OIG compares K11 prices

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Monday, May 31, 2004

WASHINGTON - An OIG analysis of pricing for power wheelchairs found that CMS could have saved $220 million dollars if Medicare based reimbursement on prices available to consumers and suppliers.

If the reimbursement was based on what suppliers paid wholesalers, the savings would rise to $459 million, and if based on prices negotiated directly with manufacturers, those savings would climb to $586 million.”

“None of this makes a whole lot of sense to this senator,” said Sen. Charles Grassley, chairman of the Senate Finance Committee, “and I don’t think it’d make a whole lot of sense to the taxpayers in my state of Iowa, or the other 49 states.”

The OIG’s pricing report confounded representatives from the HME industry who take exception to the cavalier attitude with which the OIG tosses out its projections.

“They’re assuming that a supplier should just be in a charitable business, passing along [wheelchairs] without [any margin for] all the overhead costs,” said Cara Bachenheimer, vice president of government relations for Invacare.

The OIG acknowledges in its report that its savings estimates have not taken “any supplier administrative costs” into account. Neither do the estimates make any allowance for the costs associated with servicing patients, a dealer profit margin, or the red tape of dealing with payers.

“The cost of just billing and collections alone are between 7% and 10% of the billed amount of the chair,” said Simon Margolis, National Seating and Mobility’s vice president of clinical and professional development.

In 2002, the median price Medicare paid for a K0011 was $5,297. The consumer median price was $3,863. Suppliers purchased the chairs from wholesalers and manufacturers at median prices of just $2,363 and $1,550, respectively, according to the report

The Medicare median price was based on an evaluation of 300 K0011 claims paid in 2001. Consumer pricing data was gathered from supplier locations and Web sites. In total, 379 prices were collected from 41 suppliers in June 2003. The wholesaler median price was calculated from 22 individual prices, and manufacturer results came from 36 prices in orders made between 1999 and 2003.

“The difficulty is that numbers can be presented in any way that someone wants to present them,” said Margolis. “Here, they were presented in a way that makes [the industry] look very bad.”

In light of the report’s findings, the OIG made two recommendations to CMS:

1. Use the pricing information in the report to determine whether an inherent reasonableness review is appropriate; and

2. Create a new coding system for the K0011 that accounts for the variety in models and prices for power chairs.

The industry has long been a proponent of such coding revisions. Last year, AAHomecare’s Rehab and Assistive Technology Council, with input from manufacturers and providers, proposed dividing the K0010, K0011, K0012 and K0014 codes into six new codes. The proposed codes more specifically matched a patient’s clinical indicators/condition with the appropriate power chair.

Despite not acting on RATC’s proposal, in a letter to the OIG from former CMS chief Dennis Smith, CMS agreed changes were necessary and that they were already being considered as part of the Wheeler Dealer initiative.

Further finds presented by the OIG gave a sense of the enormous growth the power wheelchair has experienced in recent years.

In 2002, Medicare paid $856 million for all power wheelchairs and $829 million for the K0011 code specifically. This spending ranked the K0011 code fourth among the top 200 procedure codes in 2002, due in part to a 33% spending increase each year for the K0011 since 1999. During that period, the total Medicare population grew by only 1%.

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