Oct. 24, AAHomecare sent a letter opposing the change to Senate Finance Committee Chairman Charles Grassley, R-Iowa, and Ranking Member Max Baucus, D-Mont. In the letter, AAHomecare stated that, among other things:
- It is neither safe nor fair to shift the burden of maintenance and repair for medical equipment to the disabled or elderly Medicare beneficiary.
- If the medical equipment is purchased, the patient incurs additional fees for clinical or emergency support or for exchange of malfunctioning equipment.
"We are trying to educate the (Senate) staff," said Cara Bachenheimer, vice president of government relations for Invacare. "They are scrambling around, and our issue is one of 20 gazillion issues. If you don't know about the business, (eliminating the capped rental) might make sense."