Respiratory providers mix it up

Thursday, March 31, 2005

YARMOUTH, Maine -- Respiratory medication providers, who are now adjusting to the average sales price reimbursement structure, shouldn't get too comfortable with the new methodology. It's still going to be a rocky ride in 2005, say industry consultants.
"It's going to be a topsy-turvy year. It certainly has started that way," said Mickey Letson, president of the Letco Companies.
Letson said providers now have the added challenge of evaluating the drug reimbursements each quarter to see what the most profitable drug mix is going to be for their patient base. Letco is already advising its customers on what transitions they should be making based on expectations for the third quarter ASP fee schedule, he said.
"People are still kind of groping their way along. Now that we are beginning to understand the scheme and how it works, how do you optimize the results," said Bob Leonard, a broker with the Braff Group. But with the fluidity of the ASP reimbursement figures and a provider's actual acquisitions costs, Leonard says, doing that can be "as difficult as solving differential equations in your head."
What many providers have discovered, however, is that brand-name drugs are now more attractive because of their higher reimbursement levels.
"We have pretty much eliminated compounding," said one provider who is grappling with the cuts. "We have switched to DuoNeb and other brand drugs because Medicare is paying more."
This provider has also deemphasized marketing to attract new patients.
"Why bother," he said. "You are not getting anything for it, so we are not interested in increasing market share."
Other providers say the addition of the $57 dispensing fee helped save their business.
"Thank God for the dispensing fee," said Brain Chambers, director of Respiratory at Binson's Home Healthcare in Center Line, Mich. "We knew there was going to be a bump, and we prepared for it. We built the business thinking we were going to lose half, but it wasn't that bad."
Leonard and Letson said their best advice to providers is to be efficient, stay in the know, and work the system to use the right drugs to maximize profits.
"Even at lower profit levels it's still a business that's worth being in because most people do respiratory meds as part of an overall respiratory program," said Leonard. "Lots of these patients are going to end up on oxygen, so it's worth starting a relationship with them early in the disease state."
"There are a lot of providers who are still lagging behind on the information. They are still doing the same thing they did last year, and they are hurting," added Letson. "The market place this year is better built for a well-structured, up-to-date business. It's no longer a market you can just jump into and make a profit, but it's still a profitable business for the astute."