Observation Deck

Bidding's Ripple Effect

Competitive bidding-derived rates are reverberating across more payers.

Medicare reimbursement rates and the multiple layers of requirements that go with providing and getting paid for home medical equipment under this program have been a major focus of AAHomecare’s work engaging both Capitol Hill and CMS for as long as I’ve been involved with the Association – going back to my time as a Board member. That’s not going to change any time soon as we continue to advocate for significant reform of the competitive bidding program, as well as pushing back against the application of bidding derived rates to rural areas and for complex rehab accessories.

However, in light of the trends showing more Medicare beneficiaries enrolling in Medicare Advantage plans, and state Medicaid plans increasingly shifting their patients into managed care systems, these payers are becoming increasingly important to HME providers. To respond to these changes in our industry’s landscape, AAHomecare brought aboard Laura Williard to serve as senior director of payer relations — our first hire to deal exclusively with non-Medicare payers. Laura joined the team in June, and hit the ground running, setting up meetings to carry HME industry concerns to important national payers such as UnitedHealthcare and Anthem Blue Cross Blue Shield, as well the Sleep Group that is part of Anthem’s AIM Specialty Health subsidiary.

The Dominos Start to Fall

AAHomecare’s decision to bring more assets to bear on the payer relations front was certainly a timely decision, as the secondary effects of the competitive bidding price cuts are now being felt beyond Medicare reimbursement.

This Fall, we’ve seen numerous reports of Medicare Advantage and TRICARE plans implementing rates based on bidding-derived cuts without any advance warning to HME providers. The resulting rates have surprised and dismayed providers across the country, given that, in the case of TRICARE, these plans layer on reductions from anywhere between 10 to 55 percent below the Medicare cuts.

One AAHomecare member who is working to renegotiate or cancel their contract reports: “Our regional plan slashed rates without any direct notice. At these rates, we will be unable to help members of our military, which is very disturbing and disappointing to us. Frankly, it is hard to imagine how any supplier will be able to offer products and services at these very, very low rates. In the end, this is going to create access to care challenges for active and retired military personnel and their families.”

Kirit Patel, owner of Progressive Home Medical in Chandler, Arizona, told us that “the new TRICARE fee schedule effective July 1 comes with a 61 percent reduction for CPAP devices when compared to the rates in effect last year. We are now down to $18.41 per month for CPAP. As a result, my company has stopped taking all TRICARE, and I know other companies in the Phoenix area are doing the same,” he added.

Pushing Back Against the Cuts

As state Medicaid programs are required to follow Medicare reimbursement rates starting in January 2019, the use of bidding-derived pricing to determine rates for all suppliers nationwide on a regional basis will eventually affect those rates, as well. AAHomecare provided advice and support to the Home Medical Equipment & Services Association of New England in their recent success in convincing Medicaid authorities in Maine to hold off on their plans to adopt these deeply reduced rates immediately. We’re also receiving reports that some other Medicare Advantage plans are reconsidering their plans to adopt these rates as a baseline thanks to provider engagement at the state level.

AAHomecare is in the early stages of gathering information about how many payers are adapting these cuts, and how providers and associations have been successful in pushing back against them.

What Providers Need to Watch For

As we noted earlier, many of these plans are not giving formal notification of these rate reductions; oftentimes contracts established by these plans do not make it mandatory for them to give such notification if the rates change. Accordingly, it is critical for providers to look carefully at their payments and explanation of benefits on a monthly basis. Since some payers will begin to take these reductions months after Medicare has implemented them, this should be an ongoing process for your organization.

When you see these payment cuts, review your contract for language regarding frequency of rate changes, notification process, and any reference to which fee schedule they are following (i.e. 2016 Medicare Fee Schedule) to ensure they are following the contract appropriately. Even if the contract allows these changes, you should reach out to schedule meetings with these payers to discuss the rates that you determine are unsustainable. Be prepared with data on the number of patients you have serviced, and point out any niche products you provide or items you have high market share in. Use this as opportunity to highlight your company’s best attributes to the payer.

Where Do We Go from Here?

Bidding derived cuts in the order of 50 to 60 percent vs. the 2015 schedule are now causing severe disruption for suppliers in rural and non-bid areas; for many, they are simply not going to be profitable or sustainable. And, when these rates are used as a jumping-off point for additional cuts by TRICARE or Medicare Advantage plans, you can end up with rates that would make you laugh if they weren’t making you cry.

I believe that this is a battle that’s going to have to be fought on multiple fronts. The leadership and expertise of the state and regional HME associations will be particularly important in collectively marshalling the strength of their memberships to engage plans serving their areas. AAHomecare is proud to serve as a facilitator for these groups to share ideas and approaches that have worked through our State Leaders Council, where this issue is increasingly becoming a major part of the group’s ongoing discussions.

Through our investment in payer relations resources, AAHomecare will continue to build relationships with payers and appeal to these organizations to not reflexively cut reimbursements in lockstep with Medicare cuts.

And finally, dealing with the proliferation of rate cutting outside of Medicare is going to force the HME sector to try and find creative solutions to obtain compensation for the products and related services we provide. Whether it’s continuing our early efforts in exploring how providers can participate in value based payment systems, conclusively demonstrating and communicating the cost-effectiveness of HME, or educating payers about the importance of preserving the HME infrastructure their home care programs rely on, AAHomecare is committed to playing a leadership role in helping this industry survive, adapt, and move forward in this challenging and changing competitive environment.

This article originally appeared in the October 2016 issue of HME Business.

About the Author

Tom Ryan is president and CEO of the American Association for Homecare (AAHomecare.org). Prior to assuming that role in 2013, he spent 25 years as the president and CEO of Homecare Concepts, a Farmingdale, N.Y.-based respiratory company that he had founded. Follow Tom on Twitter @TomRyanHME.

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