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Ready, Set, Wait Some More: CMS Releases Proposed NCB Rule
WASHINGTON--After months of speculation and if-then scenarios, the waiting for HME industry stakeholders continues. In its Notice of Proposed Rulemaking on Medicare competitive bidding, published in this morning's Federal Register, CMS did answer some questions on how it intends to implement the DME bidding program, set to begin in 2007.

But the 203-page document still does not identify exactly which products will be included in the bid or name the 10 cities where it will be phased in next year.

The Medicare Modernization Act of 2003 mandates DME competitive bidding to begin in 10 of the nation's largest metropolitan statistical areas in 2007 and expand to 80 MSAs in 2009, after which the government has the authority to expand the program nationwide.

Though the 10 initial cities were not named, CMS did publish a formula detailing how they will be selected. Factors include the total population in an area, total Medicare DMEPOS spending in the area, per beneficiary spending and the number of suppliers per beneficiary. The rule also proposes excluding New York, Los Angeles and Chicago--the three largest MSAs in the country--to allow the agency more time to gain experience with the bidding program, and selecting no more than two cities from each state.

"After we have gained experience operating competitive bidding programs in [areas] that encompass smaller MSAs in 2007 and 2008, we would propose to implement programs that include" the three cities, the rule said. CMS conducted competitive bidding demonstrations in Polk County, Fla., and San Antonio, Texas, from 1999 to 2002.

Based on CMS' proposed formula, the cities that would be up for bid using 2003 data would be Miami; Riverside, Calif.; Pittsburgh; Cincinnati; Houston; Dallas; Charlotte, N.C.; Orlando, Fla.; San Juan, Puerto Rico; and Atlanta. Other top MSAs based on CMS' formula include San Antonio, Texas; Tampa, Fla.; Kansas City, Mo.; Virginia Beach, Va.; St. Louis; San Francisco; Cleveland; Detroit; Baltimore; Philadelphia; Washington, D.C.; and Boston.

However, CMS said, the actual cities will be selected using 2005 data--which has yet to be published.

CMS also does not say what products would be put up for bid, although the rule does propose selecting products based on potential savings. It also proposes grouping similar items into product categories, such as hospital beds and accessories, so that beneficiaries would be able to get all related items in that category from one supplier. The agency will identify the top 20 product categories in terms of total Medicare spending from which to choose items for the first phase of the program. The bid items also may vary by competitive bidding areas, CMS said.

The proposed rule includes a complex formula for evaluating supplier bids based on the total capacity needed to meet Medicare demand in the area, with winners chosen based on the weighted median of the bids that are submitted. CMS would use the bids submitted to set Medicare payment amounts, which would be the median of the winning suppliers' bids. According to the proposal, suppliers whose bids are lower than the payment amount set under the bidding program could offer a rebate to beneficiaries.

To participate in the Medicare bidding program, suppliers must be accredited by a CMS-approved accreditation organization to ensure they meet applicable quality standards. CMS is expected to issue those standards this spring and, at some point after that, to name approved accreditors.

The proposed rule also provides what CMS calls "an opportunity to develop a network to collectively bid to furnish items included in a product category ... [that] would provide important assistance to small suppliers." And the agency proposes a grandfather provision to allow suppliers that are not bid winners to continue to serve their existing customers.

The agency contends that, within five years, its DMEPOS competitive bidding program will save $1 billion annually. Because prices would be lower under competition, the agency says, the program also would reduce co-payments and cut beneficiaries' out-of-pocket costs.

"We intend to implement these DME competitive reforms to get savings for beneficiaries and taxpayers, while maintaining and improving quality," said CMS Administrator Mark McClellan. "This is another way in which Medicare is now using competition to bring lower-cost, up-to-date care to our beneficiaries."

CMS said it is seeking comments on a number of key elements of the competitive bidding program, including:

• the proposed methodology for selecting the 10 MSAs for 2007;
• alternatives to defining competitive bidding areas;
• the proposed methodologies for determining whether an area within an urban area that has a low population density is not competitive;
• standards for exempting particular rural areas from competitive bidding;
• methodologies for setting the single payment amount;
• the proposed approach for calculating market demand and estimating supplier capacity;
• best method of weighting individual items within a product category to determine the composite bid;
• financial standards evaluation criteria and required documentation;
• additional options to ensure that small suppliers have opportunities to be considered for participation in the program;
• a process to determine items and/or HCPCS codes for identifying off-the-shelf orthotics subject to competitive bidding;
• the proposed rebate process outlined and how to handle those cases in which the rebates would exceed the co-payment amount.

More Questions than Answers in Proposed Rule, HME Stakeholders Say
ATLANTA--Industry stakeholders contacted by HomeCare Monday about CMS' proposed competitive bidding rule had a mixed response. Some said the rule contains unexpected details and others said it includes some surprises--but almost all said they simply need more answers.

"Two hundred and three pages and we still don't have those really critical facts known," said Miriam Lieber of Lieber Consulting, Sherman Oaks, Calif., referring to the lack of finalization of which cities and what products will be included in the initial bidding program. "Leaving so many variables undone makes it very difficult for people to plan."

"Under the category of surprises," according to Wallace Weeks of Weeks Group, Melbourne, Fla., among other things there are "the addition of a nationwide mail order competition, grandfathering, the undeveloped financial standards, a rebate program and allowing a physician to prescribe the brand, or mode of delivery."

And according to The Med Group's Don Clayback, vice president, networks, "you still have the big issues" of how CMS will calculate savings, how the agency will make sure there's a sufficient number of suppliers to meet the needs of the community, and "how the beneficiaries are going to make out at the end of this."

Said Clayback, "There is still the challenge of how you are going to prevent beneficiaries from having to deal with two or three companies for the same treatment: If someone needs a hospital bed, a wheelchair and a concentrator, theoretically they could have to deal with three different companies for that. And how that benefits the beneficiary, I'm kind of missing that point."

Additional comments from Lieber, Clayback and others, follow:

"My initial impression is that it left more questions than it answered, because the MSAs aren't identified, and the product categories aren't identified. It sounds like most of the information is going to be in the request for the bid."
--Sharon Hildebrandt, executive director, National Coalition for Assistive and Rehab Technology, Washington, D.C.

"I was not surprised that the NPRM did not identify the MSAs or the product categories subject to competitive bidding, but I was concerned about the methodology for picking the winning bid. CMS plans to determine how many suppliers it needs to meet the market capacity for the MSA and use that number to establish the cutoff for the winning bid. This has the potential to establish a winning bid cutoff that is lower than the mean or the median of all the bids."
--Asela Cuervo, Law Offices of Asela Cuervo, Washington, D.C.

"Unfortunately, there is still so much we do not know. We all know the genie is out of the bottle, but we don't know whose wish will be granted. As for me, I just do not believe the savings are there. It is going to be a monster to administer, and I think costly as well. At any rate, the time is over for complaining. Competitive bidding is coming, and we are going to have to figure out how to not only survive but to thrive."
--Mike Norby, senior vice president, medical sales, Mabis Healthcare/Duro-Med Industries, Waukegan, Ill.

"I am running the business as if we will be in the first round in 2007. I have had this approach since 2003 when the [Medicare Modernization Act] became law. My ongoing focus is to be the leanest and most efficient supplier in the area, while continuing to offer the best solutions for the right customer. I am also looking at ways to diversify my payer mix, including adding more cash sales. The HME business for me is a daily evolution."
--Cliff Woolard, president and CEO, Home Med-Equip Co., Concord, Calif.

"First, there is some definitive discussion about the use of gap-filling being used as part of the pricing strategy. With all the problems we have experienced historically and the ongoing discussions we have had with CMS, any use of gap-filling is likely to create some pricing aberrations that will be problematic for suppliers of those products."
--Tim Pontius, former chairman of AAHomecare and president, Young Medical, Maumee, Ohio

"As a card-carrying Medicare beneficiary who happens to know a little bit about the HME industry, I am frightened beyond measure at the idea that the oxygen therapy that allows me to enjoy life itself, the rehab technology that enables me to participate in life and community, and the ostomy supplies that help prevent life-threatening infections could all be supplied by the 'lowest bidders.'

"Knowing that something came from the lowest bidder would make me wonder what was compromised to enable them to reduce costs and still make profits. Are the equipment and supplies up to conventional standards? Has the time between delivery and expiration date for certain supplies been shortened? Are the people involved in providing important ancillary services properly trained? Can I be confident that the 'lowest bidder' will still be in business or, am I going to call for help only to find out 'the number you have reached is no longer in service?' Is the equipment provided what my physician prescribed or is it an item or items contained on the limited formulary the low bidder used to secure the Medicare contract?

"Reading that 200-plus pages of the NPRM provides no comfort that these questions have been asked, much less that CMS knows the answers."
--David T. Williams, former director of government relations for Invacare Corp. and industry consultant, Amherst, Ohio

"When you look at the methodologies that they're using to determine the items that will ultimately be included, I think it's really imperative that they use the latest available data possible just due to all the changes that this industry's been through since the MMA. Otherwise, they're really not going to have any reasonable data that's going to allow them to appropriately determine what products could potentially save additional money.

"We've had the FEHBP reductions, we've had a freeze in the updates, and the coding and payment initiatives that have been moving forward for other items are going to require CMS to look at all of those factors prior to determining what items should be included in competitive bidding and what savings--if any--could actually be achieved by including those items in a competitive bidding environment."
--Seth Johnson, vice president of government affairs, Pride Mobility Products, Exeter, Pa.

"We definitely need expert defending since what is actually a service industry is now being defined and described as a product industry. The hours we work, the diagnoses we work with and community/patient issues we deal with are not product-related.

"Will manufacturers one day be bidding on how well they can make a quality product at the lowest price ever? I am concerned that home care providers are being asked to make a bid that encompasses analyzing so many variables out of their control ... Can we control shipping costs, gas costs and manufacturing costs? Or how about providing health insurance to our employees? This must become a political issue, not just a bidding issue."
--Louis Feuer, president, Dynamic Seminars & Consulting, Pembroke Pines, Fla.

"Two hundred and three pages and we still don't have those really critical facts known. Leaving so many variables undone makes it very difficult for people to plan.

"Nonetheless, it looks like people need to gear up for giving it their best shot in terms of what kind of bid they would be able to do. Even if you're in New York, Chicago or L.A., it sounds like you should still continue to prepare because at some point they could find a way to carve back in some portions of these cities."
--Miriam Lieber, president, Lieber Consulting, Sherman Oaks, Calif.

"I believe it is good that they are excluding the three top MSAs and admitting that it would be difficult to administer the program in the largest population areas without first gaining additional experience. They propose criteria for selecting products that will be mostly cost-driven. It is important for providers to understand what services will be required, and that will not be known until the standards are released.

"They describe they will select the winning bidder on the weighted median of the bids, and this will remove some of the extreme outlier bids. There is some discussion about the need to give a grace period for providers who are not accredited and want to bid, but there is not a lot of detail on that or how they will grandfather those that are accredited.

"Overall, there is still a good deal of work that needs to be done."
--Thomas Ryan, AAHomecare chairman and president and CEO, Homecare Concepts, Farmingdale, N.Y.

"It's depressing reading it. It's depressing because they reiterate 'the greatest savings potential.' Every decision CMS is making is predicated on that principle."
--Cara Bachenheimer, vice president, government relations, Invacare Corp., Elyria, Ohio

"You still have the big issues: How are you going to estimate the savings? How are you going to make sure there is a sufficient quantity of suppliers to meet the needs of the community, and how the beneficiaries are going to make out at the end of this?

"There is still the challenge of how you are going to prevent beneficiaries from having to deal with two or three companies for the same treatment: If someone needs a hospital bed, a wheelchair and a concentrator, theoretically they could have to deal with three different companies for that. And how that benefits the beneficiary, I'm kind of missing that point. And then you tack that onto how much savings the government is really going to get. CMS is saying they want to have savings, but I think they need to have some formalized way of calculating those. CMS is also saying that their concern is to make sure of the welfare of the beneficiaries, but the [quality] standards have not been published yet and they're talking about a grace period for suppliers, so they may be including in the winning bids suppliers who have not yet been accredited.

"I think it gets to the point that this thing is moving way too quickly. CMS is already 18 months behind their original timeline. If the real concern is to implement this in a rational and logical way to minimize inconvenience to the Medicare beneficiary, they're really not going at it that way."
--Don Clayback, senior vice president, networks, The Med Group, Lubbock, Texas

Hobson-Tanner Bill Tops 100 Co-Sponsors
WASHINGTON--The Hobson-Tanner Bill is now up to 101 co-sponsors in the House of Representatives, enough to introduce a Senate companion bill, observers say.

The bill, officially known as H.R. 3559, was introduced in the House last summer in an effort to soften the blow of DME competitive bidding (see HomeCare Monday, Aug. 1, 2005).

"Our goal is to ensure that the Hobson-Tanner Bill becomes law because it is in the best interest of all HME, mobility and rehab providers," said Scott Meuser, CEO of Pride Mobility Products, Exeter, Pa. In conjunction with the American Association for Homecare and state associations, the company has conducted more than 225 meetings in 35 states to educate legislators on the measure, the manufacturer said.

But Washington insiders say topping the 100 co-sponsor mark and getting a companion bill in the Senate is only half the battle--at least 200 co-sponsors in the House will be needed to get the proposed legislation passed.

The text of H.R. 3559 is available at http://thomas.loc.gov. To find out whether your state's representatives have signed on, visit www.aahomecare.org for a list of current co-sponsors.

CMS Issues Provider Education Document on DRA
BALTIMORE--CMS has published a provider education document about the changes in Medicare payment for home oxygen equipment and other DME capped rentals based on the Deficit Reduction Act.

The DRA, signed into law in February, caps rental of home oxygen equipment at 36 months, then transfers equipment ownership to the beneficiary. The law also reduces the rental cap of certain other DME items from 15 to 13 months (see HomeCare Monday, Jan. 9). Both provisions are effective Jan. 1, 2006. Capped rental items furnished before that date will continue to be paid under current rules prior to the DRA changes, according to the CMS transmittal.

Regarding payment for oxygen and oxygen equipment, according to the document released Friday, the 36-month cap applies to all claims for the following HCPCS codes:

E0424-stationary gaseous oxygen system
E0431-portable gaseous oxygen system
E0434-portable liquid oxygen system
E0439-stationary liquid oxygen system
E1390-oxygen concentrator, single delivery port
E1391-oxygen concentrator, dual delivery port
E1392-portable oxygen concentrator
E1405-oxygen and water vapor enriching system with heated delivery
E1406-oxygen and water vapor enriching system without heated delivery

On the first day after the month for which the 36th monthly payment is made, the supplier must transfer title for the stationary and/or portable oxygen equipment to the beneficiary. On the same day as the title transfer, monthly payments can begin for oxygen contents used with patient-owned gas and liquid oxygen equipment, CMS said.

The HCPCs codes for oxygen contents are:

E0441-Stationary gaseous contents used with patient owned gaseous stationary system
E0442-Stationary liquid contents used with patient owned liquid stationary system
E0443-Portable gaseous contents used with patient owned gaseous portable system
E0444-Portable liquid contents used with patient owned liquid portable system

Medicare also will continue to pay for "reasonable and necessary maintenance and servicing" of beneficiary-owned equipment--including oxygen concentrators--the document said. This includes parts and labor not covered by a supplier's or manufacturer's warranty. The 36-month count begins on Jan. 1, 2006, for beneficiaries who were already receiving oxygen prior to that date; any months before January 2006 won't be included in the count.

Regarding other DME capped rental items, since 1991, suppliers have been required to offer beneficiaries the option of taking over ownership after 15 months of continuous use. In addition, suppliers have been required to give beneficiaries the option of obtaining power wheelchairs on a lump sum purchase basis. That lump sum purchase option is unchanged by the DRA's new 13-month rental cap for other DME. "However," the document said, "in those cases where a beneficiary does not elect this option, the new rules regarding transfer of ownership also apply to power wheelchairs for which the first rental month occurs on or after Jan. 1, 2006."

Effective for other capped rental items for which the first rental month is on or after Jan. 1, 2006, suppliers must transfer title to the beneficiary on the first day after the 13th continuous month of use during which payment is made.

Additional program billing and claims processing instructions will be issued later this year, the agency said. For now, CMS said, providers should continue to use the KH, KI and KJ modifiers as previously instructed for capped rental DME. These modifiers do not need to be submitted on claims for oxygen and oxygen equipment. Providers also should continue to use the BP, BR and BU modifiers as previously instructed for capped rental periods that began before Jan. 1, 2006.

To view the CMS transmittal, click here.

Judge: Physician Convicted in Power Chair Scam Can't Be Called 'Doctor'
HOUSTON--A Houston physician sentenced to 10 years in prison for Medicare fraud was told by a federal judge that she could no longer be called a doctor--and must correct anyone who calls her one.

Callie Hall Herpin, 35, pleaded guilty last year to conspiring to defraud Medicare of more than $30 million for participating in a power wheelchair scam and distributing drugs illegally.

"I consider you a disgrace to every physician in this country who adheres to the ethics of the medical profession and to the Hippocratic oath," U.S. District Judge David Hittner told Herpin at the sentencing Wednesday, the Houston Chronicle reported. Hittner said Herpin could not use the titles 'doctor' or 'M.D.' until her license is reinstated.

Hittner also said he would have sentenced Herpin to 17 more years if she had not entered into a plea agreement that limited her sentence to a maximum of 10 years.

Herpin was described as "the apex of the pyramid of illegal conduct" in the wheelchair scam that plagued the Houston area in 2002-2003, according to a statement from the U.S. Attorney's Office, Southern District of Texas.

According to the statement, Herpin and her officer manager, Etta Mae Williams, sold certificates of medical necessity and prescriptions for power wheelchairs and other durable medical equipment to certain marketers and DME suppliers for about $200 each. They wrote at least 920 fraudulent power wheelchair CMNs and prescriptions for some $184,000.

Prosecutors said Herpin admitted she did not examine all of the patients to determine their eligibility for a power wheelchair and most, if not all, of her "patients" were not eligible. In many instances, the marketers brought copies of the Medicare beneficiaries' drivers' license and Medicare card to Herpin and Williams, who used the information to produce the fraudulent CMNs. Various DME suppliers then used the fraudulent CMNs generated by Williams and Herpin to bill Medicare in excess of $30 million.

Herpin also was sentenced for her involvement in a second conspiracy with Williams in which they sold prescriptions for controlled substances, including hydrocodone products and codeine cough syrup, for cash.

As part of her sentence, Herpin was ordered to pay in excess of $12 million in restitution to Medicare. She also will forfeit $1.88 million in proceeds generated from her illegal conduct, and serve a three-year period of supervised release following the completion of her prison term.

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