OIG sharpens knife

Sunday, October 31, 2004

WASHINGTON - The OIG issued its long-awaited report on home oxygen reimbursement Sept. 13 and supplied CMS with data to justify reductions to payment rates for home oxygen by 10% to 20%.

The OIG based its recommendation on payment rates provided by 51 plans administered by the Federal Employees Health Benefits Program and 55 plans administered by Medicare + Choice (Medicare HMOs).

For oxygen concentrators (E1390), Medicare paid 15.1% more than FEHBP plans and 17% more than Medicare + Choice plans. For liquid oxygen (E0439), Medicare paid 20% more than FEHBP plans and 20.5% more than Medicare + Choice plans.

For portable gas oxygen (E0431), Medicare paid 11.5% more than FEHPB plans and 15.9% more than Medicare +Choice plans.

These findings contrast significantly with an AAHomecare study, also released Sept. 13, that surveyed 107 FEHBP plans and found “virtually no difference between the median FEHBP price and the median Medicare payment rates for home oxygen.”

The threats to home oxygen reimbursement do not end with FEHBP-based reductions. In an Aug. 19 letter to the OIG, CMS Administrator Mark McClellan said CMS agreed with the OIG’s recommendation to reduce oxygen by 10-20% and then opened the door to further cuts in 2005.

“Medicare payments for home oxygen could be further reduced under the competitive bidding program,” McClellan wrote.

In Polk County, Fla., competitive bidding reduced reimbursement for oxygen by 19%; in San Antonio, the reduction was 22%.

“I couldn’t imagine the industry taking 20 (percent reduction) and then another 20%. That would put oxygen down to $140 a month, and I just can’t imagine it,” said Mario Lacute, president of Seeley Medical in Andover, Ohio.

Although the OIG based its 15% and 20% reductions on about 50 FEHPB plans, the agency obtained information from a total of 164 FEHPB and Medicare+Choice plans. Forty of those plans used competitive bidding to set payment rates, and 53 set rates by discounting the Medicare fee schedule.

In the AAHomecare-commissioned study, Morrison Informatics, Inc., conducted a nationwide, comprehensive statistical survey of FEHBP pricing in July and August of this year.

On average, according to the AAHomecare study, FEHBP plans pay a monthly rate of $227.50 for stationary oxygen while Medicare pays $228.80 (HCPCS codes E0424, E0439, and E1390).

The study found less than a 1% difference in rates for portable oxygen.

In the MMA, Congress has authorized CMS to reduce payment Jan. 1, 2005 for home oxygen reimbursement using data from the OIG report issued Sept. 10.