NewsPoll illuminates industry schism

Thursday, January 31, 2002

An illuminating NewsPoll this month. A NewsPoll with a question that generated a deluge of opinion (see results). A poll that reveals a startling schism of belief in the DMEPOS industry, and one that "nearly caused my dentures to fall out," according to one AAHomecare staffer.

The results were split. Half of the 123 people who voted on whether or not the HME industry was better represented by an association catering to all of home healthcare, or HME exclusively, believed that the DMEPOS industry was better off pursuing its own agenda.

These results are not bad tidings for AAHomecare, the organization, so much as they are bad tidings for the DMEPOS industry. It's not because so many think their best shot in Washington made a bad move by 'throwing in' with home health, but because the association, as it pursues the interests of HME providers on the Hill, still has to persuade people that its efforts are padding the bottom line of every DMEPOS supplier in the country.

These numbers don't lie:

In 1997, the Balanced Budget Amendment froze reimbursement for DMEPOS through 2002. In Jan. 2000, AAHomecare officially opened for business. In 2001, the DMEPOS industry got roughly a 3.5% boost to Medicare reimbursement because the COLA was reinstated. That's a fact.

Another fact is this: AAHomecare won that COLA. The leadership and staff targeted key committees (i.e. Finance, Ways and Means) and lobbied hard for bipartisan support for the boost in D.C. In key home districts, AAHomecare members lobbied members of Congress - Bill Thomas, Jim McCrery, Bill Roth, Nancy Johnson, Don Nickles, Max Baucus, Orrin Hatch and so on.

Now run the numbers. Let's say you generate $2 million in revenues annually. According to the 2001 AAH Financial Survey, 42% of your revenues come from Medicare, or $840,000. Let's also assume that 53% of your Medicare revenues come from respiratory products. Lop off an additional $445,000 because the COLA for oxygen has not yet thawed, and set aside for a moment the fact that there is more to respiratory reimbursement than oxygen.

This means, conservatively, that $395,000 of your Medicare business realized a 3.5% boost. It also means that the efforts of AAHomecare raised your bottom lime by $11,850. Membership dues for a $2 million member are $1,500.

Not all the work an association does is as black and white as this example. Another example may be forthcoming. Since Tom Scully took over at CMS, AAHomecare President Tom Connaughton has sat down with the Medicare program's administrator four times. One of Connaughton's priorities involves the reinstatement of the COLA for oxygen. He and the guy that runs Medicare talk about this, and Scully, it seems, is sympathetic.

Whether the industry gets that COLA, or not, is beside the point. The point is that AAHomecare has developed a dialogue on HME with Scully.

Part of this unprecedented access (how many times did Bill Coughlin at NAMES sit down with Bruce Vladeck?) derives from the fact that AAH speaks for all of home health care. In 2000, CMS spent $13.2 billion on HHA and HME combined. HME counts for $4.6 billion. Is Scully more inclined to speak with a key figure who represents a $13.2 billion piece of his pie, or a wedge that's a third as large?

In late December, I spoke with the executive director of the American Academy of Sleep Physicians, who reinforced a suspicion about the allocation of Medicare dollars that many harbor but, at the same time, is impossible to confirm. We were talking about the movement of patient care from the hospital and the lab to the home. This is a given, but it does not necessarily follow that expenditures migrate that way as well.

"Within that Medicare pie, who are you going to get the money from?" the Academy's Jerry Barrett asked. "Pulmonary's not going to give it up. Neurology is not going to give it up. The same size pie just gets readjusted."

Pulmonologists and neurologists have their own associations. Consider the clout wielded by the American Hospital Association (whose portion of the Medicare pie is 27 times as large as the DMEPOS stake), or the American Medical Association (whose portion is eight times as large).

Factor in home health and the hospital portion of the pie is a mere nine times greater. Physicians can claim only a four times greater stake. It may be the same difference between having access to Scully, and not. And at the end of the day, it will also mean having more profit fall to your bottom line, or not. HME