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By Andrea Stark
reimbursement consultant, MiraVista, LLC

In the recent ESRD Proposed Rule, CMS conveyed their intent to freeze reimbursement in Competitive Bid Areas (CBAs) using the single payment amounts (SPAs) when the program ends on Dec. 31/2018.* CBAs encompass the most populous areas of the country and have the greatest impact on Medicare spend dollars.** In recent conversations with industry legal experts, MiraVista put forth three central questions:

  • Does CMS have the authority to freeze SPAs without contracts?
  • If not SPAs, then what is the reimbursement rate?
  • Is the CMS proposal good or bad for suppliers?


Does CMS have the authority to freeze SPAs without contracts?

CMS sets SPAs by ranking bonafide bids, determining a minimum number of suppliers to meet capacity for an area, and identifying the median bid price from this narrowed list. After CMS calculates the SPA, they offer contracts to suppliers. Upon receipt of the contract, suppliers have the right to accept or refuse the contracts, which become binding to both parties upon acceptance.

Per existing regulations, if CMS allows these contracts to expire, then no supplier can furnish competitive bid products. 42 CFR 414.408 establishes payment rules for competitive bid programs. §414.408(e)(1) states “Except as provided in paragraph (e)(2) of this section, all items that are included in a competitive bidding program must be furnished by a contract supplier for that program.” The four exceptions in (e)(2) relate to grandfathering, Medicare as a secondary payer, beneficiaries outside a CBA, and physician/hospital type exemptions, which do not apply to CMS’s proposal. Furthermore, §414.408(e)(3)(i) states unless an approved exception applies, “Medicare will not make payment for an item furnished in violation of paragraph (e)(1) of this section.” Together, these two citations put CMS in violation of the regulation if they make payment to non-contracted suppliers.

The regulations do not have a specific section dedicated to routine contract expiration. 42 CFR 414.423, however, addresses the appeals process for breach of a DMEPOS competitive bidding program contract, and it contains an applicable section “effect of contract termination.” If contracts expire, we believe the provisions of the termination clause apply in §414.423(l)(2)(i), “All locations included in the contract can no longer furnish competitive bid items to beneficiaries within a CBA and the supplier cannot be reimbursed by Medicare for these items after the effective date of the termination.”

Based on the above regulations, if a competitive bidding program cannot be administered without contracts, then CMS has two choices:

  • Extend contracts, or
  • Acknowledge the competitive bidding program is no longer in effect.


CMS did not even suggest contract extensions in the proposed rule. Without contracts, however, the regulations do not permit CMS to make payments to any supplier for competitively bid products in a competitive bidding area.

If CMS chooses to negotiate an extension with contracted suppliers, they could maintain compliance with the regulations.

Alternatively, if CMS acknowledges a lapse in the competitive bid programs in these areas, then CMS cannot use the payment rules for competitive bid programs located at 42 CFR 414.408. 42 CFR 414.408(b) states, “The single payment amount calculated for each item under each competitive bidding program is paid for the duration of the competitive bidding program and will not be adjusted by any update factor.” §414.408 only governs payment rules under a competitive bidding program.

If not SPAs, then what is the reimbursement rate?

§414.408 does not apply if the competitive bid program is not in effect. Instead, the general payment rules (using traditional fee schedules for rural and non-rural areas) at 42 CFR 414.210 must govern. There is already precedent for reinstatement of general payment rules during gaps between competitive bid programs. In July 2008, CMS awarded Round 1 contracts and then terminated them two weeks later. The CBIC website summarizes the timeline as follows:

“The Medicare Prescription Drug, Improvement, and Modernization Act of 2003 (MMA) required the competition for the first phase of the Medicare Durable Medical Equipment, Prosthetics, Orthotics, and Supplies (DMEPOS) Competitive Bidding Program to occur in 10 areas in 2007. Round 1 of the program was implemented in 2008 for two weeks until the contracts were terminated by subsequent law. The Medicare Improvements for Patients and Providers Act of 2008 (MIPPA) temporarily delayed the original Round program, terminated the contracts that were in effect, and made other limited changes. As required by MIPPA, the Centers for Medicare & Medicaid Services (CMS) conducted the supplier competition again in 2009, referring to it as the Round 1 Rebid.”

MIPPA created a gap between competitions from July 15, 2008, until January 1, 2011, when the Round 1 Rebid SPAs took effect. During the two-and-a-half-year period, the general payment rules and prevailing DME fee schedule reasserted itself over the briefly contracted SPAs. If CMS does not perpetuate the contracting process beyond Dec. 31, 2018, contract expiration should invoke another gap.

Based on our preliminary research, current regulations do not permit CMS to administer competitions without contracted suppliers. If the programs end and the general payment rules take precedent, CMS will have to recalculate rates for the traditional fee schedule because of the lapse in competitions.

The Patient Protection and Affordable Care Act incorporated new pricing methodology to 42 CFR 414.210 that averages SPAs across eight geographical regions. This methodology is referred to as national pricing. Specifically, §414.210(g)(4) requires payment adjustments for items and services included in competitive bidding programs that are no longer in effect:

“In the case where adjustments to fee schedule amounts are made using any of the methodologies described, if the adjustments are based solely on single payment amounts from competitive bidding programs that are no longer in effect, the single payment amounts are updated before being used to adjust the fee schedule amounts. The single payment amounts are updated based on the percentage change in the Consumer Price Index for all Urban Consumers (CPI-U) from the mid-point of the last year the single payment amounts were in effect to the month ending 6 months prior to the date the initial fee schedule reductions go into effect. Following the initial adjustments to the fee schedule amounts, if the adjustments continue to be based solely on single payment amounts from competitive bidding programs that are no longer in effect, the single payment amounts used to reduce the fee schedule amounts are updated every 12 months using the percentage change in the CPI-U for the 12-month period ending 6 months prior to the date the updated payment adjustments would go into effect.”

The above provision requires CMS to periodically readjust and increase the national fee schedule after adding in a CPI increase to historical SPAs. This process continues until a new competition takes effect.

National pricing created a bifurcated DMEPOS fee schedule with one set of rates for rural and non-contiguous areas, and another set of rates for urban (aka non-rural) areas. The national rates in rural and non-contiguous areas are presently enjoying a 50/50 blended rate increase through Dec. 31, 2018, due to the Interim Final Rule (CMS-1687-IFC) advanced by CMS. The ESRD Proposed Rule suggested a 24-month extension of this reprieve through Dec. 31, 2020.

The ESRD Proposed Rule is also soliciting comments on whether CMS should extend similar rate reprieve to urban areas. CMS’s proposal to create a new SPA-based fee schedule for former bid areas would exclude these areas from potential rate adjustments.

Is the CMS proposal good or bad for suppliers?

This is a great question with no easy answer.

On the surface, many beleaguered suppliers are simply relieved at the prospect of CMS advancing much needed reform. Nonetheless, freezing the SPAs not only ignores existing regulations but also the mounting effects of a flawed bidding program.

Proceeding without contracts is likely to exacerbate access problems in bid areas. The industry warned CMS of an excessive number of contracted offers to companies without a local presence. When contracts expire, so does the obligation to service bid areas under penalty of contract breach. If rates do not support profitable service in these most populous areas, CMS will unwittingly escalate access deterioration. There will be nothing to hold non-contracted suppliers, or draw new suppliers, to these dense and unprofitable markets.

On the other hand, if CMS temporarily ends the bid program and engages the general payment rules it will be a mixed bag for many suppliers. There are 130 bid areas and thousands of HCPCS-SPA combinations impacted by this alternative. National pricing averages these thousands of individual SPAs across 8 regional geographic areas. This process results in both net increases and decreases to individual SPAs. SPAs for stationary oxygen, however, are most negatively impacted due the budget neutrality reductions (aka double-dip cuts) imposed after the regional averages are calculated. In all but two bid areas (Honolulu, HI and Chester, SC), suppliers would see a rate decrease for stationary oxygen pricing compared to current SPAs.***

We expect CMS to publish a final ESRD rule in the coming weeks, but at the time of print, CMS had not posted the document. With the final rule, we expect CMS to finalize significant contracting reform that will apply pivotal bids over median bids. This single change should deliver sustainable rates in future competitions and to the national fee schedule. Until these changes take effect, current reimbursement rates remain flawed and unsustainable.

Andrea Stark is a reimbursement consultant for MiraVista. Reach her at andrea@miravistallc.com.

Article Footnotes:
* CMS also suggested an immaterial, single-year consumer price index (CPI) increase for inflation in these bid areas. To put the CPI increase into perspective, the 2018 inflation factor increased fees by about 1.1%. This is a very small increase. As such, at each reference to the CMS proposal to freeze the SPAs, we do not specifically call out the CPI increase proposal due to the immateriality of the increase.
** CBAs cover the 110 largest metropolitan statistical areas within the country. According to census data, approximately two-thirds of the US population reside in these areas. MiraVista requested specific Medicare beneficiary and utilization data from the Competitive Bidding and Implementation Contractor, but was advised this data is not publicly available without a Freedom of Information Act (FOIA) request.
*** E1390 SPA averaged $76 across all CBAs with a low of $70 and high of $90. National Pricing averages $70 across the same geographic areas with a low of $65 and high of $121.

Kelly Turner
director, People for Quality Care

Advocacy efforts are on the rise, as we near the Washington Legislative Conference on May 23-24 and the industry pushes for relief for non‐bid areas, structural reforms to the competitive bidding program, and a critical exemption of CRT accessories from bidding‐derived pricing. This May, the HME industry will take The Hill by storm with hundreds of congressional office visits and a meaningful plea for elected officials to take a stand for homecare patients and those who serve them.

One thing is clear: this is not a payment issue—this is a people issue. Millions of Americans rely on the HME benefit each year to meet their medical needs and safely maintain their independence at home.

However, faulty government policies are thwarting access and causing irreparable harm to this vulnerable patient population.

It is critical that our legislators understand the dire situation across the HME landscape, and one of the most powerful tools we have in the process is the voice of the consumers—their constituents—who are suffering as result of their inaction.

Consumer advocacy group People for Quality Care (PFQC) has been a cornerstone in having more than 5,000 end users, family caregivers, and clinicians reach out to Congress about HME issues over the past few years alone. Armed with personal stories, they have left an indelible impression within the halls of Congress. Now, stakeholders are asked to “double down” on industry efforts by expanding the reach of PFQC—which is fearlessly telling it like it is and providing irrefutable personal evidence of the damaging effects of these poor government policies on their daily lives. 

Providers need to empower their patients and community to get involved and join the fight and share PFQC’s website, www.peopleforqualitycare.org, where they can learn about the issues and take action.

Turnkey educational resources are also available on the website for HME companies to print and share with their customers, written in everyday language geared toward the public. Industry stakeholders can also share PFQC’s social media posts across their preferred networking platforms to reach their customer base in the digital space.

By connecting customers to these resources, we can double down our collective advocacy efforts and make a difference. Together, we can. Together, we will!

Kelly Turner is the director of People for Quality Care, a division of VGM Group, Inc.

I recently wrote an article entitled "Court Says No Recoupment Until After ALJ Hearings."  This article was about a court decision in which the judge said that recoupment of an extrapolated overpayment as a result of a ZPIC audit could not begin until after ALJ hearings were held. This article is reprinted below in italics.
 
Now comes potentially additional good news!
 
As you may recall, the American Hospital Association (AHA) and others sued the U.S. Department of Health and Human Services (HHS) in December 2016. American Hospital Association v. Alex M. Azar, Civil Action No. 14-CV-851-JEB, (U.S. District Court for the District of Columbia.) As a result, a federal judge ordered HHS to clear pending appeals before Administrative Law Judges (ALJs) incrementally by the end of 2020.
 
HHS asked the U.S. District Court for the District of Columbia to reconsider this order but the request was denied in January 2017.
 
HHS appealed the decision. The U.S. Appeals Court for the District of Columbia overturned the order in August 2017. This means that the lower district court could decide whether, as HHS claimed, it would be impossible to comply with the order's timetable for reducing the backlog.
 
In February 2018, AHA asked the district court to reinstate the deadline for clearing the appeals backlog. AHA argued that HHS "has not shown it is impossible to clear the backlog-minus, perhaps, some claims with serious program-integrity concerns-within five years."
 
Now the judge is getting impatient!
 
The judge in the district court has asked AHA to "elaborate and expand upon the recommendations it has made over the course of litigation for clearing the backlog by June 22."
 
What are AHA's recommendations?
 
AHA's recommendations are laid out in a "Reply Memorandum of Law in Support of Plaintiffs' Cross-Motion for Summary Judgment" dated February 15, 2018.
 
First, AHA points out that the Court has already ordered HHS to clear the backlog. When HHS argues that it is "impossible" to clear the backlog, it really means "prefer not to."
 
AHA suggests the following ways HHS can resolve the backlog:
 

  • Further curtail the RAC Program;
  • Do more to settle outstanding cases;
  • Delay repayment of denied claims; and
  • Toll interest accrual of backlogged appeals for all periods for which  beyond the statutory maximum of 90 days.

 
The deadline for HHS to respond to AHA's suggestions is in July.
 
Stay tuned! Providers need relief and HHS currently has no incentives to provide it! It's past time to fix it!

Court Says No Recoupment Until After ALJ Hearings
 
The U.S. Court of Appeals for the 5th Circuit issued an opinion on March 27, 2018, in Family Rehabilitation, Inc. v. Azar, No. 17-11337 (5th Cir. Mar. 27, 2018) that says that monies cannot be recouped from a home health agency until after hearings have been conducted by an administrative law judge (ALJ).
 
Family Rehabilitation received a notice of overpayment from the Medicare Program in the amount of $7.6 million. It appealed under what the Court described as "Medicare's Byzantine four-stage administrative appeals process" and "the harrowing labyrinth of Medicare appeals." After requests for reconsideration were denied, the agency was subject to recoupment. The agency filed timely requests for hearings before an ALJ.
 
The notice of overpayment was based on a ZPIC audit conducted in 2016 of 43 claims. An extrapolation resulted in the $7.6 million overpayment.
 
ALJ's are required by statute to hear cases and issue a decision within 90 days. "Yet," said the Court "an ALJ hearing is not forthcoming-not within 90 days, and not within 900 days." In fact, it will likely be at least another three to five years before an ALJ hears the agency's appeals.
 
Based on the above, the agency sued for a temporary restraining order and an injunction to prevent the Medicare Administrative Contractor (MAC) from recouping overpayments until administrative appeals are concluded. The agency says that it will be forced to shut down due to insufficient revenues long before the appeals process is complete. The agency claims that the delay (1) violates its rights to procedural due process, (2) infringes its substantive due-process rights, (3) established an "ultra vires" cause of action and (4) entitles it to a "preservation of rights" injunction under the Administrative Procedure Act, 5 U.S.C Section 704-05.
 
The lower federal district court said that it lacked jurisdiction because the Agency had not exhausted administrative remedies. The Agency appealed to the appellate Court.
 
Ordinarily, providers may file suit in the district court only after either (1) satisfying all four stages of administrative appeal or (2) after providers have escalated claims to the Appeals Council after ALJ hearings and the council acts or fails to act within 180 days.
 
In considering the agency's request, the court first noted that full relief in this case cannot be obtained at a post-deprivation hearing because the agency will be closed long before ALJ hearings are held if recoupment occurs. The court found that the agency may suffer irreparable harm in the form of going out of business and disruption to Medicare patients. Consequently, the court could decide the case.
 
The court went on to say that it cannot rule on the substance of the agency's appeals but providers may request that benefits be maintained temporarily until statutory and constitutional procedures have been followed. Since the agency asked for temporary suspension of recoupment until hearings are held as opposed to permanent reinstatement of benefits, the court can rule on the agency's request.
 
Finally, the court noted "HHS's ostensibly Sisyphean attempts to combat the problem" of a backlog of appeals before the ALJ.
 
Consequently, the court reversed the decision of the lower court and remanded the case back to the lower court.
 
This case is definitely one for providers to watch! It now looks possible for providers to avoid recoupment in the face of multi-year wait times for hearings before ALJ's!

Elizabeth Hogue is a private practice healthcare attorney in the Washington, D.C., area. She can be reached at elizabethhogue@elizabethhogue.net.

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Laura Williard
vice president of payer relations, AAHomecare

In December 2016, Congress passed wide-ranging healthcare legislation popularly known as the Cures bill that expedited the implementation of a requirement that the federal portion of Medicaid reimbursement to states for HME cannot exceed what Medicare would have allowed for these items, in aggregate, beginning on Jan. 1, 2018.

CMS provided its first update to Medicaid directors via a webinar in December, but it failed to include information needed for states to understand how to implement the new requirements. They released additional information less than a week before the Jan. 1 implementation date that confirmed that these requirements do not apply to medical supplies or O&P products and noted that states do have flexibility in setting rates to ensure access for their patients. The guidance gave states an option of basing Medicaid rates on Medicare’s lowest fee schedule or competitive bid rates for the state (which they described as the “simplest” option), or to conduct a comparison using both rate and unit utilization data to calculate the aggregate reimbursement under Medicare for those same items to show that the state payments are less than the federal allowable.

Many in the DME community (myself included) were taken aback by CMS’s original deadline of Dec. 31 for states to determine their approach, especially given that their guidance was issued on Dec. 27. AAHomecare quickly pushed back on that un-meetable deadline and helped convince CMS to issue an update giving states the time they needed to assess their options. We also encouraged CMS to promptly publish a listing of the codes affected, which has still not occurred. However, AAHomecare received a copy of the list of codes from CMS and provided that to Medicaid directors and the state and regional DME associations for distribution. CMS is still providing this to states as they request it.

Since that time, AAHomecare has been working with leaders at state and regional associations to help convince state Medicaid officials to analyze their spending for the appropriate coding and, if under the aggregate, to not perform any rate reductions. If states are over the aggregate amount, AAHomecare is encouraging them to make sure that cuts are limited to the 244 codes affected. As of this writing (March 8), we’ve received confirmation that 10 states are not changing their rates: Florida, Georgia, Hawaii, Michigan, Minnesota, North Carolina, Pennsylvania, South Carolina, Tennessee, and Texas. Nine states have made the decision to move to Medicare rates but AAHomecare and state associations are hopeful to change the outcome on these, as we are still working with five of those states.

We’re currently working closely with stakeholders in Ohio, Missouri, North Dakota, Colorado, and South Carolina to encourage those still-undecided states to adopt the aggregate pricing approach. In these states, we want to make sure that state officials have a clear understanding of their options. We’ve also shared our recent studies that show that DME suppliers are already operating at razor-thin or even negative margins on many products and illustrating the threat to patient access.

Challenges remain in many other states that are still analyzing their data using tools and guidance provided by CMS. Connecticut Medicaid officials, for example, just announced their intention to adopt Medicare pricing across all DME, O&P and supplies codes, going beyond the scope of the new provisions. The state’s intention to implement drastic cuts of 50% to 60% with just 30 days notice and without any consultation of the DME community is even more troubling. AAHomecare has joined the Home Medical Equipment and Services Association of New England and NCART in asking for a 90-day delay to make sure Connecticut officials have all the information available to make a better-informed decision. Other states have also used this legislation as a platform to evaluate and reduce their entire fee schedules despite efforts by stakeholders to convince them of the access to care issues.
Our state association partners have done terrific work in making sure that Medicaid officials understand their options under the new requirements beyond CMS’s self-described “simplest” approach, as well as giving them a clear picture of the potential impacts. For me, it’s been rewarding to work with dedicated state associations to fight back, and AAHomecare will continue to support their efforts to secure smarter and sustainable Medicaid reimbursement policies wherever we can. hme

Laura Williard is vice president of payer relations for AAHomecare. Reach her at lauraw@aahomecare.org.

Home for the holidays takes on many meanings this time of year. Families and friends gather from near and far to celebrate the season with loved ones. Stories shared. Songs sung. Food and festivities are all around. College students return home after working hard all semester. Babies are joyfully introduced at holiday parties. Military personnel come back for holiday leave after serving our country so well.

This is a magical time of year where people unite and commemorate all that was and all that is to be.

Thanks to home care, millions of Americans are able to be home for the holidays and spend this special time with loved ones. Technology advancements enable more people to meet their medical needs from home instead of having to rely on institutional care. Walkers, wheelchairs, home oxygen therapy, diabetic supplies, and so much more all play an important role in empowering people to live safely, comfortably, and independently at home now and throughout the year.
Everyone should have the choice to come home, be home, stay home for the holidays.

That is why People for Quality Care and companies who provide home medical equipment, services, and supplies have been working hard to make sure the ability to live out this choice is not lost.

Adequate insurance and Medicare funding is essential for home care to remain a viable option for seniors and people with disabilities, and acute and chronic conditions. People should have freedom of choice in who they get their medical care and equipment from. Hometown companies should have the opportunity to continue meeting the needs of their communities. And people should have every opportunity to be home for the holidays with the equipment and care they need.

This holiday season, take a moment to ask your member of Congress to support legislation that will help seniors and many more stay home for the holidays.

Call Congress today and ask them to support H.R. 4229, the Protecting HOME Access Act of 2017. The Washington, D.C., switchboard is happy to connect you at 202‐224‐3121. You can also visit People for Quality Care to learn more and to send a letter to Congress about this important issue.

Kelly Turner is director, People for Quality Care, a division of VGM Group, Inc. She can be reached at kelly.turner@vgm.com.

Editor’s note: Kelly and Lisa wrote this for end users. As HME providers, this is a great tool that you can use to inform your patients and customers to advocate for themselves and, in turn, your businesses.

Imagine this: your HME company has closed, is no longer taking Medicare patients, is asking you to pay up front because they no longer “take assignment,” or you’re having fewer product options or are waiting longer for deliveries and service. You’ve called Medicare and/or Medicaid and gotten the runaround.

So, what’s your next step?

Why disability and senior advocacy is needed

Many HME companies that once have provided services and equipment to people with disabilities have gone out of business because of changing federal Medicare regulations. Poor policies with inadequate funding for HME have caused more than 40% of these traditional HME companies to go out of business or stop accepting Medicare entirely.

Others have had to significantly change the way they do business, due to the unsustainably low rates Medicare reimburses them. In many cases, these companies can no longer provide the same services and equipment as they did in the past or are having to turn to the individual who needs medical equipment to cover the differences in the cost of the equipment and the low amount that Medicare will pay.

Across the nation, this is causing decreased access for medically necessary equipment and services for people who need them, or forcing the individual to pay out of pocket to get what he or she needs, instead of being able to use their Medicare benefit.

Kelly Turner at People for Quality Care says, “With no other recourse, the individual has to go without or spend more of his or her own money, which they may or may not have, to get what they need. Often the person has to make a decision, ‘Am I going to continue to try and find someone to help me, or am I going to give up and not get the service or equipment I was told I would receive from Medicare?’”

These unintended consequences have a significant impact on overall health care and spending, as home care is a cost-effective and preferred alternative for most individuals.

How you can self-advocate for your health care using videos

The viral power of video is staggering. How many videos have you seen on social media that have opened your eyes about people with disabilities? In this video, produced by Cure Medical, My ThisAbled Life’s Andrew Angulo shares his take on the value of selfie videos, in terms of how your personal story can change lives, laws and perceptions: http://bit.ly/2h01YCe.

Andrew says, "I'm just someone who experienced a life altering accident in June of 2009 and I want to share the experience of my everyday situations through silly shorts of my daily life as a photographer, film maker, action superhero and a regular Joe. In a chair. Doing stuff."

People love what Andrew shares! More than 450,000 people have watched his videos on Youtube, and the number keeps growing every day.

Lights, camera, action! Share your own story

Not sure how to begin? Or what you should say when it comes to talking about your own personal experience?

Don't worry, you don't have to be a pro! Simply use your cell phone to create a quick video that talks about your healthcare concerns and why your friends and family should support you in asking for better access to Medicare benefits for people with disabilities.

Your video doesn't have to be long. It doesn't have to be complicated or professionally produced. It just has to be honest, from your point of view, to capture the hearts and minds of people in your community.

Take a look at this one, for example, filmed on the fly and on-the-go by the Rollettes, sharing their experience with United Spinal's Roll on Capitol Hill: http://bit.ly/2v5kLSU

How PFQC can help

PFQC believes in the power of one. Each person has a voice, and when those voices come together to educate legislators about their problems accessing HME, the wheels start rolling, and change can take place. Kelly says the first step in evoking change is, “To put the individuals having problems with obtaining the proper medical equipment, supplies and services directly in touch with their legislators in Washington.”

PFQC encourages people to reach out to their legislators not only through emails, but also through phone calls, Twitter, Facebook and all the vehicles available to them to let those they’ve elected know the problems they’re having receiving the products and services that Medicare is supposed to be providing for beneficiaries.

“Our key initiative at PFQC is to make sure that beneficiaries who aren’t having access to home medical equipment and services get connected to their legislators,” Kelly says. “They can explain to those legislators on a personal level what their issues are and ask their legislators to help fight for changes that will protect access to the HME benefit by providing sustainable reimbursement rates and ensuring that there are enough providers to serve the population of Medicare beneficiaries.”

So, if the disability community doesn’t make Congress aware of problems, then the men and women in Washington can’t and won’t address these issues.

Hint, hint: This is why we're encouraging you to share your own story online with a personal video!

Kelly Turner is the executive director of People for Quality Care. She can be reached at kelly.turner@vgm.com.

Lisa Wells is the vice president of marketing for Cure Medical. She can be reached at lwells@curemedical.com.

John Gallagher
vice president of VGM Government Relations

What are the most important things needed to break a nut loose from a rusty bolt? Some WD-40, a few good tools, and an abundance of elbow grease. Much like that rusty bolt, Health and Human Services Secretary Tom Price is working to break the bureaucratic rust loose within the agencies he oversees.

There are plenty of concerned providers who are worried that Secretary Price, a strong advocate for the HME industry during his time in Congress, has forgotten about problems that must be solved. While the urgency of real reforms increases every day and providers continue to struggle to keep the lights on, the industry must recognize the machine that Secretary Price is working against and the steps his department has taken to make incremental improvements already.

Secretary Price has already had an immediate impact on DME

Round 1 2019 of competitive bidding was pulled shortly after its introduction because of Price’s actions prior to being confirmed as Secretary. Something equally as important, the industry is seeing a much different CMS since Secretary Price took over the reins. We are seeing the leadership at CMS, including the new Administrator Verma herself, beginning to be much more willing to respond to inquiries, something that we have never seen from CMS or HHS.

Reduced staff numbers slow down change

Secretary Price, as well as many other agency heads, is working with greatly reduced staff numbers. This is largely due to politics in Congress playing out with confirmations and budgets, but it is having an impact. This translates into battling with career CMS employees who are working to protect their positions and who are married to flawed programs that are harming providers and patients. An encouraging response that we have heard from more than one official within CMS is that senior staff that came with Secretary Price is quickly gaining the respect of the rank-and-file employees.

Where is the magic wand?

Many are wondering why Secretary Price cannot just snap his fingers and solve the problems facing the industry. Unfortunately, there is no magic wand to wave over everything to be solved. While he has overall authority of the direction that these agencies take, there are still rules and statutes in our government that prevent him from having complete unilateral power. There are lawyers and career staff that follow lockstep with the bureaucrats and leadership already in place at CMS, and they aren’t the most friendly when it comes to interpreting the intent of congressional action.

Agencies need a mandate for quick action

For a department or agency to act swiftly, they need to be pressured, or shown the demand for change by Congress. We are seeing an increase in congressional inquiries coming from key committees and leadership that raise red flags with the status quo going on within CMS. This continued concern from Congress is a direct result of the constant outreach from grassroots providers calling into offices, attending meetings, and messaging members of Congress through the VGM Action Center, which sees thousands of individual advocates annually. Providers need to continue demanding change by CMS to keep that pressure on.

A lot of irons in the fire

Even though HME plays an extremely important role in the world of health care, we have to recognize that Secretary Price has countless “irons in the fire,” namely the repeal and replacement of the Affordable Care Act. The unknowns and delays in passing legislation to replace Obamacare have clogged the pipes of legislative and regulatory action. I have no doubts that Secretary Price has not forgotten the problems going on within the DMEPOS industry. The costs, readmissions, and health care problems that are prevented by this industry do not go unnoticed. This is especially true with Secretary Price as he is working to overhaul the health care system to put patients at the center of health care.

Have trust that the nut will break loose

The frustrations that providers hold are not doubted and absolutely understood. Providers have to channel that frustration to the people who will listen most, their members of Congress. It has been just over four months since Price took over as Secretary and he has worked with limited staff and resources at his disposal. It takes time and energy to break a nut loose from a rusty bolt and Secretary Price is doing just that. While the industry would love to sheer that rusty bolt off, Secretary Price doesn’t have that luxury because the agency has to still function and we don’t want CMS to actively work against him, which only makes things worse.

Grassroots HME providers are some of the most hardworking and driven individuals in health care because of high level of care they provide to their patients. The industry has to allow Secretary Price the time to create relationships and drive CMS down the correct road and trust that he is doing so. The industry has concrete changes to show that the nut is breaking loose from a very rusty bolt.

John Gallagher is vice president of VGM Government Relations.

In a recent HME Newspoll, we asked HME providers to share how their businesses have been impacted by the national roll out of bid pricing. More than 100 responded. Here is an excerpt of what they said.

This pricing has been the most devastating thing we've had to contend with in health care for the last 25 years. The caps and the cuts have left us completely crippled. We can’t sustain this for very much longer!

Dave Boroughs, Riverside Medical, Savannah Tenn.

 

We closed multiple locations and laid off 30% of our staff, mainly RTs.

 

The national roll out of bid pricing has been devastating to our business. We have had to cut employer paid benefits, reduce staff, remove multiple items from our products and services, become more aggressive in collection efforts, suspend ordering from multiple vendors and create our own competitive bid process for most items that we do currently provide. Vendors were invited to bid for our business as an all or nothing package by DME categories. In addition, we have had to turn to cash sale items into a way to supplement our losses and sustain business until the new administration fixes the damage that has been done. Many of our competitors have closed their doors. We have survived by the skin of our teeth due to the fact that we also provide pharmacy services and state bid contract medications. Had it not been for these private contracts, we would certainly be in a much different situation.

Melissa Hammett,
Professional Care Pharmacy, Monroe, La.

 

We have lost key employees and as a result we are not available to be in the patients homes like we were in the past. The patient is the one suffering and they don’t understand why Medicare has done this to them. We are having patients call us in our local area that were set up with companies in Nashville. Due to the distance, they are not servicing their patients. These patients want to change to our local company but they are in their cap and we will not take them. While I am on my soapbox, I do not understand how the advantage plans can say they are following Medicare guidelines when in actuality it is only the payscale they are following. We should not have to get an authorization every year nor every month. With the reduction in staff, this is putting a hardship on providers. I am an advocate for pre-authorization on DME and thereby eliminating the need for needless audits. It is time our industry unites. The best thing our company has done is become a member of AAHomecare. They have grass root efforts that are having a positive impact and gaining support of our Congress.

 

The reimbursement rates are very unrealistic and it is hurting not only people and businesses in rural areas but the entire industry.

Rodney Askay, West River Health Services, Hettinger, ND 58639"

 

Our biggest competitor is a national. They continue to provide less patient care and good service. We have patients trying to switch to us on a weekly basis. Unfortunately, because of the "capped" status, the patient is unable to switch. Of course, they know this and don't care about service.  

 

Although I am not in a rural area, what has transpired in our area is the majority of private insurance companies has lowered reimbursement to the rural price in our area, dropping reimbursement 30% to 45 %.

 

We are doing everything we can do to survive. This industry will fail at the current reimbursement rates.

Jeremy Killough, Southeastern Home Oxygen Service, Columbus, Ga.

 

We are using personal savings in the (futile?) hope that there will be some bid relief, or that at least the 2016 bid relief payments will help to alleviate some of that debt. We are also exploring options to sell or close the business because we can't survive operating as we are now.

 

CMS's assault on HME began in the 90s with the Medicare Modernization Act. It mandated that DME companies compete by bidding against each other. This became an auction—not against other providers, but a stand-off with CMS. Naturally, CMS won in doing Congress' bidding: Congress lacked the backbone to admit they wanted to defund DME. It’s been a slow, painful death. But they've gotten what they wanted: the shutdown of an industry of small, service-oriented businesses. Another fiendish arrow in CMS's quiver since the war began has been the accompanying Kafkaesque bureaucratic documentation requirements. Those alone made our services marginally profitable without even considering the very first fee cuts, not to mention the auction. They've won.  We all need to face it, close up shop and get a life.

Kathleen Weir Vale, HOPE medical Supply, San Antonio

 

New bid pricing has caused us to stop providing many items. In most cases, the customer tells us that they can not find anyone to supply the items or do the necessary repairs. It looks as though it may get worse in June. Our government wants to destroy our industry and it looks like it has succeeded.

 

We will be billing non-assigned from now on.

 

We have debt now of $100,000, (when) we were debt free before the price reduction. I have not received a salary for over 11 months as an owner. We still cannot pay for our equipment and have to continue to finance. With rent, utilities, payroll, insurances and bonds, we still cannot pay the bills. Why does CMS not cut on their administration costs. I am sure there is a lot of waste there. Also, the patients pay for Part B monthly, but they are the ones that really get cheated—no service, cheaper equipment, etc.

Diane Friend, Valley Home Health Care, Roanoke, Va.

 

As a result of the pricing cuts, we have reduced staff to a skeleton crew, dropped products and services offered/billed, and can no longer care for our patients as efficiently or thoroughly as we previously did. We as a company are hurting; the patient is suffering as well.

Rich Waltman, HealthCare Plus, Polson, Mont.

 

Cash flow has really gone down. When payroll and credit card roll around, it is really tough. We are completely debt free and pay credit card off monthly, but have had to take money from company savings twice this year. We have had a few employs leave and haven't rehired.

 

We have laid employees off and have had to borrow money to stay open. If things keep going as they are, we will not be able to provide equipment to our customers much longer. We service a very rural, impoverished are.

Lana Cochrane, Personal Medical Equipment, Anna, Ill.

 

A lot of our clients and referral sources are upset that we no longer accept assignment on products affected by the roll out. It has resulted in a drastic drop in referrals and sales.

 

We have been really impacted with the decrease in our TriCare contract, which is based on the Medicare non-rural rate, with a further 20% discount. Now MediCal is looking to do the same.

 

We have always run a lean staff. We have had to lay off two clinical staff. No one has insurance as costs have increased over $50,000 in the past three years. My 64-year-old partner was on a call out last evening from 0100-0500 hrs. Anyone looking to buy a good used DME?

Bob Forbes, Advantage Home Oxygen, DuBois, Pa.

 

We are located in San Antonio, and the continued decrease in reimbursement affects all areas. We are a military city and the Medicare patients are always on a waiting list and no one even wants to do business with Tricare due to their contact of 65% of the Medicare allowable, which is already ridiculous. We service the military and are applying for Medicare and Medicaid, but in reality what for, with the way the reimbursement is going. You can't run a business like this and service patients’ medical needs. We are a minority, veteran-owned company just trying to stay afloat.

Brandy Hill, Patient Solutions, San Antonio

 

Hopefully we will still be in business within six months. Pray for our industry.

 

The 50%-plus cuts within six months in the rural areas during 2016 have seriously affected cash flow and margins. We are currently working on a 0% operating margin, depending on the month.  Additional cuts to oxygen are devastating!

 

We’re losing a substantial amount of revenue, causing serious changes in business practices, including decreasing product lines, going non-assigned, decreasing deliveries.

Brian Dirksen, Genesis Home Medical Equipment, Davenport Iowa

 

The biggest impact has been a reduction in customers. We receive near daily complaints from past and potential customers of lack of service and response form bid winners.

 

We have had to push more of the expense onto the beneficiary. Many people cannot afford extra expenses in a rural area. How can I be expected to deliver equipment in a rural area on such slim margins? My costs have not decreased, but my income sure has. We are the only locally owned DME in the area with our doors still open. Soon the nationals will have all the business and be able to dictate cost.

Gary Morris, GME Medical, Lynchburg, Va.

 

We moved out of the Medicare business in July of 2016. It's been tough, but we're gaining ground.

Michael Wofford, Appalachian Medical Services, Calhoun, Ga.

 

I have been in this industry for almost 40 years and I have seen a lot of crap come and go from CMS, but this is by far the worst I have ever seen. CMS can change reimbursement rates in the middle of a rental period, but we cannot change our assignment decision in response? What BS. I have laid off long-time employees and cut benefits like health care, but there is no way to make up for 50%-plus cut in Medicare.

Don Chrysler,National Home Health Care, Amarillo, Texas

 

We will be letting go of an RT and cutting on service.

 

We've dropped hospital beds/trapeze/lifts/air mattresses, cut our staff by over a third, shelved expansion plans, and gone into debt. Even with these changes we may not survive.

 

We had to stop accepting new referrals from Medicare and all the HMOs (because they pay even less than Medicare now), effectively closing our business. We delivered products 60-90 miles away on a daily basis, but we could not continue to do so because we were losing money on 80% of the items we were delivering.

S. Holland, Eleos Home Medical, Mobile, Ala.

 

I feel that the patient is the one that will suffer from the way the bid works. We have a location in a bid area and our main office is in rural area. We have had tons of patients in the bid area that can't get the services they need and are being turned away by the bid winners because they can't keep up. It is increasingly difficult to keep going with the cuts—some below our cost—especially for the capped rentals that we have to bill for over a year and maintain the equipment. It is ridiculous to expect us to keep taking care of people at that rate.

Kathy Driver, Mike's Medical, Clinton, Okla.
 

We simply cannot accept Medicare assignment on most items currently outside a very narrow service area. You are supposed to do the same amount of work for a 50% reduction in revenue; it is impossible

Al Neumann, Corner Home Medical, St. Paul, Minn.

 

We have had significant downsizing of staff, impacting patient care. In some scenarios, reimbursement is not covering cost of goods. Patients get upset and want immediate service, but you simply cannot staff. Medicare demands the same touches and service levels, and has broad medical necessity requirements, but it has reduced fee schedules to barely cover or not cover basic cost of goods, delivery, and claims costs.

 

We are billing unassigned for some product lines. Patients will have much higher out-of-pocket expenses. There are some products where our purchase price is higher than the reimbursement. We are also cutting value-added services. The only reason our DME has stayed in business is that it is part of a multi-service line home care agency. If we were a stand-alone DME, we would have been out of business at the end of 2016.

 

We have consolidated three locations into one. We no longer take assignment on walkers and bedside commodes or anything else under $50. We have also had to reduce head count and gotten further into debt.

 

We have cut down on service, reduced staffing hours and reduced inventory. We do not take any chances with questionable documentation. Our priority has shifted from taking care of the patient first, to trying to keep ours doors open.

 

The bid pricing will force us to eliminate positions, drop contracts and change our business model completely to remain viable.

 

The biggest impact has been meeting the cost of the items dispensed with the current bid pricing. We are losing money on each order dispensed.

 

The bid pricing is not sustainable and is evidence of misguided government.

 

We have been hit from all sides and the matching commercial fees are just starting to take the biggest toll. We are seriously considering dropping some of our third-party contracts. It's a tough decision when you've lost so much business already. Overall, we continue to search for ways to increase our overall bottom line, increase our retail presence and find profitable sweet-spots within the third-party payer world.

Lori Sears, Active Home Medical Supply, Lapeer, Mich.

 

With cuts in reimbursement, rigid Medicare guidelines for respiratory machines, and taking on more clients from locations closing or from winning the bid, it is hard to supply the new equipment and enteral products. There is not room for profit or error and we have continually been in the rears, continually trying to dig out. We keep hoping that our privately owned hometown company will make it. The national and hospital companies are crushing us. I do not understand how any company can get away with fraud, when we cannot even get our patients that need the equipment qualified by the rigid guidelines and let alone get a legitimate claim paid.

DeAnn Bauer, Belleville, Ill.

 

We are in a rural area of western Oklahoma. We are the only DME in our town now, as there were three at one time. These cuts have impacted us tremendously, to the point of having to get a loan to keep the doors open, and I am not sure how long that is going to help. We desperately need help quickly. If we are not able to keep going, I am not sure what out patients are going to do. These cuts have caused us to cut staff hours, reduce products we would normally carry, and not accept all new patients. Patients are having to wait on items longer, as the funds are just not available to purchase all items needed. Please help save the business. We love what we do and care for our patients, and don't want to see them have to do without.

 

There are insufficient profits from Medicare sales to cover overhead, make deliveries, and provide choice. We are especially damaged by a large number of Medicare/Medicaid referrals from other providers that are not providing equipment or services as the non-payment of deductibles and co-pays puts us immediately in the red. We have curtailed our catchment area and products as a consequence, and will file claims non-assigned when ever possible.

 

We live in a rural area and cover many counties that have no other DME services available to them. We are going to have to reduce our coverage area due to bid pricing. Bid pricing has eliminated our profit margin so we can not afford to deliver and service patients in other counties. What will those patients do then?

 

There has been over a 60% decrease in oxygen reimbursement over the last year and we’re getting paid less than those in bid areas. I don't think I have to explain the IMPACT. It's devastating. 

 

When reimbursement is less than cost, you can't stay in business. We serve residents in rural Kansas and can't continue to be in business under the current plan.

 

We are lucky to be diversified into other products and retail. It’s the patients that are suffering with poor quality service, poor quality equipment, sometimes no service. I cant believe that there is not more complaining coming from patients. They are just letting it happen. We as suppliers can complain all we want; CMS does not care about us. 

 

We are in a metro area, but all of our plans followed the Medicare rates and some even lower. We have had to adjust our service line and are still loosing money each month. No one seems to want to talk about this part of the deal. In six to 12 months, we will be gone.

 

The biggest impact has been a reduction of value added services and patient care.

 

We service a county in Montana that is bigger than the state of Rhode Island with a population of 7,000 people. I have laid off an employee (leaving it up to me and one other person to service this massive area). We have cut where we go and the services we provid, and are not breaking even with these rates. We are dying for the money from the Cures Act and praying that rates get established where we can service the patients we love. We are the only DME in the county and we can not increase profit by more patients. There are no more people. If we close, I am not sure how these patients will discharge out of the two hospitals we serve.

Jenn Morrisroe, Dillon Medical Supply, Dillon, Mont.

 

We have looked real hard at what services to continue/discontinue. Staffing cuts are on the table at this time also, which will further limit what services we can offer.

Tim Martin, ATTENTION Medical Supply, Newport, Ariz.

 

As a small town, locally owned business, the hardest part is telling the customers that you cannot afford to take care of them. I am having to say no all the time.  As an example, the quality of hospital beds I use cost me more than Medicare pays. However, with the audits, very very few people "qualify" for a bed through Medicare.   They need one, but the rules are over the top. I rent more privately than ever before.  It is sad for the clients.

 

We stopped servicing Medicare patients. The transfer of patients has been costly and time consuming, so I'm not sure we are loosing less money. Regardless, we can't sustain the cut in the long run. The years we have serviced our patients are no value at all to the government. As long as they think they are saving money (even though time will show they are making things worse), they do not care about patients and the access issues that they are experiencing. It's taking months for these patients to get the supplies that they need.

 

We have one location in a non-bid area. The biggest impact for us has been to drop certain categories, i.e. nebulizers/hospital beds/walkers, and only bill them unassigned for Medicare beneficiaries. We do enough cash business and non-Medicare business to most likely stay in business, but the patients have suffered as no one will take assignment on a lot of Medicare business.

Jim Lehan, Lehan's Medical Equipment, Rockford, Ill.

 

Bid winning companies are refusing to service areas (like ours) with extensive driving distances. We're getting cash sales in those areas because the beneficiaries are frustrated.

 

Our business has suffered greatly financially. We have also taken substantial reimbursement cuts from Medicaid and commercial insurances. I have had to decrease staff and cannot afford to provide raises or benefits any longer for existing staff. Cutting staff, costs, and service is the new norm for our 32-year-old business. Sad and frustrating. 

Randall Cramer II, All-Med Equipment & Services, Cottonwood, Ariz.

 

Luckily we have a retail pharmacy to pay the bills while our DME division tanks. We've been able to eliminate positions due to employees quitting without laying anyone off. We've switched to non-assigned billing for lots of equipment, which has hurt us with referral sources.

 

We have simply stopped taking all Medicare jobs impacted by the 2016 rate changes. Clients must now private pay, and we file non-assigned if we have the proper documentation to do so. No providers in our areas are taking Medicare, except for oxygen jobs by Apria. Medicare clients are being told to change health plans. Clients are not happy. Ironically, we are doing financially better now than before we stopped taking Medicare claims. Plus, billing staff is reduced due to less audits and difficult claim documentation.

Paul Gammie, Gammie HomeCare, Maui, Hawaii.

 

I purchased this business in August of 2015. It has been established for more 20 years and we are located in the most heavily populated senior area in NJ and my nearest competition is about 40 miles away. I basically have no competition and operate from a beautiful showroom. My revenue in 2016 was reduced over $340,000 due to the Medicare cuts. I may not be able to keep my doors open and have put everything I have into this business, including liens on my home. I have between eight to 10 employees that rely on this business, along with hundreds of seniors. My projected revenue should have been sufficient to sustain and grow the business. Now I may lose everything I have, including my home and all personal assets. I would be more than happy to sue Medicare for my financial situation if I lose the business.

 

We have learned to deal with the stupidity of the government and no longer are we dependent of their stupidity. While we have compassion for the elderly, we have learned to take them unassigned and if they cant do that, we send them down the road. The most loyal and easiest patients stay with us. We have found that the biggest challenges are personality wise and unreal expectations wise—they move on to other options and then come back asking us to take them back, which we don't do. We are a profit business and the government is expecting us to act as a nonprofit, but they tax us like a for-profit. When they get their heads out of their asses, maybe we will consider taking these things back on, but probably not. Life is much better without the government shit.

 

We have been able to grow our volume but not quite enough to cover the cuts. The biggest thing is that we need to look at outsourcing some of our operations, such as billing, and cut the workforce.  It's the only way to make it work. Unfortunately, we are like most DME companies who have a hard time dealing with that fact and have a hard time pulling the trigger.

 

Our patients have more to pay out of pocket. Those that are not capable of paying out of pocket drop their therapy, thus causing undo harm to their body and unnecessary hospitalizations.

 

These cuts have made it impossible to keep doing business in the rural areas. We have had to change our delivery systems, stop carrying certain products, and are looking to have layoffs of employees. It takes all the employees we have to do the mountains of paperwork and keep up with the regulations Medicare requires.  You pay more to watch cable television than we get paid to provide life saving oxygen in a patient's home. We are already using our savings to keep the company going. I don't know how much longer we can survive. Then what happens to the patients? What happens to my employees? With these cuts everyone loses!

 

Lots of ABNs. Lots of non-assigned sales. Medicare beneficiaries can pay the difference. Medicaid patients are not allowed to, and THAT will be when bad outcomes hit the fan.

 

We have had to change our hours of operation, and have became much tighter on who we will accept for patients. We are no longer accepting assignment for most products and dropping those that are a loss.

 

We are no longer billing Medicare for DME as of March 15th. Not sure how this will impact my job since that was one of my responsibilities. Customers are having a difficult time finding locations that will bill Medicare. 

Diane Dean, Jefferson Pharmacy

 

We were doing OK up until competitive bidding rates hit the Tricare contracts. How can you accept a nebulizer or CPAP on rental at 60% of bid rates? Now we are considering any means of reducing our expenditures and buying the cheapest equipment possible. We are trying to draw attention to this issue with both the Department of Defense and HealthNet, but so far no one is interested.

Victoria Peterson, Respiratory & Medical Homecare, El Paso, Texas

In a recent HME Newspoll, we asked HME providers to share how their businesses have been impacted by the national roll out of bid pricing. More than 100 responded. Here is an excerpt of what they said.

 

This pricing has been the most devastating thing we've had to contend with in health care for the last 25 years. The caps and the cuts have left us completely crippled. We can’t sustain this for very much longer!

Dave Boroughs, Riverside Medical, Savannah Tenn.

 

We closed multiple locations and laid off 30% of our staff, mainly RTs.

 

The national roll out of bid pricing has been devastating to our business. We have had to cut employer paid benefits, reduce staff, remove multiple items from our products and services, become more aggressive in collection efforts, suspend ordering from multiple vendors and create our own competitive bid process for most items that we do currently provide. Vendors were invited to bid for our business as an all or nothing package by DME categories. In addition, we have had to turn to cash sale items into a way to supplement our losses and sustain business until the new administration fixes the damage that has been done. Many of our competitors have closed their doors. We have survived by the skin of our teeth due to the fact that we also provide pharmacy services and state bid contract medications. Had it not been for these private contracts, we would certainly be in a much different situation.

Melissa Hammett,
Professional Care Pharmacy, Monroe, La.

 

We have lost key employees and as a result we are not available to be in the patients homes like we were in the past. The patient is the one suffering and they don’t understand why Medicare has done this to them. We are having patients call us in our local area that were set up with companies in Nashville. Due to the distance, they are not servicing their patients. These patients want to change to our local company but they are in their cap and we will not take them. While I am on my soapbox, I do not understand how the advantage plans can say they are following Medicare guidelines when in actuality it is only the payscale they are following. We should not have to get an authorization every year nor every month. With the reduction in staff, this is putting a hardship on providers. I am an advocate for pre-authorization on DME and thereby eliminating the need for needless audits. It is time our industry unites. The best thing our company has done is become a member of AAHomecare. They have grass root efforts that are having a positive impact and gaining support of our Congress.

 

The reimbursement rates are very unrealistic and it is hurting not only people and businesses in rural areas but the entire industry.

Rodney Askay, West River Health Services, Hettinger, ND 58639"

 

Our biggest competitor is a national. They continue to provide less patient care and good service. We have patients trying to switch to us on a weekly basis. Unfortunately, because of the "capped" status, the patient is unable to switch. Of course, they know this and don't care about service.  

 

Although I am not in a rural area, what has transpired in our area is the majority of private insurance companies has lowered reimbursement to the rural price in our area, dropping reimbursement 30% to 45 %.

 

We are doing everything we can do to survive. This industry will fail at the current reimbursement rates.

Jeremy Killough, Southeastern Home Oxygen Service, Columbus, Ga.

 

We are using personal savings in the (futile?) hope that there will be some bid relief, or that at least the 2016 bid relief payments will help to alleviate some of that debt. We are also exploring options to sell or close the business because we can't survive operating as we are now.

 

CMS's assault on HME began in the 90s with the Medicare Modernization Act. It mandated that DME companies compete by bidding against each other. This became an auction—not against other providers, but a stand-off with CMS. Naturally, CMS won in doing Congress' bidding: Congress lacked the backbone to admit they wanted to defund DME. It’s been a slow, painful death. But they've gotten what they wanted: the shutdown of an industry of small, service-oriented businesses. Another fiendish arrow in CMS's quiver since the war began has been the accompanying Kafkaesque bureaucratic documentation requirements. Those alone made our services marginally profitable without even considering the very first fee cuts, not to mention the auction. They've won.  We all need to face it, close up shop and get a life.

Kathleen Weir Vale, HOPE medical Supply, San Antonio

 

New bid pricing has caused us to stop providing many items. In most cases, the customer tells us that they can not find anyone to supply the items or do the necessary repairs. It looks as though it may get worse in June. Our government wants to destroy our industry and it looks like it has succeeded.

 

We will be billing non-assigned from now on.

 

We have debt now of $100,000, (when) we were debt free before the price reduction. I have not received a salary for over 11 months as an owner. We still cannot pay for our equipment and have to continue to finance. With rent, utilities, payroll, insurances and bonds, we still cannot pay the bills. Why does CMS not cut on their administration costs. I am sure there is a lot of waste there. Also, the patients pay for Part B monthly, but they are the ones that really get cheated—no service, cheaper equipment, etc.

Diane Friend, Valley Home Health Care, Roanoke, Va.

 

As a result of the pricing cuts, we have reduced staff to a skeleton crew, dropped products and services offered/billed, and can no longer care for our patients as efficiently or thoroughly as we previously did. We as a company are hurting; the patient is suffering as well.

Rich Waltman, HealthCare Plus, Polson, Mont.

 

Cash flow has really gone down. When payroll and credit card roll around, it is really tough. We are completely debt free and pay credit card off monthly, but have had to take money from company savings twice this year. We have had a few employs leave and haven't rehired.

 

We have laid employees off and have had to borrow money to stay open. If things keep going as they are, we will not be able to provide equipment to our customers much longer. We service a very rural, impoverished are.

Lana Cochrane, Personal Medical Equipment, Anna, Ill.

 

A lot of our clients and referral sources are upset that we no longer accept assignment on products affected by the roll out. It has resulted in a drastic drop in referrals and sales.

 

We have been really impacted with the decrease in our TriCare contract, which is based on the Medicare non-rural rate, with a further 20% discount. Now MediCal is looking to do the same.

 

We have always run a lean staff. We have had to lay off two clinical staff. No one has insurance as costs have increased over $50,000 in the past three years. My 64-year-old partner was on a call out last evening from 0100-0500 hrs. Anyone looking to buy a good used DME?

Bob Forbes, Advantage Home Oxygen, DuBois, Pa.

 

We are located in San Antonio, and the continued decrease in reimbursement affects all areas. We are a military city and the Medicare patients are always on a waiting list and no one even wants to do business with Tricare due to their contact of 65% of the Medicare allowable, which is already ridiculous. We service the military and are applying for Medicare and Medicaid, but in reality what for, with the way the reimbursement is going. You can't run a business like this and service patients’ medical needs. We are a minority, veteran-owned company just trying to stay afloat.

Brandy Hill, Patient Solutions, San Antonio

 

Hopefully we will still be in business within six months. Pray for our industry.

 

The 50%-plus cuts within six months in the rural areas during 2016 have seriously affected cash flow and margins. We are currently working on a 0% operating margin, depending on the month.  Additional cuts to oxygen are devastating!

 

We’re losing a substantial amount of revenue, causing serious changes in business practices, including decreasing product lines, going non-assigned, decreasing deliveries.

Brian Dirksen, Genesis Home Medical Equipment, Davenport Iowa

 

The biggest impact has been a reduction in customers. We receive near daily complaints from past and potential customers of lack of service and response form bid winners.

 

We have had to push more of the expense onto the beneficiary. Many people cannot afford extra expenses in a rural area. How can I be expected to deliver equipment in a rural area on such slim margins? My costs have not decreased, but my income sure has. We are the only locally owned DME in the area with our doors still open. Soon the nationals will have all the business and be able to dictate cost.

Gary Morris, GME Medical, Lynchburg, Va.

 

We moved out of the Medicare business in July of 2016. It's been tough, but we're gaining ground.

Michael Wofford, Appalachian Medical Services, Calhoun, Ga.

 

I have been in this industry for almost 40 years and I have seen a lot of crap come and go from CMS, but this is by far the worst I have ever seen. CMS can change reimbursement rates in the middle of a rental period, but we cannot change our assignment decision in response? What BS. I have laid off long-time employees and cut benefits like health care, but there is no way to make up for 50%-plus cut in Medicare.

Don Chrysler,National Home Health Care, Amarillo, Texas

 

We will be letting go of an RT and cutting on service.

 

We've dropped hospital beds/trapeze/lifts/air mattresses, cut our staff by over a third, shelved expansion plans, and gone into debt. Even with these changes we may not survive.

 

We had to stop accepting new referrals from Medicare and all the HMOs (because they pay even less than Medicare now), effectively closing our business. We delivered products 60-90 miles away on a daily basis, but we could not continue to do so because we were losing money on 80% of the items we were delivering.

S. Holland, Eleos Home Medical, Mobile, Ala.

 

I feel that the patient is the one that will suffer from the way the bid works. We have a location in a bid area and our main office is in rural area. We have had tons of patients in the bid area that can't get the services they need and are being turned away by the bid winners because they can't keep up. It is increasingly difficult to keep going with the cuts—some below our cost—especially for the capped rentals that we have to bill for over a year and maintain the equipment. It is ridiculous to expect us to keep taking care of people at that rate.

Kathy Driver, Mike's Medical, Clinton, Okla.
 

We simply cannot accept Medicare assignment on most items currently outside a very narrow service area. You are supposed to do the same amount of work for a 50% reduction in revenue; it is impossible

Al Neumann, Corner Home Medical, St. Paul, Minn.

 

We have had significant downsizing of staff, impacting patient care. In some scenarios, reimbursement is not covering cost of goods. Patients get upset and want immediate service, but you simply cannot staff. Medicare demands the same touches and service levels, and has broad medical necessity requirements, but it has reduced fee schedules to barely cover or not cover basic cost of goods, delivery, and claims costs.

 

We are billing unassigned for some product lines. Patients will have much higher out-of-pocket expenses. There are some products where our purchase price is higher than the reimbursement. We are also cutting value-added services. The only reason our DME has stayed in business is that it is part of a multi-service line home care agency. If we were a stand-alone DME, we would have been out of business at the end of 2016.

 

We have consolidated three locations into one. We no longer take assignment on walkers and bedside commodes or anything else under $50. We have also had to reduce head count and gotten further into debt.

 

We have cut down on service, reduced staffing hours and reduced inventory. We do not take any chances with questionable documentation. Our priority has shifted from taking care of the patient first, to trying to keep ours doors open.

 

The bid pricing will force us to eliminate positions, drop contracts and change our business model completely to remain viable.

 

The biggest impact has been meeting the cost of the items dispensed with the current bid pricing. We are losing money on each order dispensed.

 

The bid pricing is not sustainable and is evidence of misguided government.

 

We have been hit from all sides and the matching commercial fees are just starting to take the biggest toll. We are seriously considering dropping some of our third-party contracts. It's a tough decision when you've lost so much business already. Overall, we continue to search for ways to increase our overall bottom line, increase our retail presence and find profitable sweet-spots within the third-party payer world.

Lori Sears, Active Home Medical Supply, Lapeer, Mich.

 

With cuts in reimbursement, rigid Medicare guidelines for respiratory machines, and taking on more clients from locations closing or from winning the bid, it is hard to supply the new equipment and enteral products. There is not room for profit or error and we have continually been in the rears, continually trying to dig out. We keep hoping that our privately owned hometown company will make it. The national and hospital companies are crushing us. I do not understand how any company can get away with fraud, when we cannot even get our patients that need the equipment qualified by the rigid guidelines and let alone get a legitimate claim paid.

DeAnn Bauer, Belleville, Ill.

 

We are in a rural area of western Oklahoma. We are the only DME in our town now, as there were three at one time. These cuts have impacted us tremendously, to the point of having to get a loan to keep the doors open, and I am not sure how long that is going to help. We desperately need help quickly. If we are not able to keep going, I am not sure what out patients are going to do. These cuts have caused us to cut staff hours, reduce products we would normally carry, and not accept all new patients. Patients are having to wait on items longer, as the funds are just not available to purchase all items needed. Please help save the business. We love what we do and care for our patients, and don't want to see them have to do without.

 

There are insufficient profits from Medicare sales to cover overhead, make deliveries, and provide choice. We are especially damaged by a large number of Medicare/Medicaid referrals from other providers that are not providing equipment or services as the non-payment of deductibles and co-pays puts us immediately in the red. We have curtailed our catchment area and products as a consequence, and will file claims non-assigned when ever possible.

 

We live in a rural area and cover many counties that have no other DME services available to them. We are going to have to reduce our coverage area due to bid pricing. Bid pricing has eliminated our profit margin so we can not afford to deliver and service patients in other counties. What will those patients do then?

 

There has been over a 60% decrease in oxygen reimbursement over the last year and we’re getting paid less than those in bid areas. I don't think I have to explain the IMPACT. It's devastating. 

 

When reimbursement is less than cost, you can't stay in business. We serve residents in rural Kansas and can't continue to be in business under the current plan.

 

We are lucky to be diversified into other products and retail. It’s the patients that are suffering with poor quality service, poor quality equipment, sometimes no service. I cant believe that there is not more complaining coming from patients. They are just letting it happen. We as suppliers can complain all we want; CMS does not care about us. 

 

We are in a metro area, but all of our plans followed the Medicare rates and some even lower. We have had to adjust our service line and are still loosing money each month. No one seems to want to talk about this part of the deal. In six to 12 months, we will be gone.

 

The biggest impact has been a reduction of value added services and patient care.

 

We service a county in Montana that is bigger than the state of Rhode Island with a population of 7,000 people. I have laid off an employee (leaving it up to me and one other person to service this massive area). We have cut where we go and the services we provid, and are not breaking even with these rates. We are dying for the money from the Cures Act and praying that rates get established where we can service the patients we love. We are the only DME in the county and we can not increase profit by more patients. There are no more people. If we close, I am not sure how these patients will discharge out of the two hospitals we serve.

Jenn Morrisroe, Dillon Medical Supply, Dillon, Mont.

 

We have looked real hard at what services to continue/discontinue. Staffing cuts are on the table at this time also, which will further limit what services we can offer.

Tim Martin, ATTENTION Medical Supply, Newport, Ariz.

 

As a small town, locally owned business, the hardest part is telling the customers that you cannot afford to take care of them. I am having to say no all the time.  As an example, the quality of hospital beds I use cost me more than Medicare pays. However, with the audits, very very few people "qualify" for a bed through Medicare.   They need one, but the rules are over the top. I rent more privately than ever before.  It is sad for the clients.

 

We stopped servicing Medicare patients. The transfer of patients has been costly and time consuming, so I'm not sure we are loosing less money. Regardless, we can't sustain the cut in the long run. The years we have serviced our patients are no value at all to the government. As long as they think they are saving money (even though time will show they are making things worse), they do not care about patients and the access issues that they are experiencing. It's taking months for these patients to get the supplies that they need.

 

We have one location in a non-bid area. The biggest impact for us has been to drop certain categories, i.e. nebulizers/hospital beds/walkers, and only bill them unassigned for Medicare beneficiaries. We do enough cash business and non-Medicare business to most likely stay in business, but the patients have suffered as no one will take assignment on a lot of Medicare business.

Jim Lehan, Lehan's Medical Equipment, Rockford, Ill.

 

Bid winning companies are refusing to service areas (like ours) with extensive driving distances. We're getting cash sales in those areas because the beneficiaries are frustrated.

 

Our business has suffered greatly financially. We have also taken substantial reimbursement cuts from Medicaid and commercial insurances. I have had to decrease staff and cannot afford to provide raises or benefits any longer for existing staff. Cutting staff, costs, and service is the new norm for our 32-year-old business. Sad and frustrating. 

Randall Cramer II, All-Med Equipment & Services, Cottonwood, Ariz.

 

Luckily we have a retail pharmacy to pay the bills while our DME division tanks. We've been able to eliminate positions due to employees quitting without laying anyone off. We've switched to non-assigned billing for lots of equipment, which has hurt us with referral sources.

 

We have simply stopped taking all Medicare jobs impacted by the 2016 rate changes. Clients must now private pay, and we file non-assigned if we have the proper documentation to do so. No providers in our areas are taking Medicare, except for oxygen jobs by Apria. Medicare clients are being told to change health plans. Clients are not happy. Ironically, we are doing financially better now than before we stopped taking Medicare claims. Plus, billing staff is reduced due to less audits and difficult claim documentation.

Paul Gammie, Gammie HomeCare, Maui, Hawaii.

 

I purchased this business in August of 2015. It has been established for more 20 years and we are located in the most heavily populated senior area in NJ and my nearest competition is about 40 miles away. I basically have no competition and operate from a beautiful showroom. My revenue in 2016 was reduced over $340,000 due to the Medicare cuts. I may not be able to keep my doors open and have put everything I have into this business, including liens on my home. I have between eight to 10 employees that rely on this business, along with hundreds of seniors. My projected revenue should have been sufficient to sustain and grow the business. Now I may lose everything I have, including my home and all personal assets. I would be more than happy to sue Medicare for my financial situation if I lose the business.

 

We have learned to deal with the stupidity of the government and no longer are we dependent of their stupidity. While we have compassion for the elderly, we have learned to take them unassigned and if they cant do that, we send them down the road. The most loyal and easiest patients stay with us. We have found that the biggest challenges are personality wise and unreal expectations wise—they move on to other options and then come back asking us to take them back, which we don't do. We are a profit business and the government is expecting us to act as a nonprofit, but they tax us like a for-profit. When they get their heads out of their asses, maybe we will consider taking these things back on, but probably not. Life is much better without the government shit.

 

We have been able to grow our volume but not quite enough to cover the cuts. The biggest thing is that we need to look at outsourcing some of our operations, such as billing, and cut the workforce.  It's the only way to make it work. Unfortunately, we are like most DME companies who have a hard time dealing with that fact and have a hard time pulling the trigger.

 

Our patients have more to pay out of pocket. Those that are not capable of paying out of pocket drop their therapy, thus causing undo harm to their body and unnecessary hospitalizations.

 

These cuts have made it impossible to keep doing business in the rural areas. We have had to change our delivery systems, stop carrying certain products, and are looking to have layoffs of employees. It takes all the employees we have to do the mountains of paperwork and keep up with the regulations Medicare requires.  You pay more to watch cable television than we get paid to provide life saving oxygen in a patient's home. We are already using our savings to keep the company going. I don't know how much longer we can survive. Then what happens to the patients? What happens to my employees? With these cuts everyone loses!

 

Lots of ABNs. Lots of non-assigned sales. Medicare beneficiaries can pay the difference. Medicaid patients are not allowed to, and THAT will be when bad outcomes hit the fan.

 

We have had to change our hours of operation, and have became much tighter on who we will accept for patients. We are no longer accepting assignment for most products and dropping those that are a loss.

 

We are no longer billing Medicare for DME as of March 15th. Not sure how this will impact my job since that was one of my responsibilities. Customers are having a difficult time finding locations that will bill Medicare. 

Diane Dean, Jefferson Pharmacy

 

We were doing OK up until competitive bidding rates hit the Tricare contracts. How can you accept a nebulizer or CPAP on rental at 60% of bid rates? Now we are considering any means of reducing our expenditures and buying the cheapest equipment possible. We are trying to draw attention to this issue with both the Department of Defense and HealthNet, but so far no one is interested.

Victoria Peterson, Respiratory & Medical Homecare, El Paso, Texas

The DMEPOS competitive bidding program has a long and controversial history; at this point, however, the program appears to be well-cemented into the fabric of the industry. Reports of abuse of the bidding process continue to rise with each new bid submission, including, among others, suppliers with little to no experience in certain product categories winning large competitive bid territories—territories that they have never served previously. The Trump Administration and Health and Human Services’ new leadership is determined to engage in substantial regulatory reform, which leaves many suppliers in the industry asking, “Will the program be continued, modified, or scrapped?”

CMS is poised to make changes to the program

Representative Tom Price, M.D., was confirmed by the Senate as the new Secretary of HHS on Feb. 10. As an orthopedic surgeon, Secretary Price has been a strong supporter of DME suppliers and other health care providers for many years. CMS’s recent removal of the Round 2019 information from its website suggests that Secretary Price and CMS plan to consider program reform options. On Jan. 31, CMS announced key changes to the program for Round 2019 on its website, including consolidating the Program’s bidding process into a single round of competition. A few days later, CMS removed the information and replaced it with a joint statement from CMS and the CBIC—“CMS has decided to temporarily delay moving forward with the next steps of the Round 2019 DMEPOS Competitive Bidding Program to allow the new administration further opportunity to review the program.”

Notwithstanding the current delay, CMS initially intended for the following program changes to be implemented for Round 2019 bidding:

Round 2019 would include two additional product categories: (1) CPAP devices and related accessories; and (2) insulin pumps and supplies, which would be bid in the national CBA.

Round 2019 would create 10 new CBAs for CPAP devices and related accessories. The new CBAs would be divided in half with CMS reimbursing suppliers in five CBAs on a non-bundled, capped monthly rental basis, and CMS reimbursing suppliers in the other five CBAs on a bundled, non-capped monthly rental basis. This “demonstration project” is intended to provide the program with reimbursement and utilization data to determine the best method for reimbursing suppliers for CPAP devices and disposables.

CMS would implement a “lead item bidding” reimbursement methodology for certain DME in Round 2019, which will require that bidders “bid for a lead item within a grouping of similar equipment” and payment for all similar equipment in the same grouping will be based on the relative ratio between the lead item and non-lead item.

CMS would require suppliers to maintain a $50,000 surety bond for each CBA for which a bid is submitted. CMS set forth this all-CBA bonding requirement to stop some bad-actor-suppliers from submitting “sham” or “speculative” bids by requiring that bidders demonstrate to the surety bond issuer that it has the financial ability to honor the financial commitments associated with each surety bond in each CBA.

Potential legislative changes

If either HHS or the White House pursues a legislative solution, it is widely predicted that the administration would most likely ask Congress to adopt a bill similar to the one Secretary Price proposed as a congressman in 2013—the Medicare DMEPOS Market Pricing Program Act of 2013 (MPPA). Although that bill never passed, the MPPA provides insight into Secretary Price’s views about the program and, possibly, the Administration’s views regarding same.

In short, the MPP was intended to be a budget-neutral replacement to the program. The MPP establishes supplier reimbursement rates by using a “lead bidding clearing price” reimbursement methodology. The previously expressed goal of the MPP is to collect data from a limited number of suppliers, in a limited number of areas, and on a limited number of products to ensure that the government prices DME at market rates and in the least disruptive manner to suppliers. Moreover, the MPP requires government transparency at all levels and stakeholder contribution in the design and implementation of the MPPA. For example, here is a rough example of how the MPP’s program administrator would price a hospital bed:

  1. A “lead item” would be selected from the hospital bed category. CMS would identify the lead item in each product group by selecting the item within the group that had the highest number of allowed services nationwide for a particular calendar year. For the hospital bed grouping, a semi-electric hospital bed with mattress and side rails (HCPCS E0260) has the highest number of allowed services; therefore, E0260 would be the lead item in this grouping.
  2. The other hospital beds in the grouping would be given a relative ratio to E0260. A semi-electric hospital bed without a mattress (HCPCS E0261), for example, would be included in the hospital bed grouping. E0261 would be given a relative ratio to E0260 based on the 2015 reimbursement rates. In 2015, E0260 was reimbursed at an average of $134.38 and E0261 at $124.20. Therefore, the relative ratio for E0261 would be 0.92—the non-lead item’s 2015 average fee schedule ($124.20) divided by the lead item’s 2015 average fee schedule ($134.38).
  3. In 20% of bidding areas (10% of bidding areas in subsequent bid years), each supplier interested in supplying hospital beds would be required to declare how many beneficiaries it can service within the bidding area and participate in the bidding auction. The auctioneer would start the auction in descending order with high bids first and work the price of the hospital bed (E0260) down to the point at which the number of remaining suppliers’ capacity meets the Medicare Program’s utilization demands. This is the “clearing price.”
  4. All bidders at or below the “clearing price” are required to accept a contract at the “clearing price” rate.
  5. The secretary and auctioneer would use an economic model that takes into consideration both geographic and socio-economic factors to determine the market price for hospital beds in all bidding areas that were not required to submit a bid. The reimbursement rates for supplies in those bidding areas would be set by multiplying the clearing price established in Step 3 by the relative ratios established in Step 2 while making adjustments for both geographic and socio-economic considerations.

The MPP approach would contrast starkly with the program in its current iteration. Currently, the program requires all suppliers to submit bids if they wish to participate; MPP only requires that a fraction of suppliers submit bids. The program sets reimbursement rates based on the median price of the bid winners; the MPP sets rates at the “clearing price.” The program requires bids in all product categories in each CBA; the MPP limits bids in CBAs to two product categories to be auctioned—the remaining product categories will be priced using Step 5 above. As a result, if the administration pursues changes similar to those previously proposed by Secretary Price, this new legislation would have a substantial impact on the Program. However, CMS would need to move quickly to implement a new program by 2019.

Potential regulatory changes

While waiting for Congress to act, Secretary Price might also consider regulatory alterations to the program within the bounds of the current statutory scheme. Program alterations could focus on addressing some of the key criticisms addressed above—non-binding bid submissions, low bid submissions, median pricing reimbursement methodology, and lack of transparency. These issues could be addressed, at least partially, through regulatory reforms to the Program and could include the following:

  • Require that bid submissions are binding upon the supplier. CMS’s proposal for Round 2019 required suppliers to have a surety bond of at least $50,000.00 in each CBA in which the supplier submits a bid. Although this will help alleviate some of the pressures from bad-actor-suppliers, HHS could require that selected bidders fulfill the obligations of their bids and/or that, if they fail to do so, the company and its owners (e.g., 5% or more) would be prohibited from seeking any future bids for a period of specified time.
  • Require that the Program move away from the median bid reimbursement methodology to the clearing price reimbursement methodology. As stated above, many believe adopting the clearing price methodology will remove the incentives for bad-actor-suppliers to submit unreasonably low bids. Moreover, the clearing price methodology would represent the actual price of DME goods on the market.
  • Provide exemptions for rural areas from competitive bidding or establish an enhanced payment that contemplates different delivery costs associated with serving rural markets.
  • Require that CMS adopt the lead item billing methodology. The lead item billing methodology, if modeled after the MPPA, could increase stakeholder involvement in the pricing of items. Moreover, lead item billing is touted by the industry as a process that reduces supplier bidding obligations and simplifies the bidding process. In point of fact, CMS appears to have already heard the writing on the wall. For Round 2019, CMS had proposed that hospital beds, seat lifts, support surface mattresses, transcutaneous electrical nerve stimulation (TENS) devices, walkers, and standard power wheelchair product categories’ reimbursement rates be determined by using the lead item billing methodology. But, with the current bidding process placed on hold, HHS could consider expanding the lead item billing methodology to all applicable product categories for Round 2019.
  • HHS could establish an enhanced quality metrics framework that: (1) considers bids on the basis of supplier experience and quality (e.g., suppliers with only a certain period of experience or owners and operators with that experience); and (2) evaluates bidding suppliers’ Medicare compliance programs and other quality metrics (e.g., patient satisfaction). While Medicare Part A reimbursement rules have adopted some quality monitoring metrics as a basis for payment or enhanced payment, CMS has yet to propose standards that would differentiate payments to suppliers based on quality. To date, for example, there are no differentiating factors between suppliers (e.g., the speed by which a supplier can fulfill a product, repair a product, or provide alternative options in the event of an emergency—such as back-up oxygen systems). Medicare could also evaluate credit worthiness in the same way that banks or other financial institutions evaluate borrowers. Instead, under the current approach, the CBIC assumes that if a bidder (1) meets the supplier standards, (2) meets financial requirements, (3) is not under investigation for overpayment, (4) is accredited AND has the ‘right price’—the company can be a winning supplier. Critics say that this approach has allowed several market entrants, with limited experience outside their market, to serve nationwide markets.
  • HHS could eliminate the ability to enter into subcontracts at all or limit the subcontracting to a specified % of total sales (e.g., no more than 15%). Under the current approach, there are no limits on how much subcontracting a winning supplier may engage in. This permits winning suppliers to establish vast networks with other suppliers where the winning supplier has no market presence. In addition, HHS could establish express regulations on subcontracts, financial or other solvency requirements on subcontractors, quality standards for subcontractors, or express approval of subcontractors (as opposed to the informal notification process that exists with the CBIC currently).
  • HHS could consider halting the inclusion of any additional product categories into Round 2019 bidding, and even consider removing certain product categories from the Program altogether. This approach could enable CMS to keep the current Program operable before expansion into new product areas while the Administration evaluates Program reform options.

Conclusion

Many industry advocates and stakeholders have widely discussed the fact the Program has a number of flaws. But, it is clear that HHS has many options. While CMS’ implementation of the Program was based upon statutory requirements, there are many rulemaking and implementation options to consider. As with any unwinding or a modification of a program well down the tracks at this point, HHS will need to evaluate whether to fix the train while barreling down the track or pull the rip cord entirely while looking at the fork in the tracks ahead. There appears to be little doubt that some level of changes will be proposed. The when, how much, and how deep remain to be determined. Stay tuned.

Barry Alexander, Matthew Agnew, and Emily Shaw are healthcare attorneys at Polsinelli, PC. Reach them at barry.alexander@polsinelli.com, magnew@polsinelli.com, or eshaw@polsinelli.com.

Elizabeth Hogue
attorney

CMS has selected five new recovery audit contractors (RACs) and established new rules. RAC audits will undoubtedly resume soon. Performant and Cotiviti were awarded contracts, along with HMS Federal Solutions. A previous RAC auditor, CGI Group, did not bid in the latest round of contracts for RACs. Performant will focus on auditing home medical equipment (HME), home health agency (HHA) and hospice claims.
 
CMS will continue to pay RAC auditors a contingency fee when overpayments are identified. Providers frequently point out that RACs are incentivized to find erroneous overpayments and these errors have resulted in a multi-year backlog of claims pending appeal, especially before administrative law judges (ALJs). Nonetheless, CMS announced that RAC auditors have recouped $8 billion for the federal government since the audits began in 2009.
 
Under previous rules, RACs received payments for overpayments they identified in less than 45 days. Under new rules, RACs will now receive payments for overpayments they identify only after providers have an opportunity to appeal through the second level of an appeal process that provides five stages of appeals. As a result of this change, contingency rates for payments to RACs will likely increase substantially, from the current 9.5% to 12%.
 
Also under previous rules, RACs could review claims that were up to three years old. Under new rules, claims reviewed by RACs cannot be more than six months old.
 
Audits by RACs have been on "pause" while new rules were developed and disputes about the contracting process resolved. When RAC audits resume, providers can expect more of the same, i.e., a focus on vague eligibility criteria, such as home bound status and terminal illness, which are open to broad interpretation.
 
RAC auditors are also likely to continue their focus on whether care that was provided was reasonable and necessary. Unfortunately, RAC reviewers often seem to evaluate this issue very differently than providers who are "on the ground," so to speak. It seems reasonable to require RACs to cite national standards of care to support their conclusions that care provided was not reasonable and necessary. Without such support, what constitutes reasonable and necessary care seems to be "in the eye of the beholder," which makes such determinations extremely difficult for providers to address on appeal.
 
CMS's initial meeting with new RACs is in November. Audits will begin soon thereafter.
 
As always, the "name of the game" for providers with regard to all types of audits, including RAC audits, is documentation, documentation and more documentation! Although it is an age-old "story" and most clinicians certainly know how to provide appropriate documentation, consistently excellent documentation appears to remain elusive.

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