Shifting Policies: Funding Forecast 2010

“Consensus.” It’s a relatively simple word but often an elusive goal, especially when it comes to healthcare reform policy. The dialogues that have taken place on Capitol Hill and in town halls across the country this past year serve as proof positive that 100 people, given a complex and emotionally charged issue, will inevitably express 100 different points of view.

When we zero in on those specific areas of healthcare benefit reform that affect HME providers and, more specifically, respiratory providers, the principle still applies: At a time when providers’ and patients’ abilities to obtain and maintain the funding on which they depend hangs in the balance, conflicting points of view on the best solutions threaten to weaken the final outcome. The potential cost of doing nothing is incalculable.

There is no lack of willingness on the part of politicians, industry organizations, and many providers and manufacturers to assert their opinions and suggestions for addressing growing concern about funding in the respiratory sector. These parties certainly do not always agree, even when they are seemingly “on the same side.” However, they know that effective solutions can only be found through the open exchange of ideas. About one conclusion there is no doubt: When the fate of your business and your patients is at stake, it is in everyone’s best interests to know the facts, take a position, and be willing to voice it.

Funding Laws and Proposals

To fully understand the challenge that our industry faces today with regard to funding, let’s review the reimbursement strategies that have recently been enacted or proposed, and the ways in which they are viewed within and outside of the industry.

The 36-Month Oxygen Cap

Before January 1, 2009, the law stated that Medicare patients renting oxygen equipment would own that equipment after 36 months. Under the new 2009 changes to the law, a patient’s rental payments do end after 36 months, but at that point the supplier then owns the oxygen equipment and must continue to provide it—along with all of its related supplies and services—for two additional years, as long as oxygen is still medically necessary.

This provision, referred to as the 36-month oxygen cap, puts providers at a distinct disadvantage. Not only must they now absorb the costs of equipment maintenance for the last two years of the five-year coverage period, but find a way to provide their customary level of service without any reimbursement and without charging their patients, per the law. The five-year cost obligation for providers holds, even if their patients travel or move after the 36-month rental period ends. (See the Funding Focus column in this issue for more about this aspect of the law.)

Not surprisingly, the HME industry’s reaction to the 36-month oxygen cap is unanimously negative. The cap already began having a dramatic impact on January 1, 2009, when the first group of respiratory patients reached the “three years of therapy” mark. Some industry analyzers estimate that as much as 30 percent of the 1.4 million Medicare beneficiaries who rely on the home oxygen benefit have been impacted. “The magnitude of these cuts is creating turmoil and uncertainty within the provider community,” says Peter Kelly, Chair of the Council for Quality Respiratory Care (CQRC).

However, opinions on the best strategy for countering the policy are not quite as unified. Initiatives for addressing the challenges of the cap reveal marked differences, with organizations and individuals aligning themselves accordingly.

HR 2373: The Home Oxygen Patient Protection Act of 2009 (HOPP) and HR 3220: Medicare Home Oxygen Therapy Act of 2009

The Home Oxygen Patient Protection Act of 2009 (HOPP), sponsored by Rep. Tom Price (R-GA), is a brief and simply worded proposal. It seeks to amend Part B of Title XVIII of the Social Security Act to restore Medicare payments for the rental of oxygen and oxygen equipment, and repeals the 36-month oxygen cap.

The Medicare Home Oxygen Therapy Act of 2009 (MHOTA), sponsored by Rep. Mike Ross (D-AK) and Rep. Kendrick Meek (D-FL), is another proposed bill regarding the oxygen benefit. Often referred to as “the Ross bill,” MHOTA is like HOPP in that it seeks to amend Title XVIII of the Social Security Act to reform Medicare coverage and reimbursement for home oxygen therapy services. Like HOPP, it repeals the 36-month rental cap on oxygen equipment. However, unlike HOPP, it is designed to be budget neutral. It pulls oxygen therapy out of competitive bidding, and it changes the definition of home oxygen therapy in such a way that it eliminates it from the category of durable medical equipment (DME) under the law. Under MHOTA, home oxygen therapy would become a separate entity, defined as including specific provider services. The term “qualified home oxygen therapy provider” would carry a specific meaning and set of guidelines with regard to education, delivery, maintenance, monitoring, evaluations, documentation, and all other manner of patient support.

Responses to both HOPP and MHOTA have been mixed. The American Association For Homecare (AAHomecare) applauds MHOTA’s design, and points to its potential for providing cost transparency while stabilizing the policy on oxygen funding. The organization has urged providers supporting MHOTA to contact their Representatives and ask them to cosponsor the bill in order to improve its chances of being included in Congress’ hotly debated healthcare reform package (See Recent Progress below).

However, the National Association of Independent Medical Equipment Suppliers (NAIMES) and the Committee to Save Independent HME Suppliers (CSI: HME) have both voiced concerns over some stipulations of MHOTA. At this writing, all parties have been working on a compromise that would preserve key elements of the proposals and put to rest objections regarding some of MHOTA’s measures regarding the home oxygen benefit separation and definition. “We pledge to comply with current regulations while working with Congress and the Administration to address the unintended consequences of legislation and regulations,” says CQRC’s Kelly.

Recent Progress

The funding regulation landscape is extremely fluid, especially at the state level. Below are just a few examples of recent progress being made on behalf of HME providers.

After researching the pros and cons, including meeting with industry manufacturers, providers, and advocate groups, California’s Department of Health Care Services (DHCS) announced in August that it would not move forward with the proposed DME competitive bidding program for Medi-Cal funding. According to a statement posted on DHCS’ website, the department is “currently looking at other options to save costs for the Medi-Cal program.”

Oregon has partially reversed its 2007 adoption of the 36-month oxygen cap policy, thanks to ongoing support from the Pacific Association for Medical Equipment Services (PAIMES) and the state’s HME community, including providers large and small. The cap will no longer apply to oxygen patients receiving Medicaid; however, those receiving both Medicaid and Medicare are still subject to the cap.

An August meeting of industry organizations, including the American Association for Homecare and the National Association for Independent Medical Equipment Suppliers, as well as HME industry members, patients, clinicians and physicians, held a meeting to establish a unified proposal regarding oxygen reform. It was agreed that the proposal would include the following:

  • Eliminate the 36-month cap on oxygen payments.
  • Recognize the services that are provided as part of the oxygen benefit.
  • Create a mechanism to show cost transparency that is less burdensome than that called for in the current provision.

The proposal will not include the question of competitive bidding, as it was agreed that this should be addressed in separate legislation with the goal of eliminating the program. Although he cautioned that there are many steps between reaching consensus and legally enacting change, AAHomecare President Tyler Wilson also noted, “This is an important step in the right direction, which means getting all stakeholders in the oxygen community working together toward a common goal.”

Home Sleep Testing Policies

By all accounts, the sleep market has been in growth mode for years, and is expected to continue that growth indefinitely. Back in March 2008, the Centers for Medicare Services (CMS), looking at the rising costs incurred by expanded numbers of sleep apnea patients, declared home sleep testing (HST) an acceptable option for qualifying patients for CPAP.

In response to the CMS determination, advocates for sleep laboratories went to work on the local level to help refine Local Coverage Determinations (LCDs) and preserve in-lab, polysomnography (PSG) testing. Due to these efforts to influence CMS administrators, today the education and distribution of portable sleep monitoring devices remains in the hands of sleep labs, to be offered or not at their discretion, and leaves HME providers unable to work with patients in this arena. Furthermore, a Wachovia study shows that despite the continued expansion of sleep laboratories conducting PSG, relatively few are offering portable monitoring studies.

However, there is no denying the growing requirement for funding in the sleep sector. The rise in OSA diagnostic tests every year inevitably points to the need to reduce costs, and it is expected that CMS will continue to advocate for portable monitoring as a solution.

Something to Talk About

To help providers engage others in constructive and focused conversation and thus contribute to industry advocacy efforts, the American Association of Home Care (AAHC) released a series of talking points on the subject of competitive bidding:

Bad for Patients

  • Reduces access and choice for quality HME items and services.
  • Restricts the number of homecare providers available to patients.

Bad for Business

  • Is actually “anti-competitive.”
  • Abbreviated Round One in 2008 shut out majority of providers.
  • Shut out 90 percent of qualified HME and service providers during its two weeks in operation.

Not a Cost-Effective Solution

  • Will lead to more expensive and longer hospital stays, and more physician visits.
  • Current HME and related services are a cost-effective alternative to institutional care and help control Medicare spending.
  • HME and related services are the slowest-growing portion of Medicare spending.
Finding Your Voice

“I wouldn’t want to be in the shoes of someone trying to assess the overall outlook for the home care sector, not just in the funding proposals, but among the providers themselves,” says Michael Reinemer, Vice President of Communications and Policy at AAHomecare. “Every provider has their own mix of payers and patients depending on when they started and what types of treatments they’re helping to provide.”

As a provider, how do you sort through these 18 Respiratory Management October 2009 funding issues? One way is to start with the common threads, those ideas on which nearly everyone agrees. For instance, regardless of their personal situation or political point of view, everyone seems to understand that money is saved when people with health problems are able to receive treatment in their homes instead of in hospitals. President Obama has expressed this sentiment, and Senator Tom Daschle (D-SD) has publicly noted the vast difference in expense between at-home oxygen therapy and hospitalized treatment, even referring to home healthcare as “a panacea.”

Within the HME sector, common threads abound. For instance, providers and patients understand that the monetary cost of home care goes beyond equipment. This becomes a key point when evaluating the merits of any funding proposal. But how much should it actually cost to care for a patient? Understandably, HME providers believe that they are in the best position to make that determination.

There is also near-consensus that the competitive bidding program in its current form will not ultimately benefit home care patients. Initial attempts to implement the program showed its inherent faults. Key factors such as whether providers who win bids will actually have the equipment and training required, or be able to service people in certain locations, have not yet been adequately addressed.

Consensus becomes more elusive at the next level: evaluating the best ways to put common beliefs into action. This is where the debate really begins, and where those who influence public opinion swing into action. One lesson of politics is that you can persuade more people to your point of view with one or two simple messages than you can with books full of compelling documentation. This often means having to boil down an issue to its barest form for public consumption, and that is what HME organizations are striving to do.

AAHomecare is vigorously using its influence to help spread the word about funding policy. In February of 2009, the association called for small and large oxygen providers, some regional and state homecare associations, buying groups, the CQRC, and its own senior volunteer leadership to come together to form a New Oxygen Coalition (NOC) to help improve the oxygen benefit in Medicare. Since that time, the NOC has made progress through a series of consensus building meetings.

“We have a lot to do in this area,” acknowledges Reinemer, “but it isn’t just about ‘PR.’ It’s about education. It’s about getting more people to understand the benefits of what providers do. The HME sector has not been around for thousands of years like doctors have. We’re small, and that makes it easier for us to be misrepresented.”

Indeed, too much time and effort must be spent responding to misinformation that is all too easy to disperse and much more difficult to repudiate. A recent example: comments made by Bruce Vladeck, an administrator of the Medicare and Medicaid programs in the mid-1990s. Vladeck recently remarked publicly that Medicare and Medicaid administrators have tried to change the DME benefit since the 1980s—only to be thwarted by Congress. This statement was soundly rebutted by AAHomecare on the C-SPAN television and radio broadcast, Washington Journal. “This statement is patently false,” the rebuttal read. “Congress has cut DME payments and changed the payment system in Medicare numerous times since Vladeck left his job.” The rebuttal cited the Balanced Budget Act of 1997, the Medicare Modernization Act of 2003 (MMA), the Deficit Reduction Act of 2005, and the Medicare Improvements for Patients and Providers Act of 2008 (MIPPA) as examples of incidences of DME payment cuts and changes.

Misinformation about the HME sector is often coupled with a type of mischaracterization that paints providers as greedy and conscienceless businesspeople trying to take advantage of the system, as exemplified by Vladeck’s description of medical oxygen and delivery services as “only air.” Speaking on behalf of his organization, Reinemer reiterated the actual history of rate reductions in Medicare, as well as the 9.5 percent cut required to pay for the delay in the competitive bidding program, and the nearly nonexistent growth rate in Medicare spending for home medical equipment. Although subsequent to the aired rebuttal, Vladeck admitted misspeaking, the damage had been done, and the former administrator still maintained that Medicare overpays for DME.

Other industry organizations are making a concerted effort to extend their reach. Back in June, NAIMES spoke to a New Jersey reporter, who in turn wrote an article that appeared in that state’s Courier News and the Home News Tribune this past August. In the article, the writer presents with simple clarity NAIMES’ message about the negative effects of CMS’ 36-month oxygen cap: “NAIMES claims that suppliers are being forced to reduce services, forgo their salaries, fire staff and turn away patients,” the article states. To maximize the power of the press, NAIMES distributed the article to various media outlets. “As you can see,” commented NAIMES President and CEO Wayne Stanfield, “getting our message out takes time but it eventually does work.” NAIMES also includes a “write a letter to your representative” form letter on its website to encourage activism among HME providers.

As an HME professional, you have a right and even an obligation to voice your opinion, and there are several ways in which to do it. A letter or phone call to your state representative in Congress actually carries a great deal of influence, say industry organizers. If you need some help getting started, turn to the HME organizations whose function it is to preserve and support its industry (see Sources, next page). Changes in funding policy are inevitable; the opportunity to influence those changes is in your hands.


For more information on funding issues and ways to voice your concerns as an HME professional, contact or research the following organizations:

American Association For Homecare (AAHC)
Works to strengthen access to care for the millions of Americans who require medical care in their homes. AAHomecare represents healthcare providers, equipment manufacturers, and other organizations in the homecare community.
(703) 836-6263

Committee to Save Independent HME Suppliers (CSI: HME)
Formed in May of 2009 by a group of HME suppliers wishing to respond to policy changes threatening the well-being of independent medical suppliers and patients, the self-described nonprofit business league has set about advancing its agenda of industry awareness on Capitol Hill and among consumers with the help of a lobbying firm and public relations firm retained for this purpose.

Council for Quality Respiratory Care (CQRC)
An alliance of the nation’s leading home oxygen therapy providers and manufacturers, representing nearly half of the more than 1.5 million Medicare beneficiaries who depend on the home oxygen benefit for independence and quality of life, CQRC works closely with policymakers and their staffs to facilitate a deeper understanding of the clinical, operational, and service-related complexities associated with the provision of this life-enhancing benefit.
(410) 212-3843

National Association of Independent Medical Equipment Suppliers (NAIMES)
A grassroots advocacy organization whose goal is to influence policy through legislative education and by offering assistance to suppliers at the state level which will affect change at the national level.
(703) 836-6754

New Oxygen Coalition (NOC)
(See information for AA Homecare, above.)

This article originally appeared in the Respiratory Management October 2009 issue of HME Business.

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