Providers grapple with neb-med cut

Saturday, December 31, 2005

WASHINGTON - As the dust settles following a drastic cut to the respiratory medication dispensing fee, providers aren't exiting the market, but they are honing their survival skills.
"I got tons of calls right after they announced it," said Harold Davis, director of operations for VGM's Nationwide Respiratory. "I'm sure there are some that are considering (selling) but I haven't talked to anyone for sure that has made that statement."
Don White, president of Associated Healthcare in Amherst, N.Y., previously threatened to exit the respiratory medication business but now admits he can't.
"We're so heavily involved with our respiratory oxygen patients that we feel it would put us at a competitive disadvantage," said White. "I would say that 75% of the patients that have respiratory meds with us are also on oxygen."
A study released in September by AAHomecare stated 44% of providers said they would stop dispensing respiratory meds to Medicare beneficiaries if the fee was reduced too much. In January, the dispensing fee will drop to $33 a month, from $57.
One industry insider said companies will close, it's just a matter of who.
"Guys that have 300 to 500 patients, no way they'll stay," said the insider. "Companies with a $15,000 to $17,000 a month gross, they're not making money, so why bother?"
Overhead costs such as pharmacist salaries, product inventory and shipping are substantial, said Joe Lewarski, vice president of clinical and government affairs at Inogen.
"The ASP model is designed to cover your cost of the drug," said Lewarski. "Without an adequate dispensing fee to cover other costs, many companies may find it difficult to dispense those drugs and break even."
Providers have long contended that the patient services they provide should be factored in to reimbursement rates.
"We're going to have to evaluate our service model because the government has chosen to ignore the value of very important clinical and patient support services that are integral to the delivery of those respiratory meds," said Lisa Getson, vice president of business development and clinical services at Apria.
Reluctant to cut patient services drastically, providers instead must take a hard look at their business models.
For White's 2,000 patients that means less person-to-person contact. Instead, customers will receive e-mail or postcard notifications when it's time to reorder. White also plans to implement an easy-pay system to automatically deduct copays from patient's charge or checking accounts. White hopes the move will erase an average 7% revenue loss on copays.
In the end, it comes down to survival of the fittest.
"You have to have the correct drug mix and be a very smart, very well-run company," said Mickey Letson, president of Decatur. Ala.-based Letco Companies. "If you do not, you are not going to make it."