WASHINGTON - CMS blindsided the HME industry in late July 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.
"There will be a negative impact," said AAHomecare Chairman Tom Ryan. "I crunched the numbers for my company and saw a well over $100,000 decrease over a year. That's a sizeable hit, and it's a sizeable hit for most people, and when they crunch the numbers, they are going to see that."
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 proposed 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. CMS also proposed to create a new category for portable and transfilling concentrators.
Under the new reimbursement methodology, CMS proposes the following national monthly reimbursement rates: $177 for stationary and $32 for portable add-on;
$64 for oxygen generating portable equipment add-on for portable concentrators or transfilling systems; $101 for stationary contents delivery; and $55 for portable contents delivery.
CMS proposes to implement the changes on Jan. 1, 2007.
If the proposal passes as is, Medicare will pay a provider $209 for supplying a beneficiary with a stationary concentrator and portable add-ons. For supplying a beneficiary a portable or transfilling concentrator, Medicare will pay $241.
CMS officials declined to discuss the specifics of the proposal. Questions or concerns should be submitted during the comment period and will be addressed in the final plan. However, according to an official, CMS has proposed paying more for portable concentrators and transfilling units for two main reasons: They give beneficiaries more control over their oxygen supply, and they help providers cut costs by reducing deliveries.
"That works best for everyone," said the official.
Given that most providers still rely on standard stationary concentrators, "you are going to get more negatives than positives," said an industry source.
"Is (the proposal) a big hit? That depends on the technology you provide," said the source. "Providers who use traditional delivery technology are not going to like it."
Michael McDonald estimated that if the proposal passes as is, his company will see a 13% cut in reimbursement. Equally troubling, he said, is that after the beneficiary assumes ownership of the equipment after 36 months, Medicare proposes to pay providers only $55 to refill portable cylinders.
"Continuous rental has always subsidized the tanks," said McDonald, president of Clinical 1 Home Medical in Weymouth, Mass. "Now your incentive to provide portable tanks to that patient is $55? It is impossible. I don't know what is going to happen."
Industry watchers blamed that scenario and others in the proposal on Medicare's failure to recognize the service that goes into providing equipment.
"That is the biggest deficiency," said Cara Bachenheimer, Invacare's vice president of government relations. "CMS has completely ignored the notion that there has to be a relationship between the provider and patient and to sustain that relationship there has to be a financial foundation and there is none."
During the 60-day comment period on the proposal, "we will argue that strenuously," she said.