Respiratory Round Up

Some providers of respiratory products and services might argue that the term "respiratory equipment" has become virtually synonymous with "budget cuts." Given recent developments, the argument is almost justifiable.


In late January, there was a proposed oxygen cap at 36 months where the title of oxygen equipment would be transferred to the beneficiary at the end of the 36-month timeframe. The proposed oxygen cap was part of a larger Deficit Reduction Act or S. 1932. Despite a widespread grassroots effort to prevent the new rule, a final vote of 216 to 214 in the U.S. House of Representatives narrowly approved the budget reconciliation bill. The cuts are part of a larger objective to reduce Medicare expenditures for durable medical equipment (DME) by $750 million over the next five years. The new rule requires beneficiaries to own the equipment after 36 months. Ultimate concern over patient safety has providers asking several questions.

Lack of 24-hour on call support will undoubtedly increase patient visits to emergency rooms and the need for readmissions to hospitals. -AAHomecare

Who will maintain the equipment? Who will fix a concentrator when something goes wrong? How will respiratory therapists maintain service levels? How can providers staff respiratory therapists when their services aren't reimbursed by Medicare? Will patient safety be compromised? Will customers know how to fix their equipment?

Although the extent of service typically varies according to the provider, the service component of respiratory HMEs generally includes evaluations, delivery, setup, training, maintenance, respiratory therapist visits (depending on the size of the provider) and emergency response capabilities.

Maintenance and service payments may be made after 36 months if the Centers for Medicare and Medicaid Services (CMS) deems that they are "reasonable and necessary." The amount of service and maintenance payment will be determined by CMS.

For providers who continue to express concern that oxygen is a therapy-driven business relying on service to ensure quality of care, how can a respiratory provider stay profitable despite the 13-month rule? Will HMEs be able to staff respiratory therapists to develop care plans for chronic obstructive pulmonary disease (COPD) clients?

"The 36-month cap will put patients at risk, yet I don?t think it will stay in this format for 36 months," says Bob McCoy, managing director of Valley Inspired Products and presenter at the American Association for Respiratory Care (AARC) annual conference. "This has been a great opportunity to focus attention on the issue. I think we will see reimbursement methodology change with a focus on what is a purchase item and what is a service item. It will be a hard road for the HME, since change is always painful, yet in the end, both the patients and the HME will come out ahead (again, only if there is positive — clinical change).

"The HME provider needs to focus on medicine, not just payments. We need science, research and education to lead the way, with lobbying for payment after we have set a strong clinical foundation," McCoy says.

According to the American Association of Homecare (AAHomecare) and Respiratory Care magazine, oxygen can be provided to COPD patients who live at home for one year less than the average Medicare cost for one day in the hospital which is $3,606. Direct medical costs for COPD in the United States total $18 billion per year, nearly 19 percent of Medicare expenditures.

Will patient safety be at risk with the transfer of ownership going to the patient? Some of the risk factors include control over the dosage levels becoming the patient's responsibility, a possible reduction of home oxygen patients using liquid or high pressure oxygen, and the potential for patients to switch to industrial oxygen to meet their needs.

AAHomecare lists other safety issues arising from this policy change including:

  • Ongoing patient education and monitoring regarding oxygen usage and safety will no longer be performed, creating the potential for unsafe use of oxygen (example: smoking while using oxygen.)
  • Warning against the use of life-enhancing medical oxygen equipment is imperative to the overall well being of patients on oxygen therapy. Home care companies currently provide 24-hour on call service to assist patients with trouble shooting equipment malfunctions or improper use. Lack of 24-hour on call support will undoubtedly increase patient visits to emergency rooms and the need for readmissions to hospitals.
  • Home care companies would no longer perform routine maintenance on concentrators and liquid oxygen systems after 13 months with potential detrimental effects to the patients, such as equipment malfunction. In addition, once ownership of medical oxygen equipment is transferred to the patient, home care companies will no longer be able to assist the equipment manufacturer with potential recalls.

Although HME providers are aware that the services they provide save costs to the health care system in the long term by keeping people healthier and at home longer, many experts say that Congress and Medicare need to have conclusive data from the HME industry in order to support this mission of home care.

Respiratory Assistive Devices

Under a final rule issued Jan. 26, certain respiratory assistive devices (RADs) that help patients who have difficulty breathing will no longer be considered durable medical equipment (DME) requiring frequent and substantial servicing for payment purposes, but will be reclassified as capped rental DME items effective April 1 of this year. The rule applies to RADs that have a backup rate feature that delivers air pressure whenever the user's spontaneous breathing efforts are insufficient. With this action, Medicare beneficiaries will pay less out-of-pocket for the use of the equipment, according to CMS.

Beneficiaries must pay up to $128 per month in coinsurance for as long as the respiratory device is being used. Under the new rule, that coinsurance amount will decrease to $96 a month, beginning with the fourth month of rental. After 13 months of rental, the beneficiary may take over ownership of the device and will no longer have to pay any co-insurance on the rental of the device.

According to CMS's Office of External Affairs, the Medicare program will save under this rule in that the monthly rental payments will be reduced with the fourth month of rental and will stop altogether after 13 months when the title for the equipment transfers from the supplier to the beneficiary.

The Health and Human Services inspector general found that RADs do not require frequent service to justify continuous rental payments. Under the new rule, beneficiaries using RADs may elect to take over ownership of the equipment after renting it for 13 months. The rule also allows for a transition period for devices that are currently being rented to Medicare beneficiaries so that rental months paid prior to April 1 will not count toward the rental payment cap.


For HME providers, there is some good news for the sleep segment of the market. Referrals for sleep are now surpassing that of oxygen and those referrals are expected to grow dramatically this year and next. Public awareness initiatives and mainstream media coverage are leading more consumers to be diagnosed with sleep apnea. Some statistics show that as many as 90 to 95 percent of people with sleep apnea are currently undiagnosed.

In 2007, the American Medical Association may step in and recognize sleep as a physician specialty which will result in more physicians getting involved and diagnosing sleep disorders.

Sleep Center Expansion Continues
According to a Q1 2006 Sleep Center Survey by Wachovia Securities, on average, sleep centers report 21 percent growth in beds over the past 12 months. Respondents expect the number of beds to increase 31 percent over the next 12 months. Results support 20 percent obstructive sleep apnea (OSA) market growth forecast through 2007, which assumes near 30 percent mask revenue growth forecast through 2007, which assumes near 30 percent mask revenue growth and mid-teens flow generator revenue growth.

More Sleep Centers Selling CPAPs
Currently around 15 percent of sleep centers sell mass and flow generators with the remainder referring patients to a home medical equipment dealer. HMEs will need to stay competitive as a projected 15 percent of sleep centers plan to start selling equipment directly within the next 12 months, according to a Q1 2006 Sleep Center Survey by Wachovia Securities.

Inhalation Drug Dispensing Fees

CMS cut the dispensing fee for home inhalation drug therapy for Medicare beneficiaries from the current $57 per monthly supply to $33 despite arguments from respiratory providers and advocates that the original $57 fee was under-reimbursing providers.

Inhalation drug therapy requires a number of services and members of AAHomecare are currently working closely with CMS on a demonstration program for care management and outcomes for inhalation drug therapy patients to "ensure that Medicare policy is informed by good data."

In a national follow-up survey of home care pharmacies commissioned by AAHomecare and conducted by Muse & Associates last year, home care pharmacies reported that their total dispensing costs for services they provide related to nebulized inhalation drugs are $66.55 for a 30-day supply and $138.80 for a 90-day supply. The survey gathered responses from 82 home care pharmacies, which together provide inhalation drug therapy to more than half of all of the Medicare beneficiaries who use inhalation drug therapy. In the Muse survey, inhalation services were grouped into seven major categories that represent 117 inhalation therapy services. The survey respondents indicated that all seven major service categories should be accounted for in the dispensing fee.

This article originally appeared in the March 2006 issue of HME Business.

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