Oxygen Provider Discusses Problems with Bidding Program in AAHomecare Briefing

June 16, 2008

On Thursday, AAHomecare hosted a media advisory telephone briefing in which the organization discussed the lawsuit and congressional action to delay competitive bidding.

On the call were Tyler Wilson, president and CEO of AAHomecare, and John Reed, executive vice president and COO of PRO2 Respiratory Services, Cincinnati.

Wilson outlined recent legislative action, specifically the introduction of a bill to delay competitive bidding, as well as the inherent problems with competitive bidding. Wilson said, "For many businesses in this sector, losing the ability to provide home medical equipment and services under Medicare is essentially a death knell."

Reed addressed the competitive bidding program from a home care provider's perspective. He cited problems with the program that included a lack of transparency in the bid process and the lack of a definition of clear service standards.

"The new fee schedule reductions will cost a company like mine more than $1.5 million per year in cash," Reed said. "And the average profit margin for a company like mine is well below 10 percent. Imagine your own lifestyle impact if you were putting 8 percent of your salary away in savings, and your employer cut your wages by 35 percent. To put that number in perspective, our company's total paid wages in Cincinnati in 2007 were $1.1 million. If we eliminated every single employee, we'd still need to come up with another $500,000 to break even on these fee schedule cuts. Our company's total purchases for equipment and supplies for the entire year were only $1.8 million. We would need to reduce our purchases by more than 75 percent to break even."

Reed further explained the impact of competitive bidding on beneficiaries, noting that patients would no longer see HME staff, such as respiratory therapists who assess signs and symptoms, relieve fears and educate. "Because of this, we're sure that hospital readmissions will also increase," he said.

Reed predicted a one-day delay for patients being discharged on nights, holidays and weekends, meaning more costs to the Medicare system. He said that with less staff and less overall providers serving the Medicare population, providers will not be available to set up patients being discharged from the hospital in a timely manner.

Another issue is that physicians will have to receive and re-sign physician orders for patient getting supplies from a non-contract supplier. "To put that in perspective, I've got 2,000 active CPAP sleep patients who get all their supplies from me, and the physician will be inundated with orders for things like masks and headgear," Reed says.

One of the most important problems with round one, Reed said, is that the Centers for Medicare & Medicaid Services (CMS) has been slow to provide beneficiary education. "Patients in the last two weeks received grandfathering letters from providers like me," he said. "We sent out more than 2,000 letters to existing patients, explaining that there's a competitive bid program out there, and that there are significant changes that could occur in the Medicare program. We're getting responses back from every patient that they're unaware that this program was occurring and they have questions as to what the program will mean to them."

Addressing winners located outside of the bid area, Reed said, "We believe that the majority of home oxygen winners in Cincinnati serve less than 5 percent of the current patient population. Many of these companies do not yet exist in Cincinnati. And we're now just under three weeks away from implementing this program."

As for providers preparing for the implementation of competitive bidding, Reed says they are not ramping up. "They're preparing to serve patients in this program, but the common theme we've heard is that they will go forth with the least possible cost model and in going forth that way, they are prepared to be snowed under, if you will, if the phones start ringing drastically off the hook," Reed says.

Editor's Note: Laurie Watanabe, editor of Mobility Management, contributed to this report.