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