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Headline News
Industry Rallies against New Threat to Home Oxygen
WASHINGTON--Home oxygen providers braced for another body blow last week when the House of Representatives passed the Children's Health and Medicare Protection Act (H.R. 3162), which includes an 18-month cap for oxygen rental as a means of paying for the $50 billion bill.

In a vote of 225-204, on Wednesday the House approved what is known as the CHAMP Act, which provides medical coverage for uninsured children under the State Children's Health Insurance Program and eliminates most of a 10 percent physicians' reimbursement cut set to take effect in 2008. The bill, which also eliminates the first-month purchase option for power wheelchairs, would be funded through a tax increase for cigarettes and a series of payment cuts to Medicare Advantage plans and health care providers.

The House action preceded by a day the Senate's passage of its version of an SCHIP expansion. That $35 billion package reauthorizes the program--which is set to expire Sept. 30--and would be paid for largely by a cigarette tax increase. The Senate bill does not include the DME cuts.

Representatives from the House and the Senate must hammer out a compromise once Congress returns from its August recess. While President Bush has said he will likely veto the legislation, stakeholders are hopeful the HME industry can put forth enough effort to keep the oxygen and PWC provisions from appearing in the compromise bill before it is sent to his desk.

"We think we have a very good shot at getting oxygen and power wheelchairs out of it," said Cara Bachenheimer, vice president, government relations, for Elyria, Ohio-based Invacare. "And there is a huge question if they can come up with a compromise package the president will sign."

However, Bachenheimer continued, it is "critical" that providers spend August communicating with their legislators about the provisions. "We have a lot of support, but we need people to be educated about these issues," she said.

"I don't think by any stretch of the imagination that the battle is lost here," said Joe Priest, president and COO for AirSep, Buffalo, N.Y. Priest also appealed to providers to contact their federal legislators about the issue. "There is time, but ... you need to voice your concerns through your [representatives] and your senators, and that can make a huge impact."

Although a 13-month oxygen cap surfaced earlier this year in President Bush's 2008 budget proposal, the industry had not expected the oxygen and PWC cuts to be included in the SCHIP legislation. According to Bachenheimer, the provisions weren't in the House bill "until the 11th hour ... but then they said, 'We need some way to pay for this gigantic package, so everyone is going to pay.' Virtually every provider has some cuts in there."

Legislators, bound by law to provide a means to pay for the cost of the expanded children's coverage, focused at first on raising tobacco taxes and initially proposed a 61-cent tax increase on cigarette sales. The Senate version of the bill, in fact, would be funded by that tax. But in the end, House lawmakers declined to raise the tax more than 45 cents a pack--and homed in instead on Medicare reimbursements.

The Congressional Budget Office has estimated that eliminating the PWC first-month purchase option would save $600 million over five years and $900 million over 10 years. Lowering the oxygen rental cap from 36 to 18 months would save $1.8 billion over five years and as much as $6 billion in 10 years.

"If [this oxygen cap] ends up going through," Priest said, "I think the real detriment will be to the patient. This is a huge reduction in reimbursement. For [providers] to continue to provide equipment, they are going to have to drive every nickel of service out of this. You are virtually going to drop off the equipment and go."

That would, Priest predicted, prompt escalating hospital readmissions and trips to the emergency room.

While Bachenheimer said nothing can be certain about the bill's outcome, she noted increasing support for the industry in the halls of Congress and said HME has allies in the Senate who oppose the home care cuts. She pointed to a July 27 letter from Sen. George Voinovich, R-Ohio, to Senate Finance Committee Chairman Max Baucus, D-Mont., in which he wrote of his opposition "to further cuts in the Medicare DME and oxygen benefit."

Bachenheimer also pointed out that new oxygen equipment technology has consistently been exempted from competitive bidding and the 36-month cap as well as the House version of the CHAMP Act. But the industry--everyone in it--needs to step up efforts to educate legislators and CMS about HME, she said.

"People have to take the future of this industry into their own hands," Bachenheimer stated.

"It's practically a textbook example of irony that Congress would cut a break for tobacco while cutting back on home oxygen therapy for the older Americans who depend on it," commented Michael Reinemer, vice president, communications and policy, for the American Association for Homecare.

"Everyone favors health insurance for children. But it's a needless and shameful trade-off to attack oxygen and power wheelchair benefits again to expand health insurance for kids. In the days and weeks ahead," Reinemer continued, "we hope providers will join a state-by-state, district-by-district effort to make sure that these provisions do not make their way into a bill presented to the president."

To view the full text of the House of Representatives' CHAMP bill, click here.

CHAMP Act's Cuts Draw Strong Response; AARP Is Unexpected HME Foe
ATLANTA--News of the so-called CHAMP Act's oxygen and power wheelchair provisions--legislation proposed in the House of Representatives that would reduce the 36-month oxygen rental cap to 18 months and eliminate the first-month purchase option for power wheelchairs--spurred a number of industry stakeholders into action last week.

The Council for Quality Respiratory Care, a coalition of 11 key manufacturers and providers, fired off a letter to House Speaker Nancy Pelosi, D-Calif., and Minority Leader John Boehner, R-Ohio, in hopes of keeping the oxygen provision out of the bill, which is designed to expand the State Children's Health Insurance Program.

"Proposals to cap Medicare payments for vital home oxygen therapy at 18 months would severely impair the provider community's ability to ensure access to quality home oxygen services," CQRC said in the letter. "Of the more than one million frail and vulnerable beneficiaries currently relying on oxygen therapy in their homes, 35 percent will feel the direct, damaging and potentially irreversible effects of such profound cuts in this critical benefit."

The letter also noted the "sweeping changes to the home oxygen benefit" via the Medicare Modernization Act, which mandated competitive bidding, and the Deficit Reduction Act, which mandated the 36-month cap, both of which are in the process of being implemented. New studies show those actions will slice reimbursement by about 19 percent, according to the group, which includes Air Products Healthcare, AirSep, American HomePatient, Apria, DeVilbiss Healthcare, Invacare, Lincare, Pacific Pulmonary Services, Praxair, Respironics and Rotech.

"We are deeply concerned that further changes in Medicare's payment structure or reducing funding for home oxygen at this time would deal a devastating blow to providers and the patients who rely on their care," the CQRC said.

The letter was also signed by the American Association for Homecare and advocacy groups including the Coalition for Pulmonary Fibrosis, COPD Alert-National Patient Support and Advocacy Group and the National Emphysema/COPD Association.

Wayne Knewasser, vice president of public relations and government affairs for Premier HomeCare, Louisville, Ky., and AAHomecare secretary, said when he first became aware of the bill's oxygen and power wheelchair provisions, he put 25 to 30 of his employees on the phones to the offices of legislators to make them aware of the ramifications."

AAHomecare, Waterloo, Iowa-based buying group VGM and the Georgia Association of Medical Equipment Suppliers, to name a few, all sent members a call to action encouraging them to reach their legislators.

But their efforts were tripped up, in part, by the AARP, which has long been considered a friend to Medicare beneficiaries. The mighty organization for seniors championed passage of the House bill and said it will continue to press Congress to make the CHAMP Act a reality.

"The AARP and other groups are talking so positively about this legislation and they are not identifying the group of beneficiaries that use oxygen and power mobility. Why are they not defending these beneficiaries?" asked Knewasser. "You can agree that the SCHIP program is a beneficial program for the health and welfare of the children, but you can also disagree with [how they plan to pay for it]."

Instead of funding the SCHIP expansion completely through an increase in cigarette taxes, House members elected instead to cut reimbursements for DME. "It's just a crazy thing to think that the tax on cigarettes is being held back in exchange for oxygen reimbursement," Knewasser said.

The AARP's stance on the issue needs to be addressed, and now is the time for providers to muster their muscle and make the issues known not only to legislators but to beneficiaries as well, he said. "We need to let the beneficiaries know that these groups are not truly representing everybody," said Knewasser, adding that he has already alerted a Medicare advocacy group for beneficiaries about the issue.

According to one GAMES member, "If we can sufficiently convince [AARP] of the harmful consequences to their members, then they would have to swing into action (or risk advocating for 'Americans of all generations' at the expense of their own members, which would be contrary to their explicit priorities). AARP will be either a strong ally or a strong foe. I think they typically will be one of our strongest allies, unless they misunderstand the issues--as is apparently the case here."

For the full text of the CQRC's letter to Congress, click here.

To read an AARP press release in support of the CHAMP Act, click here.

To contact AARP about the CHAMP Act, call Nora Super, senior legislative rep, at (202) 434-3770.

Oxygen Service Study Proposed in House Bill
WASHINGTON--While the Children's Health and Medicare Protection Act (H.R. 3162) passed by the House of Representatives last week contains home oxygen and power wheelchair cuts, it also includes one provision that would be favorable for HME, according to Cara Bachenheimer, vice president, government relations, for Elyria, Ohio-based Invacare.

Bachenheimer pointed out that the CHAMP Act contains a provision for a study to understand the service component that oxygen suppliers provide. The study would be carried out by the Department of Health and Human Services and would be due to Congress 18 months after the law is passed. The study would consider:

--Types of services provided;
--Which services are medically necessary or can contribute to better outcomes; and
--How much Medicare should be paying for services and medical equipment.

The HHS secretary would also be directed to compare payment rates to competitive bidding rates to show how much Medicare should pay, Bachenheimer said, and also to recommend whether Medicare should pay separately for service.

Results of a study commissioned by the American Association for Homecare in 2006, which was conducted by research firm Morrison Informatics, showed that 72 percent of providers' costs in supplying home oxygen go to services and related expenses while equipment represents only 28 percent. (See HomeCare Monday, July 10, 2006.)

The service issue in providing home oxygen therapy has long been "nebulous," Bachenheimer said. It is unclear what services are important and what CMS expects. The proposed study would provide critical information for CMS as well as guidance for providers.

"We need to have that study," Bachenheimer said. "We have industry studies and that is great, but the government will never look at those studies and say, 'You are absolutely right.'"

To download a PDF of the Morrison Informatics study, click here.

Bond Requirement Would Likely Hurt Small Providers, Observers Say
BALTIMORE--It was a case of déjà vu for many in the industry last week when HHS announced a proposed rule that would require all DMEPOS providers to supply CMS with a $65,000 surety bond (see HomeCare Monday, July 30).

In 1997, the Balanced Budget Act mandated that providers obtain a $50,000 surety bond as a condition of Medicare enrollment. The next year, CMS--then called the Health Care Financing Administration--published a proposed rule that included the requirement, but it was never finalized.

The bond was, and is, intended to curb fraud. So, will it? Stakeholder opinions are mixed.

"It will combat some fraud, [but] it's not the only thing that anyone who wants to eliminate or reduce fraud needs to rely on," said HME consultant Wallace Weeks, president of Weeks Group in Melbourne, Fla. In the proposal's favor, he said, many potential scammers would likely give up from the get-go just because the requirement is in place.

If sham companies are under-reporting income and showing little, if any, profit, Weeks said, that ultimately weakens their financial position and, thus, their ability to buy a bond.

"At a minimum, it will raise their premium and, at the worst, make them uninsurable," Weeks said. He estimated that a surety bond premium would be $3,000 to $6,000 a year, "so I think the majority of suppliers can handle it. Those that can't are going to be companies who have such a bad financial position that an insurance company will not write the bond."

Meanwhile, VGM President Ron Bendell said the bond requirement could force some providers out of the business, "so that could reach some potential for fraud, but I think those that are going to commit fraud are going to be able to get past this hurdle also."

Raul Lopez, director of operations for Bayshore Dura Medical, Miami Lakes, Fla., and president of the Florida Association of Medical Equipment Services, was also uncertain the requirement would be effective against fraud. "I don't know that it would be a deterrent, because anybody who wants to get into the business to commit fraud will spend whatever they need to when they think there's a huge payout at the end," Lopez said.

In Florida, providers who do business with Medicaid are already required to have a surety bond. One question Lopez had was whether those companies would be required to get an additional bond for Medicare. If so, "you're hitting the Medicaid provider twice in the pocket," he noted.

The majority of FAMES members--80 to 85 percent--do not do Medicaid business, he said, so getting a bond would be new for them. The added cost will be a factor for providers vying to participate in competitive bidding, but even for those that aren't, it's an added expense to other constantly mounting costs--gas, vehicle insurance, rent, utilities.

"Our expenses continue to go up, but our reimbursement either stays the same or, in some cases, reduces," Lopez said. "We don't get to increase our fees because of gas price increases, unlike every other industry, so it's going to be a pain for some people."

"I think it is one of those things we are going to have to swallow," said David Petsch, president of Petsch Respiratory Services in Martinez, Ga. However, while the price is "a little high," he noted, "there is nothing unreasonable about it. I would support it to add to our industry's image to fight fraud and abuse."

"We have all heard it before, and were prepared to deal with it then," said Todd Tyson of Norcross, Ga.-based Hi-Tech Healthcare. "It is an additional expense, but not an unrealistic one. The big issue before was finding someone to write the surety bonds, but there are companies that will provide bonds now."

"I think CMS needs to sit back and make a plan," said Kim Brummett, vice president of reimbursement for Advanced Home Care in Greensboro, N.C. "We have competitive bidding, accreditation, re-enrolling two large areas in Miami and L.A. and now this. Seems like they are throwing ideas out one on top of the other [and] not all are needed."

The ultimate consequence, according to Miriam Lieber of Lieber Consulting, Sherman Oaks, Calif., may be the loss of small providers. With the cost of the surety bond on top of costs for accreditation, Lieber said, some providers might "truly have to evaluate the additional financial burden.

"This may become the last straw for many small providers who finally decide to exit the HME market, particularly small pharmacy HME owners," she said.

VGM's Bendell made a similar assessment.

"It's a further cost being borne by smaller suppliers that I'm not so sure they can handle," Bendell said. "With accreditation and everything else that's going on, this is just another added cost to the whole industry--when they're looking to further cut reimbursement."

To view the proposed rule, which includes instructions for submitting comments, click here. Comments on the rule must be submitted no later than 5 p.m. on Oct. 1, 2007.

To view the probe results in full, click here.

Letco Companies Acquired by Harvard Drug Group
PITTSBURGH--In a deal announced Friday by merger-and-acquisition firm The Braff Group, pharmacy specialists The Letco Companies has been acquired by The Harvard Drug Group, a portfolio company of H.I.G. Capital, a Miami-based private equity group. Braff initiated the transaction.

Founded more than 20 years ago, Decatur, Ala.-based Letco provides turnkey solutions for pharmacies worldwide, specializing in respiratory and compounded, customized medications, as well as technology-driven diagnostics. The company offers a suite of pharmacy operations consulting, compounding chemicals, equipment and supplies, pre-mix medications and industrial facilities equipment.

Additionally, the firm is recognized as a developer of technology designed to improve efficiencies in both durable medical equipment and pharmacy operations. In particular, Letco developed the Instant Diagnostics System, which facilitates the qualification of patients requiring oxygen therapy nationwide.

The company also offers chemicals, training and technical support for compounding pharmacists.

According to the announcement, since 2004, Letco has posted an annual compound growth rate of more than 66 percent. Mickey Letson, one of the company principals, will continue to lead the company as an executive and new shareholder of Harvard Drug, the second-largest distributor of generic drugs in the United States. Based in Livonia, Mich., the company supplies generic and branded drugs to more than 6,700 retail customers, including independent, regional and national pharmacies. Its institutional customers include hospital central-purchasing agents, long-term care facilities and government clients.

"The acquisition of Letco not only adds branded and generic respiratory medications to Harvard Drug's array of product offerings, but it also opens up new distribution channels for its products and services," said Chuck Gaetano, managing director for Braff. "Moreover, with Mickey Letson's continued involvement, the company adds an experienced, visionary leader to its management team."

Terms of the deal were not disclosed.

H.I.G., which acquired a stake in Harvard Drug in January, has numerous other health care holdings including Accupac, Align Networks, APS Healthcare, Gould & Lamb, HealthStar, JC Nationwide and MSC. The investment firm has more than $4 billion of equity capital under management.

Joint Commission Names New President, Home Care Accreditation Execs
OAKBROOK TERRACE, Ill.--A New York physician with a strong track record in patient safety and quality improvement in medical care will take the reins as president of The Joint Commission, the accrediting organization announced last week.

Mark R. Chassin, M.D., M.P.P., M.P.H., will assume his new duties Jan. 1. He is currently the Edmond A. Guggenheim professor of health policy and chairman of the department of health policy at Mount Sinai School of Medicine, as well as the executive vice president for excellence in patient care at the Mount Sinai Medical Center.

Chassin succeeds Dennis O'Leary, M.D., who has been at the organization's helm for 21 years. O'Leary will continue in his role until the end of the year before becoming President Emeritus in 2008.

Chassin isn't the only change to The Joint Commission's roster of executives. Also last week, the accreditor named Debra Zak, Ph.D., R.N., as executive director of its home care accreditation program and promoted Robert Floro, R.R.T., to director.

In announcing the changes, the commission said both Zak and Floro bring broad experience to their new positions.

Zak, whose role will be to advocate for accreditation for home care companies, has been with The Joint Commission for 15 years, serving most recently as field director of surveyor management and development in the division of accreditation and certification operations. She also has worked as a surveyor and as an associate director of standards interpretation. Before joining The Joint Commission, she worked in the home care field and as a hospital nurse.

Zak succeeds Mary Ann Popovich, who retired earlier this year. (See HomeCare Monday, April 2.)

Floro, who will concentrate on the DMEPOS aspects of accreditation, was most recently senior associate director of The Joint Commission's home care program. He was previously a general manager for American HomePatient in central and eastern Kentucky, and also held leadership positions with Respro Home Care in Kentucky, Ohio, Indiana and Tennessee.

The Joint Commission's home care accreditation program was launched in 1988 and has accredited more than 3,400 organizations with over 10,000 locations.

Apria, Lincare Post Q2 Gains
LAKE FOREST, Calif., and CLEARWATER, Fla.--National providers Apria Healthcare and Lincare Holdings announced increased second-quarter profits in recent earnings reports.

Lake Forest, Calif.-based Apria reported its Q2 profit was up 12.8 percent on earnings of $20.8 million compared to $18.5 million in the same period last year.

Revenues for the quarter were $394.0 million, a 4.8 percent increase over $376.1 million in 2006.

Gross margins were 65.9 percent in the second quarter this year, compared to 65.7 percent reported a year ago.

Days sales outstanding were 48 days at June 30, down from 52 days at the same time last year. According to the company, the improvement is a direct result of increased cash collections stemming from initiatives to optimize billing processes and to increase patient copayments.

"Growth over the prior year, and sequentially with the first quarter, is encouraging, and our sales force segmentation strategy is gaining traction," said CEO Lawrence Higby. He added that the company's "larger and more focused sales force will contribute to accelerating revenue growth. Operationally, the initiatives we put in place in 2006 and early 2007 in the areas of asset utilization and revenue management continue to show improved results."

During the quarter, Apria also reduced its $500 million revolving credit line balance by $55 million. As of June 30, the outstanding balance on the revolver was $155 million.

Management affirmed the company's previous estimate of 2007 revenue growth in the 4 to 5 percent range.

Clearwater, Fla.-based Lincare said its revenues for the quarter were $397.1 million, a 13.4 percent increase over revenues of $350.1 million in 2006.

The company said the increase was comprised of approximately 10.4 percent internal growth and 4.5 percent growth from acquisitions.

Net income for the quarter increased to $56 million from $51.9 million for the second quarter in 2006.

The company also reported revenues for the six months were $775.5 million, a 13.4 percent increase over $683.7 million for the comparable period last year. Income for the period was $109.9 million compared to $99.8 million for 2006. The increase was comprised of 10.2 percent internal growth and 4.6 percent growth from acquisitions, the company said.

During the first half of 2007, Lincare opened 21 new locations, increasing its total number to 999. The company also added nine operating centers.

"We are experiencing strong customer growth and expanding market share in our core businesses and continue to expand by opening denovo locations in new and contiguous geographic markets," CEO John Byrnes said in a statement. "Our financial position is strong and we achieved significant operating cash flows in the first six months of 2007."

Lincare generated $170.1 million of cash from operating activities and invested $65.5 million in net capital expenditures during the year's first half. Total debt was $481.6 million, and cash and cash equivalents were $23.7 million at June 30.

In Brief
In a July 30 statement from Mike Leavitt marking the 42nd anniversary of Medicare and Medicaid, the HHS Secretary said he thinks changes to the programs over the last six years have made them "more effective and more efficient. Medicare has been transformed into a program that provides a prescription drug benefit, creates a greater focus on preventive benefits and leads the movement toward more transparency in health care by providing price and quality information for the first time. There is also much more flexibility and innovation in the Medicaid program because of the new provisions in the Deficit Reduction Act of 2005."

Leavitt also cautioned against expansion of the State Children's Health Insurance Program (see related stories in this issue), which would cut billions from the Medicare Advantage program. "The benefits of more than 8 million seniors--many of them minority beneficiaries, or beneficiaries with lower incomes or living in rural areas--would be put at risk," he said. President Bush has threatened to veto the legislation if it reaches his desk in its present form.

The American Association for Homecare announced that Alex Bennewith has joined the staff as senior manager of government affairs to help address the myriad of legislative and regulatory issues facing the home care industry. She served most recently in government relations with the Cystic Fibrosis Foundation and the Spina Bifida Association of America. Tilly Gambill also has joined AAHomecare as manager of marketing and communications. She comes to the association from Docs For Tots, a Washington-based advocacy network for physicians that champions the health care and social needs of children.

The Georgia Association of Medical Equipment Services has named Teresa Tatum as its executive director. A graduate of Georgia State University's College of Public and Urban Affairs, Tatum has 16 years of experience working with national trade shows, conferences and associations. Most recently, she served more than five years as conference manager for Medtrade and Medtrade Spring, Nielsen Business Media's annual industry trade shows. Borrowing a popular strategy from today's political environment, Tatum said she is planning a "listening tour" throughout the state and is looking forward to working with GAMES members in "addressing the most critical and timely issues facing the home health care industry."

According to a July 30 report in USA Today, the Social Security Administration has a record backlog of 745,000 pending disability appeals, with wait time for a hearing currently averaging 17 months. The newspaper also reported that of the 2.5 million people who file disability claims each year, almost two in three are initially denied benefits.

An ambitious project aimed at making New York City a center for the $260 billion global market for medical devices and diagnostics got a boost on Thursday as the World Product Centre said it will begin leasing for a million-square-foot permanent exhibit and conference complex in The Big Apple's midtown district. To be developed by Extell Development Co., the facility will be located across the street from the Javits Convention Center on a site best known as the former home of the Copacabana nightclub. The project's backers say the complex will help medical professionals in sourcing and integrating the latest advances in medical technology into patient care--bringing together under one roof the world's leading manufacturers of medical devices, diagnostics, equipment and supporting systems whose makers could mount as many as 2,000 permanent displays and demonstrations.

Ready for tighter HIPAA rules? A bill introduced last month by Sens. Patrick Leahy, D-Vt., and Edward Kennedy, D-Mass., would create new privacy safeguards for patients' protected health information and could have a big impact on how providers work with patient data. The bill, which would give patients the power to decide when, and to whom, their health information is disclosed, has been referred to the Committee on Health, Education, Labor and Pensions. Stay tuned.

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