Home Oxygen Providers Face Further Cuts

Allegations that competitive bidding distorted the home care industry’s market structure, forcing business closures and industry-wide layoffs, have not halted efforts to further shave Medicare’s home oxygen reimbursement.

The Government Accountability Office has proposed chopping an additional $700 million off Medicare’s home oxygen tab, which already has been reduced 31 percent by the competitive bidding program. Kathleen King, the GAO’s director of health care, testified before Congress in March that although oxygen payments have been reduced several times, further savings are possible.

The home care oxygen industry is still reeling from $800 million in Medicare payment reductions in 2009 stemming from the Deficit Reduction Act of 2005 and the Medicare Improvements for Patients and Providers Act of 2008. The average Medicare payment for home oxygen therapy is less than half of what it was back in 1997.

“Everyone is getting tired,” said Jack Hogan, vice president of Health Complex Medical in Waterbury, Conn. “It’s hard to keep positive.”

Buried deep within the GAO report is an acknowledgement that home oxygen providers have long pressed for: Medicare’s payments for home oxygen are not aligned with the cost of providing equipment. But the GAO’s suggestion that oxygen providers cut costs by supplying more portable oxygen tanks per patient visit played like a familiar refrain.

“It’s something that jumped off the page for me,” said Gary Sheehan, MBA, president and chief executive officer of Cape Medical Supply in Massachusetts. “They really fail to account for the full cost of the services we provide.”

The report took specific aim at providers who employ respiratory therapists, saying that offering respiratory services not required by Medicare simply “increases their costs.” Industry leaders expressed outrage but not surprise at this latest charge.

“Never have they ever accounted for the value of respiratory therapists and sleep technologists,” Sheehan said, “(even though) the clinical feedback that they give to patients is critical to how these patients do.”

“That is where the flaw is,” agreed Bob McCoy, BS, RRT, FAARC, immediate past chair of the American Association for Respiratory Care’s home oxygen section. “Equipment is all that people focus in on, and equipment doesn’t solve the problems. It’s a tool used by professionals to try and gain results.”

Home care companies have an opportunity to change the mindset from equipment-based to service-based beginning in October when Medicare will stop paying hospitals for patient readmissions within 30 days of discharge.

“(It will) create a financial incentive for hospitals to start looking at their home care providers not as who can do it cheaper, but who can do it better,” said McCoy, who also is managing director at Valley Inspired Products in Apple Valley, Minn.


Oxygen suppliers still will have to contend with their familiar foe of competitive bidding. CMS announced last week that bidding of the delayed second round will begin sometime in winter 2012. Zip codes in the 91 metropolitan statistical areas have been divided into 100 competitive bidding areas, with three each in New York, Los Angelos, and Chicago. Oxygen devices and supplies will be covered, along with new products in the wound care supplies and support surfaces categories such as mattresses and overlays.

Like many companies, Health Complex Medical has been analyzing patients’ oxygen usage, deploying portable oxygen concentrators as they’re purchased, and considering whether to outsource tasks such as billing and shipping. But Hogan also has been hard at work petitioning congressmen to end the program.

Momentum is building behind a new congressional bill, HR 1041, that would repeal competitive bidding and terminate any previously awarded contracts. The Fairness in Medicare Bidding Act (FIMBA) has gained 145 co-sponsors from both parties since its introduction in March. Support is needed in larger states, such as California and Texas, where legislators have been slow to sign on. FIMBA proposes to be budget-neutral, but the bill does not specify what budgetary cuts will compensate for the
$20 billion that the Congressional Budget Office projects the competitive bidding program will save over 10 years.

“The call to action right now is to save money, so our resistance – if there is any – is to show that we will not cost the government any more money by repealing competitive bidding,” Hogan said.

Contact Kristen Ziegler at [email protected].