Legislative

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Sunday, June 30, 2002

WASHINGTON - The OIG is recommending that CMS drop its semi-annual maintenance payment for capped rental equipment and pay only for repairs when needed, according to a June report.

Or, the OIG says CMS could drop its 15-month rental option altogether, which would effectively drop the payment.

After tracking more than 3,500 pieces of capped rental equipment for five years, the OIG concluded that Medicare pays "substantially" more for maintenance on rented equipment than for repairs on purchased equipment. The office also concluded, after analyzing supplier documentation for more than 250 maintenance services from June 2000, that only 9% of rented equipment actually receives any maintenance and servicing.

"We found that, overall, Medicare would have saved 96% of the maintenance payments made to suppliers for the services in our review…" the OIG report states. "If this 96% is applied to the total maintenance payments for the 31 codes in 2000, Medicare would have saved $98 million of the $102 million paid for maintenance this year."

But industry sources say the report neglects to mention one thing: The maintenance payment was not created solely to pay for maintenance. When the 15-month rental option was initiated as part of the Six-Point Plan, the maintenance payment was included as a way to compensate suppliers after rental payments ceased, they say.

"They're opening a can of worms here, because the logic back then was that the payment was to cover other costs a supplier incurs," said Cara Bachenheimer, a healthcare attorney with Epstein, Becker & Green.

Those costs not only include servicing the equipment when it needs repairs or is destroyed, but they include refurbishing the equipment when it's returned, industry sources say. There is also the cost of managing inventory.

"With a rental, the supplier's retaining all the risks," said Asela Cuervo, AAHomecare's senior v.p. and general counsel. "They've overlooked that."

As for eliminating the 15-month rental option, industry sources say that doesn't make sense, either. They say beneficiaries prefer renting because they often need the equipment for a limited time or they don't want to be responsible for it.

"The majority of our customers select a maintenance agreement over purchasing the equipment," said Donald White, CEO of Assisted Healthcare in West Amherst, N.Y.

Yet CMS has agreed with the OIG's recommendation and stated that they will consider a legislative initiative to eliminate the 15-month rental option. HME

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