Question & Answer

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Wednesday, April 30, 2003

Dr. Paul Hughes discusses IR
WASHINGTON - On Feb. 11, CMS’s new inherent reasonableness authority went into effect, allowing CMS to reduce or increase reimbursement it feels is inappropriate. Don’t expect the bureaucrats to start slashing right away. It’ll take several months for the DMERCs get up to speed with the new reg, and it could be late this year or early next before Medicare employs IR as a cost-cutting tool, say industry watchers. Likewise, a number of Medicare officials believe the best course of action is to take it slow and steady, don’t dash out of the gate and try to tackle a number of big ticket or high-profile items that are sure to be controversial. HME News caught up with Region A Medical Director Dr. Paul Hughes in late January, and among other things asked him a few questions regarding IR. Here’s what he had to say.

HME News: In your view, how should IR be used?

Hughes: Say the fee schedule for a group of products is $10, but we know from other sources that most people buy this for $7. That is what IR is supposed to do at its heart. If everyone else is paying $7, why should we pay $10? We’ve got 40 million patients. IR is supposed to let CMS move their fee schedule closer to that $7. On the other hand, there are some items where Medicare doesn’t pay enough. If Medicare pays $10, and everyone else is paying $14.50, IR is supposed to allow Medicare to do something in the other direction.

HME: You’d be hard pressed to find anyone on the HME industry that believes CMS will use inherent reasonableness to raise reimbursement.

Hughes: If they are smart they’ll do some of both. I don’t want Medicare to underpay, but neither do I want Medicare to over pay. I think (IR) is a good tool that will let the agency and the contractors, if it is done carefully, readjust to be more in line with what other companies pay.

HME: Where do you think Medicare overpays?

Hughes: Drugs in general. Everyone acknowledges that the Red Book AWP price is dramatically inflated. I think enteral/perenteral nutrition prices ought to be looked at. In the past they were thought to be on the high side, and I would look again to see if that is true.

HME: Where do you think Medicare under pays?

Hughes: I think if they look at oxygen, that for the services rendered, they are not paying enough. That is my opinion based on my experience with suppliers about the degree of service that is needed to take care of these patients, to get the stuff delivered, to keep an eye on them and keep them monitored. The price for ostomy bags are low. They are an example where new versions of old things have come out and the prices are higher but the fee schedule increases haven’t kept up. In some areas like that, I’m hoping that CMS will take the opportunity to adjust fees. HME

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