Budget a mixed bag for home infusion providers
Long-term effect could depend on your patient mix
Congress’ final budget will obviously impact your Medicare business in the near future, but exactly how will vary drastically from one agency to the next, even among those in the same specialty niche. While the budget was not as bad for home infusion agencies as many had feared, it’s anything but a windfall.
A handful of areas in particular were of major concern to the home infusion industry. Here’s how Congress’ hand finally played out and how it’s likely to affect you:
• Drug reimbursement.
The early indications that drugs furnished on or after Jan. 1, 1998, would be reimbursed at average wholesale price minus 5% proved true, with the average wholesale price being determined "on the basis of commercially available surveys and studies," says Alan Parver, president of the National Alliance for Infusion Therapy in Washington, DC.
Great news for the home infusion industry is that if payment is made to a licensed pharmacy, a dispensing fee will be paid.
"This is a breakthrough in that they are willing to pay for some of the services the pharmacy incurs in providing these drugs," says Parver. "There may be some issues regarding what is a reasonable dispensing fee, but the fact it is recognized in the statute is certainly a step in the right direction."
There is no indication as to what the dispensing fee might be or how such a figure would be arrived at.
"It’s good news, but it will be bad news if the fee comes out to be 50 cents," says Tim Redmon, the director of regulatory affairs for the National Home Infusion Association in Alexandria, VA. "But if they go to the pharmacy associations to find out what the costs are associated with dispensing a drug and come up with a fair and equitable dispensing fee, this is good."
Redmon notes that any impact the budget has on reimbursement for Medicare will eventually trickle down to the private sector.
"As Medicare goes, so goes the rest of the payers, but they never catch up until a year or two out," he says. "They will catch up with any of the freezes and oxygen rates, but because private pay takes one or two years to catch up, the cuts that are going on now are just phase one."
• Competitive bidding.
The good news, as forecast in earlier issues of Home Infusion Therapy Management, is that the budget agreement does not include the Senate’s provision that would have given the Secretary of the Department of Human Health and Services authority to implement competitive bidding for any Part B Medicare services outside of physician services. (See HITM, August 1997, p. 101, and HITM, September 1997, p. 114.) However, the good news could be short-term.
Instead, notes Parver, the budget includes an amendment that allows the Secretary to conduct competitive bidding demonstration projects.
"This opens the door for competitive bidding down the road," he says.
The amendment provides that no more than five such projects in three sites each could be authorized. At least one of the projects would be for oxygen and oxygen equipment. The amendment goes on to state that the results would then be evaluated regarding the "impact of establishing competitive acquisition on Medicare program savings, diversity of product selection, and quality. If the Secretary determines that a demonstration project was successful at the end of the three years, the Secretary could expand bidding on that item to additional sites."
Some skepticism exists
However, some doubt the likelihood of such an expansion.
"If you go out over that three-year period, my belief is you’ll find that the beneficiaries will not be happy with this system," says Redmon. "We won’t know that until we see the results, but it will answer the question of whether it works or not."
A hint may have been given by a similar project that was being run at Palmetto Government Benefit Administration of Columbia, SC. (See HITM , May 1997, p. 57.) According to Redmon, the Health Care Financing Administration (HCFA) ran into freedom of choice difficulties when it realized patients may potentially have to visit numerous suppliers to get all the equipment they need. If a beneficiary requires a bed, oxygen, and a wheelchair and three different providers had the low bids for each, the patient won’t have the luxury of one- or even two-stop shopping.
With the projects under this provision terminating no later than Dec. 31, 2002, Redmon notes that agencies have at least a three-year warning, which is ample time to figure what your costs are in preparation for a competitive bidding environment.
Parver says it is unclear whether parenteral and enteral nutrition (PEN) would be included in any competitive bidding projects.
• Fee schedule.
In the past, PEN was one of the few areas not subject to a fee schedule. Congress’ budget changes that.
Parver notes that the budget requires any fee schedule to be budget-neutral the first year, which prevents across-the-board drastic cuts from current reimbursement levels. After the first year, the fee schedule will be updated annually by the percentage increase in the consumer price index (CPI) for the 12 months preceding June, although the budget notes that no update could occur before 2003 for PEN. Until then, reimbursement for PEN is frozen at 1995 payment levels.
A highlight is that the conferees, in their report designed to give evidence of what Congress’ intent was regarding specific items in the budget, recommend that the Secretary carefully examine the appropriateness of including professional services in the fee schedule and vary the payment by care setting.
"They are addressing some of the issues we’ve raised over the past months and years, which is that PEN is more than the delivery of items and equipment; it also involves professional services," says Parver. However, he cautions against over-optimism.
"This is report language, so it is not binding as a statute, but agencies [such as HCFA] are expected to read the report language very carefully," he says. "We would have preferred to see the language in the statute itself, but the fact Congress is making the point is something we feel HCFA will not ignore or should not ignore."
In July, an Office of Inspector General (OIG) report noted the high reimbursement rates for PEN. Redmon notes that the report didn’t institute the five-year freeze but likely solidified them.
"I think the freeze was coming, but this kind of locked it up," he says. "OIG has always been good at timing, and right before the budget they pull out some of their reports, so this is not surprising; they do this year after year, and that way they get the cuts they want."
• Inherent reasonableness.
The Secretary has the authority to look at current Medicare Part B reimbursement rates and determine if they are "inherently reasonable." The budget gives the Secretary broader authority to adjust reimbursement for services and supplies according to inherently reasonable rates. No particular item or service can be increased or decreased by more than 15% from the preceding year.
"It’s an extraordinary remedy, and it’s not used often," says Parver. "I think one of the intentions behind this provision is to allow HCFA to define a more streamlined process where they could implement these payment changes without as many hurdles to overcome."
• Oxygen.
Home infusion agencies that deal in oxygen could be in trouble. Although the proposed 40% cut was reduced to 25% for 1998 and 30% for 1999, that’s not the worst news.
According to Redmon, the Secretary has the authority to pay less for concentrators than what is paid for liquid or gas, as long as the total paid out for oxygen is budget neutral.
"That came about because concentrators cost less to produce oxygen than the gas and liquid because the latter have delivery costs associated with them that the concentrators don’t have," says Redmon. "They’re saying that it costs more on one side so they’ll pay more, but the concentrators don’t cost as much so they’ll pay less."
Depending on your patient mix, those supplying oxygen primarily through concentrators could take a hit. But with the above reimbursement plan, providers figure to begin leaning towards liquid and gas oxygen.
"It all goes back to the prescribing physician and if agencies can get them to prescribe liquid or gas if it’s at a higher rate," says Redmon. "The speculation is it will be higher for the gas/liquid end than the concentrator, but we don’t know what the percentage will be. Will it make it worth it? It depends on what kinds of numbers HCFA comes up with, and for the Secretary to establish this could be a year-long process."
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