Senate proposes to end capped rental for DME

Sunday, October 30, 2005

WASHINGTON -- Senate leaders have proposed eliminating the capped rental option for home medical equipment as a way to shave about $900 million from the 2006 Medicare budget. If enacted, the change would slash the average provider's annual revenue by 3% to 5%, said an industry consultant.

"Companies like Lincare and Apria won't be hit too hard because of the amount of oxygen that they do," said Mike Barish, president of Ancor Healthcare Consulting in Coral Springs, Fla. "But for mom and pops that are concentrating on DME and Medicare, because they don't have managed care contracts, it could be a big hit."

Most bread-and-butter items of DME are capped, including hospital beds, wheelchairs, patient lifts, CPAPs and nebulizers.

The Senate Finance Committee proposed eliminating the capped rental provision as part of its Medicare and Medicaid spending plan for 2006. The full Senate is schedule to vote on the plan this week. If the Senate includes the capped rental provision, it could still be eliminated when the Senate and House compromise on a final Medicare/Medicaid package, probably in mid-November.

Currently, providers contact Medicare beneficiaries at the 10th month of the 15-month capped rental period and ask if the patient wants to continue renting or purchase the equipment. If the patient decides to purchase the equipment, he does so at the 13th month. Otherwise, he rents the equipment for the full 15 months.

Under the Senate proposal, for DME in the capped rental category,
after a 13 month rental period, the supplier would transfer the title for the item to the beneficiary. The option for a supplier to retain ownership of the item after a 15 month rental period would be eliminated. The option for beneficiaries to purchase power wheelchairs at the time they are initially furnished would be moved to the tenth month as with other rental cap items. This amendment would apply to items for which the first rental month occurs on or after January 1, 2006.

By eliminating the capped rental option, providers would automatically lose two months reimbursement per item (the 14th and 15th months), as well as the twice yearly maintenance-and-service fee they receive for servicing capped items. The maintenance fee equals one-month's rental. Providers would also lose the equipment and not be able to integrate it back into their fleet once the patient no longer needs it.

In their scramble to find savings, some senate staffers, relying a 2002 OIG and CMS report, believe the maintenance fees are unnecessary and should be eliminated.

The industry's job now: educate the staffers that the capped rental provision serves an important purpose for beneficiaries.

Last Monday, AAHomecare sent a letter opposing the change to Senate Finance Committee Chairman Charles Grassley, R-Iowa, and Ranking Member Max Baucus, D-Mont. In the letter, AAHomecare stated that, among other things:

- It is neither safe nor fair to shift the burden of maintenance and repair for medical equipment to the disabled or elderly Medicare beneficiary.

- If the medical equipment is purchased, the patient incurs additional fees for clinical or emergency support or for exchange of malfunctioning equipment.

"We are trying to educate the (Senate) staff," said Cara Bachenheimer, vice president of government relations for Invacare. "They are scrambling around, and our issue is one of 20 gazillion issues. If you don't know about the business, (eliminating the capped rental) might make sense."