Medicare proposes to revamp O2 reimbursement

Sunday, July 30, 2006

WASHINGTON -- CMS blindsided the HME industry last week when it proposed a plan to significantly revamp how Medicare pays for home oxygen therapy, including a proposal to reduce reimbursement for a stationary oxygen concentrator from about $200 to $177 a month.

"I don't think anyone anticipated this," said one industry source. "A lot of work obviously went into this behind the scenes that a lot of us were unaware of."

On Friday, industry watchers were still reviewing the plan that CMS released on Thursday and were not prepared to comment on specifics.

Under the payment methodology, CMS proposes the following new national monthly rental rates:

1. Stationary payment: $177
2. Portable add-on: $32
3. Oxygen generating portable equipment add-on
for portable concentrators or transfilling systems:
4. Stationary contents delivery: $101
5. Portable contents delivery: $55

CMS proposes to implement the changes on Jan. 1, 2007.

The changes revolve around Medicare's new regulation that caps oxygen reimbursement at 36 months and transfers title of the equipment to the patient at that time. One requirement of the reimbursement change is that it be revenue neutral. To do that, Medicare has taken money from one area--stationary concentrators, for example--and applied it to other payment categories.

"Is it a big hit? That depends on the technology you provide," said another industry source. Providers who use traditionally delivery technology are not going to like it."

Given that most providers still rely on standard stationary concentrators, "you are going to get more negatives than positives," the source added.

According to CMS:

Under the proposed new oxygen and oxygen equipment class
structure described above, in those cases where the
beneficiary needs both stationary and portable oxygen,
monthly payments of $241 or $209 (proposed revised
stationary payment of $177 plus one of two proposed portable
equipment payments, $32 or $64) would be made during rental
months 1 through 36. The stationary payment (which includes
payment for stationary equipment, as well as oxygen contents
for stationary and portable systems) of $177 would be made
during rental months 1 through 36 for beneficiaries who only
need stationary oxygen and oxygen equipment.

Monthly payments of $101 for stationary oxygen contents and/or $55
for portable oxygen contents would be made in cases where
beneficiaries own their stationary and/or portable oxygen
equipment. The $101 payment is for stationary oxygen
contents only and is derived from the current payment of
$156, which is made for both stationary and portable oxygen
contents. The $55 payment for portable oxygen contents only
is also derived from the current payment of $156 that is
made for both stationary and portable oxygen contents and
would replace the current statewide portable oxygen contents
fees (average of $21), which was based on a relatively small
number of claims and allowed services compared to the number
of claims and allowed services that were used in computing
the statewide fees (average of $156) for a combination of
stationary and portable oxygen contents.