Respiratory Outlook

A Look Ahead

To be successful next year, respiratory providers will have to concentrate on business efficiencies.

respiratory business efficienciesFrom the re-compete of Round Two of competitive bidding to audits to ICD-10, 2015 is looking like another “eventful” year for HME respiratory providers.

This year — 2014 — has already been difficult for respiratory providers due to reimbursement reductions driven by Round Two of competitive bidding. On one hand, you have a large group of providers with no bid wins trying to figure out how to increase revenue, on the other you have winners who are scurrying for ways to make up for the slashed reimbursement rates.

And soon they’ll have to repeat the process all over again.

“Service providers who took pride in excellent care now must become good business people, focusing on service model changes as well as efficiency and productivity improvements,” says Scott Wilkinson, executive vice-president of sales & marketing for Inogen. “It can be a tough transition for many, and in the short term, there are probably no winners.”

Karen Butterton, chief strategy officer of Barnes Healthcare Services, says that many respiratory companies that participated in the competitive bidding program did not understand their cost structure when they submitted their initial bid.

“We are now seeing the impact today: companies selling, closing and/or filing bankruptcy,” she says. And this will likely spill over into 2015.

But with that says, Wilkinson thinks the long-term view brings some good news. While oxygen and sleep therapy reimbursement rates have changed dramatically over the last year, he says there should be a measure of stability and predictability in the future.

“Rates are essentially locked over the three-year competitive bidding contract window, and it appears we have seen rates bottom out if you look at the average rates across the Round Two CBAs and the Round One re-compete CBAs,” he says. “This stability should allow for the savvy providers to focus on the necessary business improvements needed to survive and compete in the future.”

He also says that market demographics seem to be in respiratory providers’ favor, as there continues to be a rising prevalence of COPD, and the benefits of long-term oxygen therapy are well documented. The market is still posting solid growth in terms of patients.

At the end of the day, 2015 can be an attractive space for providers who can run an efficient business.

Round Two Re-compete

The Round Two Re-compete bidding schedule and registration period will occur sometime this fall, with the 60-day bid window likely beginning in early 2015. There are some changes from Round Two (and the Round One Re-compete) that will likely affect the respiratory industry.

“Nebulizers and Related Supplies are now a separate category,” says Mark J. Higley, Vice President, Regulatory Affairs, VGM Group, Inc. “The Respiratory Equipment and Related Supplies and Accessories product category has been added, which includes both oxygen and CPAP/RAD devices. For some bidding entities, these product categories combine products that may not have been furnished by the provider in the previous round. For example, HMEs furnishing oxygen do not necessarily furnish CPAP devices and RADs.”

Higley also sees an opportunity with the Re-compete to improve the reimbursements (single payment amounts) for respiratory products and services.

“House Bill HR4920 would create stronger licensure and ‘bid performance’ requirements,” he says “Under the current program, suppliers are free to bid in virtually all CBAs with no requirement to accept a contract offer. This has created ‘low-ball’ bids in previous rounds, and, unlike other acquisition programs, these bids count in determining the new reimbursement amount. HR4920 would require bidders to accept the contract if their submitted bid was lower than the eventual single payment amount. This should stem the amount of ‘low-ball’ attempts, improve the likelihood of securing in-CBA area contractors, and improve reimbursement.

“And, the combining of product categories, such as oxygen and CPAP, might result in a reduction in the amount of out-of-area bidders, who, in previous rounds, bid CPAP in virtually all areas of the country,” he adds. “Delivery of CPAP supplies has seen, arguably, an increase in drop-shipments. Now that the bidding supplier must also offer oxygen and oxygen equipment in the same CBAs (requiring comparably more in-home service), we anticipate a decrease in the number of out-of-area contracts offered.”


When it comes to-face-to-face (F2F) in 2015, the challenge is keeping up with the rule requirements, effective dates, enforcement dates, delays, who can and can’t audit, etc. But regardless, the rule is already affecting the respiratory industry, especially in the case of hospital discharges. It’s unsure where all this will lead in 2015.

“Where this is a problem for oxygen suppliers and hospitals is upon discharge from a hospital setting,” says Ronda Buhrmester, VGM Group, Inc., Reimbursement Specialist. “While the stationary unit E1390, portable concentrator E1392, and home-filling unit, K0738, are not part of the F2F ruling that was implemented July 1, 2013, other oxygen equipment is included, such as the portable system, E0431, oxygen content, E0443, liquid oxygen, and some other oxygen HCPCS codes. With the F2F ruling, both the detailed written order and face-to-face evaluation have to be in the suppliers’ hands prior to delivery of the equipment. The detailed written order must have been written within six months of the face-to-face evaluation.”

If a patient needs a stationary concentrator and portable gaseous system to be discharged home, the portable gaseous system requires a written order prior to delivery, which means the supplier cannot deliver the portable system for the patient to be discharged to their home until the written order is received prior to delivery.

“We all know how busy life is in a hospital setting and trying to get patients discharged home,” Buhrmester says. “Normally oxygen suppliers receive a prescription that states ‘2lpm home oxygen and portable with supplies.’ This type of order isn’t considered a written order prior to delivery because it’s not detailed enough. While the supplier can deliver the stationary unit based on that type of referral, the portable cannot be delivered until there is a written order prior to delivery in the DME supplier’s possession. The patient needs the portable to get home because without the oxygen, their oxygen saturations will decline. The supplier, then, has to get the written order completed by the practitioner PRIOR to delivery.”

More Trends in Twenty-Fifteen

Butterton says the top trends to look for in 2015 are administration/process, regulation and technology. “RTs will be consultants — goals, direction of therapy, the educator,” she says. “They will be expected to provide evidenced-based medicine and protocols. Regulation — practices, protocol and documentation to support therapy. Finally, technology will change the way we monitor patients in the in home setting. Intervention is critical.”

As far as clinical trends, Wilkinson says there is a lot of focus on readmission rates now by the provider community, and rightly so.

“Providers will need to offer products that foster compliance and increase their patient education efforts, and actually measure readmission rates to understand the overall effectiveness of their service offering,” he says. “It’s a good thing, overall, as this will force providers to take a necessary long-term view regarding clinical outcomes, and it will ensure a balance between cost reduction efforts versus patient care.”

For Bob Messenger, Manager, Respiratory Clinical Education, Invacare Corporation, 2015 will focus on reimbursements, audits and increasing hospital demands for patient education and outcomes management.

“Reimbursement is obviously the No. 1 concern for all providers, but particularly for those who continue to make routine oxygen deliveries,” he says. “Thinner margins, changing hospital demands and ever increasing operational costs will force more providers to adopt a non-delivery approach to providing oxygen.”

Messenger also pointed out that with the maximum penalty for readmissions being raised this October to 3 percent and COPD being added to the mix of DRGs that drive that program, hospitals are pursing every internal and post-discharge option to keep those patients from coming back in. And they will increasingly turn to HME providers to help in this pursuit.

Finally, Oct. 1, 2015, is the new compliance date for healthcare providers, health plans and health care clearinghouses to transition to ICD-10, the 10th revision of the International Classification of Diseases.

“ICD-10 codes will provide better support for patient care, and improve disease management, quality measurement and analytics,” says Centers for Medicare & Medicaid Services Administrator Marilyn Tavenner. “For patients under the care of multiple providers, ICD-10 can help promote care coordination.”

It may be a little soon to predict the effects ICD-10 will have on respiratory providers, but Buhrmester says the key is to start getting ready today:

“ICD-10 affects the entire industry,” she says. “The codes are more detailed, which means there will be new codes to learn and become familiar with. The DME industry should already be working with staff education and working with their billing software companies to be prepared and familiar with the new codes.”

This article originally appeared in the October 2014 Respiratory Management issue of HME Business.


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