ATLANTA--CMS might want to reduce the number of home medical equipment providers, but its relentless actions combined with those of Congress could also have dire consequences for Medicare beneficiaries, according to HME stakeholders.  

“Demand is exceeding supply,” said Wayne Stanfield, president and CEO of the National Association of Independent Medical Equipment Suppliers. “The existing providers cannot absorb the number of patients from providers who have thrown up their hands and said, ‘I give up.’”

Since the beginning of the year, HME providers have been slammed with a 36-month oxygen rental cap, a 9.5 percent across-the-board DME cut, mandatory surety bonds and accreditation, the resurfacing of competitive bidding and the requirement that ordering physicians be registered in Medicare’s PECOS (Provider Enrollment, Chain and Ownership System).

Payment audits have also been stepped up, and numerous reimbursement threats to such HME staples as oxygen, sleep and mobility products continue. The House health reform bill (passed Saturday night) includes 25 sections involving DME, 24 of which would adversely affect providers.  

“Medicare clearly wants to do business with fewer providers,” said consultant Wallace Weeks of Weeks Group in Melbourne, Fla. “They are putting barriers to entry and to sustainability in the industry. Bonding, accreditation, competitive bidding--all are designed to reduce the number of providers we have.”  

The actions are working. Hundreds of providers are collapsing under the load and either pulling out of Medicare or out of the industry altogether, according to information compiled by the Accredited Medical Equipment Suppliers of America. AMEPA has reported that in Miami, the number of oxygen providers dropped from 401 in April 2008 to 205 in October 2009. Similarly, the number of oxygen providers in Los Angeles fell from 258 to 120 during the same period, and in California’s Riverside County, only 21 oxygen providers were left out of 48 to service patients in a 7,200 square-mile radius.

A recent HomeCare Web poll shows that within a year, a full third (33 percent) of respondents plan to get out of the HME business, and another 13 percent plan to exit Medicare.

While CMS may be dealing with fewer providers, it could also be grappling with more headaches. Already, even before the implementation of competitive bidding in January 2011, access issues are surfacing according to CMS itself.

In an Oct. 30 email, a CMS employee said that in “areas within Montana, a Medicare beneficiary may experience supplier access issues” in obtaining oxygen, enteral and parenteral nutrition and power wheelchairs (see "Montana Benes Could Lose Access" in this issue). The reason: a shortage of providers meeting the agency’s new surety bond and accreditation requirements.

So far, CMS has remained silent on how many providers have either withdrawn from the Medicare program voluntarily or had their provider numbers revoked because of the surety bond and accreditation mandates. But Stanfield said he believes it could be about 10,000--and that would be on top of all those who have already fallen out of the industry.

"If you look just at the small pharmacy-based suppliers, I am aware of close to a dozen in a rural area of Virginia that have pulled their numbers,” Stanfield said.

It isn’t just rural areas that are affected, either. Stanfield said that in one urban market in California, referral sources are calling providers to get their patients serviced because the HME companies they have used for years are no longer in the Medicare program.

“It’s going to affect providers all across the spectrum,” Stanfield said.

Left without a Provider to Call On

Neal Hansen can attest to that. His company, Hansen Homecare Specialty Service in Ketchikan, Alaska, covers Ketchikan, its environs and Prince William Island. It’s a costly endeavor. The island is accessible only by ferry, and it costs him $600 just to get there, Hansen said. He’s already had to cut the number of times he visits the island, and with any more cuts from Medicare, he might have to rethink servicing those patients at all, he said.

Then there are the patients in other remote areas of Alaska that are left without care because their providers have closed up. Hansen said he would like to help, but right now, he is thinking there aren’t enough patients to warrant the cost.

So Hansen, who did obtain his surety bond and accreditation, plans to stay in business by diversifying. He already does business through the Internet, and it helps that he owns his own building and employs only family.

“With what we’ve got, we’re doing OK,” Hansen said.

Tactics such as diversification could make the difference for providers who choose to stay in the business, according to Miriam Lieber of Sherman Oaks, Calif.-based Lieber Consulting. Lieber, who spoke last week at the Ohio Association of Medical Equipment Suppliers, characterized providers who attended the meeting as a strong group of “survivors,” but even they were wondering when CMS and Congress were going to ease up.

That’s anyone’s guess, Lieber said. She added that providers must “either wait out the storm or they walk away.” If they choose the former, she said, “they mix it up, diversify, cut up the pie. They have to mix it up.”

The idea is that providers “don’t have all their eggs in one basket--and definitely not the Medicare basket,” she said.

Weeks agreed. “Some are choosing just to jettison the Medicare portion of their business,” he said. “Some are more set now on diversifying their revenue sources … working on diluting Medicare as a percentage of their revenues. I’ve been seeing that for a good two years now.”

Weeks is not surprised that a number of providers are electing to leave the HME business. In 2004, he recalled, he made a keynote presentation at Medtrade during which he predicted that by 2010, 25 percent of the industry would be lost.

Then, his prediction was largely based on the fact that “it is part of the natural evolution of any industry. As industries reach maturity, they consolidate,” he said. “Customers develop bargaining power as an industry gets toward the top of its growth stage. That translates to shrinking margins.” But pushed by regulatory and legislative actions, however, the HME industry got to that shrinking point much earlier.

“Most industries don’t have the amount of regulation we have, so we have some acceleration,” Weeks said.

But both consultants pointed out there is something of a silver lining to a shrinking industry.

“There’s a bigger piece of the pie for those that remain,” said Lieber. “It’s going to cause the top line of those left in the industry to grow,” said Weeks. The average annual revenue for providers a few years ago was $1.8 million, but “I think we’re going to see that average revenue grow to be $3 million per year,” Weeks said.

Get Out Your Legal Pad

Still, there will be collateral damage from the forced consolidation, according to Stanfield.

“CMS’ solution to the [access] problem was for the patient to make sure their supplier was approved or they would have to pay out-of-pocket,” he said. “That’s really not possible for a senior who is in no position to do anything about this problem and didn’t do anything to create it.

“[CMS and legislators] simply don’t realize how much capacity is being served by very small companies,” he continued. “What is being missed is that those providers could each have had 10 or a dozen oxygen patients. But because of the cap arrangements, no one can take those patients. There are so many moving parts to this that it is frightening.”

Like the providers in Ohio who wondered when CMS was going to ease up, Stanfield wonders why such emphasis is placed on an industry that accounts for only 1 percent of the nation’s total health care bill. “It’s astounding that this industry is being crushed like this,” he said.

CMS says it is taking such actions to counter fraud and abuse, but Stanfield pointed out there is a much easier way to do that. “Not one penny can be billed to Medicare without a supplier number,” he said. “The answer is simple: Don’t give supplier numbers to crooks.”

Yet the National Supplier Clearinghouse, CMS’ enrollment contractor, persists in doing just that, he said. “Why is the contractor still issuing supplier numbers after 16 years when every single report that has come out has said that they have failed [to curb fraud and abuse from the front end]?”

Concluded Stanfield, “You could take three people and a legal pad and do a better job than CMS is doing.”

homecaremag.com