To view the interim final rule click here.

Apria Says OIG Report Is Just Plain Wrong
LAKE FOREST, Calif.--In a statement issued last Wednesday, Apria Healthcare Group responded to a recent HHS Office of Inspector General report on inhalation drug supplier services, saying the report is "fraught with inadequacies, both in terms of data collected and the study's broad-based erroneous conclusions."

A Sept. 29 OIG report concluded that Medicare beneficiaries of inhalation drug therapies receive few services under the current dispensing fee. CMS is currently reconsidering its dispensing fee for inhalation drugs for 2006 and announced earlier this year it will likely fall below the current $57 per month, or $80 for a 90-day supply (see HomeCare Monday, Aug. 8).

In compiling its report, critics have pointed out that the OIG did not distinguish between managed care and traditional fee-for-service plans in its calculations, which industry advocates have called an "apples-to-oranges" comparison.

"We are extremely disappointed that the OIG disregarded or excluded most of the services necessary to safely and effectively provide home inhalation therapy, before reaching the conclusion that inhalation patients do not receive meaningful services," said Apria CEO Lawrence M. Higby.

The company maintains that the OIG excluded services that represent more than 80 percent of the total costs providers incur to take care of beneficiaries who need inhalation drug therapy. The OIG collected information about a short list of activities instead of conducting a time and motion study or collecting provider cost information, Apria said, which the provider maintains would have given the agency more meaningful data on which to base a decision about any adjustment to the dispensing fee.

"A significant downward adjustment to the dispensing fee in 2006 will leave Apria with no choice but to reevaluate its ability to consider serving Medicare beneficiaries," Higby concluded. The company provides respiratory therapy through more than 500 branches in 50 states.

A recent press release from AAHomecare warned 44 percent of home care pharmacies said they would stop providing the inhalation drugs to Medicare beneficiaries if the dispensing fee is cut significantly.

Citing results of a Muse and Associates survey conducted in August and September, the association said the OIG study "grossly understates the service components of home inhalation drug therapy." Instead, the association said survey results showed the costs of providing a 30-day supply of nebulized drugs is $66.55 and the cost for a 90-day supply was $138.80--meaning that the dispensing fees should actually be raised.

To access a copy of the OIG report, click here.

For more information about the AAHomecare survey, click here.

CMS Establishes New Disaster Code, Modifier
BALTIMORE--A month after Hurricane Katrina hit, CMS has created a new condition code and modifier for disaster-related claims.

The new code and modifier, effective for dates of service on and after Aug. 21, will help facilitate claims processing and track services and items provided to victims of Katrina, as well as future disasters. According to CMS, many of its normal operating procedures have been relaxed to speed the provision of health care services to storm evacuees because many beneficiaries--and providers in host states--have no access to health care records or verification of patient status as Medicare or Medicaid beneficiaries.

The new condition code is DR (Disaster Related), and the new modifier is CR (Catastrophe/Disaster Related).

For physicians or suppliers billing their local carrier or durable medical equipment regional carrier, only the modifier should be reported and not the condition code. CMS has instructed Medicare contractors to recognize the new code and modifier on Oct. 3, if possible, but no later than Oct. 31.

For more information on the new code and modifier, click here.

Provider News
Arcadia Opens HME Stores in Sears
SOUTHFIELD, Mich.--Arcadia Resources opened six Sears Home Health Care centers in the Detroit area last week.

Each center, which operates inside of Sears department stores, includes more than 1,000 products including items such as wheelchairs, scooters, stairway lifts, walkers, orthopedic supports, bathroom safety products and adjustable beds.

Arcadia, a home care mail-order pharmacy, DME supplier and staffing service provider, developed the concept and is responsible for the operation of the centers. Detroit was selected for the launch because it is one of Sears' strongest markets in the United States and has a significant population of active consumers in their late 40s through their 70s and 80s, according to a company release.

"The Sears Home Health Care centers are designed to serve the growing population of adults who are seeking home care solutions that allow them to maintain an active and independent lifestyle," said John Elliott II, chairman and CEO of Arcadia Resources.

In June, Arcadia announced it was expanding its direct-to-consumer marketing with the acquisition of catalog outsourcing and product fulfillment company Rite at Home Healthcare Products, Burr Ridge, Ill. The deal gave Arcadia licensing rights to distribute Sears' Shop at Home catalog of home health and wellness products via direct mail and the Internet. (See HomeCare Monday, June 27, 2005.)

CCS and MP TotalCare Merge
NEW YORK--In a move that company officials tout as creating one of the country's largest providers of direct-to-consumer diabetes medical and other supplies, private equity firm Warburg Pincus has acquired Florida-based providers CCS Medical and MP TotalCare for approximately $630 million.

Warburg Pincus plans to merge the two companies, acquired in separate transactions--$360 million for CCS and $270 million for MP TotalCare--and operate them as CCS Medical.

Company officials said the merger gives CCS Medical a 180-person sales force, which they say will continue to focus on developing and maintaining referral relationships with physicians, diabetes educators and other health care professionals.

CCS Medical, currently headquartered in Clearwater, Fla., with locations in Roanoke, Va.; Pittsburg, Pa.; and Santa Anna, Calif., provides supplies directly to consumers with a portfolio of diabetic supplies, insulin pumps, wound care, urologicals, ostomy, incontinence and respiratory supplies and prescription meds.

MP TotalCare, headquartered in Tampa, Fla., has locations in Columbus, Ohio; Atlanta and Denver and provides diabetes testing, respiratory and other medical supplies. It also provides pharmacy outsourcing services to retail pharmacies, insurance companies and health care service providers.

According to Howard Deutsch, former chairman and CEO of MP TotalCare and new executive chairman of CCS, "The continued rapid growth of chronic conditions in the United States, especially diabetes, coupled with demographic trends and the increasing preference of mail-order fulfillment, make CCS Medical's combined scale, expertise and product breadth a powerful platform for future growth."

A private equity investor since 1971, Warburg Pincus currently has $12 billion under management and an additional $8 billion available for investment in sectors including health care, information and communication technology, financial services, energy, industrial, media and business services and real estate. The company has invested approximately $1.3 billion in 41 health care services companies including Coventry Health Care, Medical Staffing Network, Spheris, Value Health and United HealthCare.

Management Change at Air Products
LEHIGH VALLEY, Pa.--Home care services provider Air Products Healthcare said last week that company CEO Bob Cucuel "has decided to pursue other opportunities outside the company." Cucuel had been with the company since 2002, when it acquired American Homecare Supply, which he founded.

Current COO Dave Hunter took over management of the business, a subsidiary of global gases provider Air Products, effective Oct. 1. Hunter joined Air Products Healthcare in 2002 after 16 years with Air Products and has led the finance, IT and operations functions since joining the U.S. home care business.

Last November, the company acquired $30 million Chicago-area independent Ultra Care, and said it expects to spend $75 million on acquisitions per year, in line with strategy to expand in key regions east of the Mississippi River.

In Brief
Health care spending could increase to more than one-third of the nation's gross domestic product by 2020, according to an Employment Policy Foundation report. Currently, health care spending represents 15 percent of the GDP. The projected increase means health care expenditures could consume $6 trillion annually by 2020, EPF said. Health care costs increased by 8.2 percent in 2004, according to EPF, a rate of increase nearly twice as fast as the overall growth of the economy.

HHS is giving $28.5 million in grants to 17 states for people with disabilities or long-term illnesses, HHS Secretary Michael Leavitt announced. Part of President Bush's 2001 New Freedom Initiative, the grants are intended to help those persons live in their homes and participate in community life. Ten states were granted $1.6 million to establish family run centers that provide information, education and training opportunities and 10 were granted $26.8 million to develop more comprehensive long-term support systems.

HHS Inspector General Daniel R. Levinson said health IT systems show promise in reducing fraud and abuse in federal health programs, and that his office is working to promote the technology. With a stated goal of promoting health IT to make relevant data more accessible to law enforcement agencies, Levinson said the OIG is working with CMS and other agencies to develop Stark exceptions and anti-kickback statute safe harbors to pave the way for investing without funning afoul of laws that prohibit hospitals and other entities from helping finance physicians' health IT endeavors. Other areas OIG will focus on are compliance, Medicaid and the implementation of provisions in the MMA, Levinson said.

AAHomecare is in the process of forming a new council to better represent members who focus on disposable medical supplies. The Medical Supplies Council would include providers of urological, ostomy, diabetic and incontinence supplies, and it would be responsible for defining significant issues for these supplies and services and creating supporting activities to address these concerns. The proposed council will hold its first informational session for members interested in medical supplies issues at Oct. 18 at Medtrade in Atlanta. The meeting will take place on from 4 to 5 p.m. in room B201 of the Georgia World Congress Center.

HomeCare Web Poll
If CMS' dispensing fee for respiratory medications is lowered for 2006, would you continue to serve Medicare beneficiaries? To participate in HomeCare's monthly Web poll, visit www.homecaremag.com.

Visit this week's sponsor at www.remitdata.com.