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Home medical equipment industry jeopardized by low reimbursement rates, study says

Study also faults current Medicare model for lack of transparency, failing to consider costs of supplying equipment to beneficiaries.

Jeff Lagasse, Associate Editor

Photo by <a href="http://amazementhomecare.com/?page_id=6372"> Amazement Home Care </a>Photo by Amazement Home Care

Medicare reimbursement rates for home medical equipment cover just 88 percent of overall costs for companies providing this service, raising concerns about the future viability of the home medical equipment industry under the current Medicare model, according to an American Association for Homecare study.

The report's conclusions show the current Medicare competitive bidding program for home medical equipment is producing financially unsustainable rates, and faults the program for its lack of transparency.

It also claims the Centers for Medicare and Medicaid Services does not take into account the other costs that go into supplying home medical equipment to Medicare beneficiaries when assessing the viability of bids.

[Also: CMS slashes payments for durable medical equipment by as much as 50% in some cases]

Study co-author Allen Dobson said in a statement that the data consistently shows reimbursement-to-cost ratios far less than 100 percent, saying, "No matter how the data is sliced, by organization size and/or product category, the current reimbursement model does not cover provider costs. That is likely unsustainable over the long term."

In fact, the products surveyed were reimbursed at an average of 88 percent of the overall cost of providing them, when all operational costs and the cost of goods were considered. Some products were reimbursed at far less. CPAP machines and related supplies were reimbursed at a rate of just under 68 percent, and standard beds were reimbursed at about a 69 percent rate.

A September 2016 Government Accountability Office report that was just released to the public finds that the number of beneficiaries using home medical equipment services and supplies fell nearly three times as fast in competitive bidding areas (-17 percent) as in non-competitive bidding areas (-6 percent). The GAO also notes instances of access problems and delivery delays which may be increasing beneficiary hospital use.

[Also: Medicare saves over $4 billion in durable medical equipment costs]

"The new GAO findings are consistent with these study results," said Dobson. "Taking both of these studies together, it's evident that the competitive bidding process should be carefully examined and monitored to determine if problems encountered warrant fundamental changes to the program in order to avoid the possibility of severe dislocation to the home medical equipment industry and the patients it serves."

The bidding program sets rates and provides exclusive contracts for winning bidders in 110 metropolitan areas in the United States. In the beginning of 2016, the CMS began applying these rates to the remainder of the country, resulting in reimbursement cuts of 50 percent or more on many products for providers in rural communities and other areas outside of the original bidding program. These new lower rates are also being adopted by TRICARE military healthcare administrators and other payers nationwide, impacting providers and their patients.

AAHomecare, patient disability groups and other stakeholders in home medical equipment are currently supporting legislation under consideration in Congress that would roll back part of the reimbursement reductions for rural home medical equipment providers to give policymakers a better chance to study the potential effects of cuts on Medicare beneficiaries.

Twitter: @JELagasse

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