HCFA’s IR authority comes under attack from DME industry
By MATTHEW HAY
HHBR Washington Correspondent
WASHINGTON The durable medical equipment (DME) industry has weighed in strongly against the process, data, and methodology the Health Care Financing Administration (HCFA; Baltimore) used to come up with special payment limits for five items of DME and one prosthetic device based on its inherent reasonableness (IR) authority. The agency’s proposed rule would slash reimbursement for these items anywhere from 22% to 57%.
DME providers see the cuts as part of the agency’s long-running campaign to expand its pricing authority using its IR authority. "What this was was a test," said Invacare (Elyria, OH) Director of Government Affairs Dave Williams. "This was to see if the procedure worked and what are the roadblocks." According to Williams, there is ample information for HCFA to attack other product lines. But instead, he said, HCFA selected high-volume products. "In dollar numbers per product it may look really small, but when you look at the volume it is pretty significant," he said.
The six items included in the Aug. 13 Federal Register notice are folding walkers (pick-up; E0135), wheeled walkers without seats (E0143), commode chairs with fixed arms (E0163), TENS units (2 lead; 0720), TENS units (4 lead; EO730), and vacuum erection systems (L7900). The notice proposes that payment for these items be 80% of the actual charges for the items or the special payment limits established in the proposed rule, whichever is less. HCFA plans to phase in the reductions over a period of two to four years.
In comments submitted to the agency Oct. 12, the Health Industry Distributors Association (HIDA; Alexandria, VA) strongly objected to the agency’s use of Veteran’s Administration (VA) acquisition prices as a basis to determine appropriate Medicare reimbursement amounts. "VA acquisition prices are simply not comparable to suppliers’ acquisition prices for comparable items," argued HIDA. "The VA wholesale acquisition price is based on the government’s ability to negotiate large national contracts with manufacturers."
HIDA also objected to HCFA’s decision to increase VA wholesale prices by 67% to arrive at the proposed payment limits. That 67%, said HIDA, is based on data that HCFA compiles from HCPCS coding recommendations typically submitted by manufacturers. But according to HIDA, manufacturers are not typically in a position to provide accurate estimates of either wholesale or retail prices.
HIDA also objected to the fact that the agency issued the Aug. 13 proposed notice even though HCFA Administrator Nancy Ann DeParle had earlier promised House Ways and Means Health Subcommittee Chairman Bill Thomas (R-CA) that the agency would not proceed with any IR actions until the General Accounting Office (Washington) study he requested on HCFA’s use of IR was complete. Earlier this year, Thomas told DeParle he was concerned with the way HCFA and the durable medical equipment regional carriers (DMERC) derived pricing data for enteral nutrition and five other items. As a result, HCFA was forced to delay proposed IR cuts for those items. DME representatives said they were encouraged after meeting with GAO investigators about the ongoing IR study last summer.
Meanwhile, Thomas is seeking to rein in the expanded IR authority that was granted to HCFA and the DMERCs by the Balanced Budget Act of 1997. Thomas included a provision in the Balanced Budget Refinement Act, passed by his subcommittee last week, that would restrict the agency from using IR authority until the Secretary of Health and Human Services has published proposed and final rules outlining the process for such authority.
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