April 18, 2017
Published by Inside Health Policy

Oxygen-Equipment Suppliers Hope Price Helps Implement His Own Measure 

Oxygen-equipment suppliers hope CMS uses an upcoming subregulatory measure to change a retroactive reimbursement policy to pay them more for equipment they supplied during the second half of last year. While a House lawmaker, HHS Secretary Tom Price introduced a bill, which is now law, that delayed for a year applying reimbursement rates that are based on bids in urban areas to areas of the country where there was no bidding. However, suppliers disagree with the way CMS implemented that law and are now asking the agency to change it in an upcoming transmittal to Medicare Administrative Contractors.

The Council for Quality Respiratory Care, a group of seven home oxygen and sleep equipment suppliers and manufacturers, is urging CMS to make several changes to regulations on reimbursement, bid procedures and audits.

Pay rates for durable medical equipment are determined by bids in cities and suburbs. CMS planned to apply those lower, bid rates in rural areas, starting in July 2016, though super rural areas are not subject to the bid rates.

Apria CEO Dan Starck said it cost more to service less-populated areas because of longer drives and lower volume. When lawmakers passed the 21st Century Cures Act, they included a measure, written by then Rep. Tom Price (R-GA), to retroactively roll back the pay cuts in non-bid areas to help out industry. However, by the time Congress passed the Cures bill in December, CMS had additional data that wasn’t available during the first half of 2016, and the agency used that data to lower pay rates, then based the frozen rates on that lower amount.

The Council for Quality Respiratory Care is asking CMS to set rates during the second half of last year at levels paid during the first half of last year. Starck said this could be done in the upcoming transmittal to Medicare Administrative Contractors, which would not require the public comment period involved in rulemaking.

Another reimbursement policy that the group asks the agency to change applies to oxygen concentrators. CMS applied a budget neutrality measure to concentrators, which had the effect of making reimbursement in rural areas 10 percent lower than in bid areas. The lower rural pay rate is due to the convergence of two factors. First, although rural areas are subject to bid rates, super rural areas are paid off the fee schedule, and they get an additional 10 percent add-on. Second, CMS applied a budget neutral rule that was designed for the fee schedule, even though it is now being applied to mostly bid rates that aren’t based on the fee schedule. The result is that the super rural areas lose the 10 percent add-on, and pay rates in rural areas are cut 10 percent, even though the 10 percent is taken off of bid rates, not rates set by the fee schedule. However, rates in bid areas are not cut 10 percent.

Starck said Congress never intended for suppliers in rural areas, where costs are higher, to be paid less than suppliers in urban and suburban areas.

The Council for Quality Respiratory Care also recommends changes to the method for setting rates in the bid program. The group suggests creating separate categories for oxygen and sleep-therapy equipment. CMS included both types of equipment in the same category because many beneficiaries need them both and it is easier for beneficiaries to get their equipment from a single supplier. However, Starck said the system allows suppliers to game the system by low-balling bids on equipment they don’t sell to get into the program.

Another policy linked to low-ball bids is CMS' reliance on median prices, the group says. The Council for Quality Respiratory Care would like CMS to instead use clearing prices -- an approach that academics who work on auctions have advocated for several years. Also, industry says CMS should not count new bidders in its volume calculations, which would eliminate those bids from calculations of the clearing price. Industry also calls for CMS to do a better job of discarding unlicensed bidders, which Starck said continues to be a problem, despite agency efforts to fix it.

Audits are another area in which suppliers seek changes. The group says CMS should eliminate face-to-face and related documentation, and the written order prior to delivery requirements. Instead, CMS should rely on the Certificate of Medical Necessity and prescriptions as the primary documentation for showing medical necessity, industry says. The Council for Quality Respiratory Care asks that the proof of delivery requirements be modified to allow exceptions to the basic requirement that the proof of delivery be obtained only at initial delivery. The group wants CMS to provide guidance asking Medicare contractors to avoid auditing the same patients multiple times using different dates of service. Also, CMS should streamline audits and prevent duplicate audits, the group says.

CMS has been dealing with a backlog of appeals for several years. It eliminated much of the backlog for hospitalsand now the majority of the backlog is for durable medical equipment. The new contractor hired to review appeals rules in favor of suppliers of home oxygen equipment in more than 80 percent of the appeals.

“If CMS’s own contractor acknowledges that nearly 100 percent of beneficiaries who are prescribed home respiratory therapy actually meet the medical necessity requirements, it is not clear why claims should be denied,” the Council for Quality Respiratory Care states in a letter to CMS.

To learn more, visit cqrc.org and follow CQRC on Twitter at @TheCQRC.

Learn More About Home Respiratory Therapies:

Millions of Americans are living with COPD and Obstructive Sleep Apnea, experiencing acute respiratory failure, or living with neuromuscular diseases. These individuals rely upon home respiratory therapies to remain at home. Learn more about home respiratory therapies and how they can help.

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