Legislating the HME Industry; Will Washington Lawmakers Ever Lighten Up? – home medical equipment industry

CHANGES IN THE home medical equipment industry have been many over the last 20 years. In that time, the HME business has gone from a loosely regulated, highly lucrative health care industry niche to a heavily policed, reimbursement-starved industry that bows – almost daily, it seems – to one new law or regulation after another.

Indeed, the industry has, for several years, been battered by a host of blows targeted at cutting reimbursement and curbing fraud. Oxygen reimbursement cuts, inherent reasonableness, competitive bidding – all have had their roots in a Washington both critical and suspicious of the HME industry.

But the times, are they a-changing? Some industry experts think the legislative climate as it relates to the industry is indeed changing, thanks in part to the efforts of the industry itself. New regimes at the Department of Health and Human Services and the Centers for Medicare and Medicaid Services (formerly the Health Care Financing Administration) also seem to demonstrate a spirit of cooperation. And Congress appears slightly more supportive of home health care.

“Things are starting to turn around in that people – Congress and other regulators – understand now the very important role that is played by the HME industry in conjunction with all the other elements of the home care business,” says David Savitsky, chairman of the American Association for Homecare, Alexandria, Va. “And I think as a result of that, we’re now beginning to see more respect for it … I think things are certainly improving and the image of the industry is getting better all the time.”

What do legislators and those in charge of regulatory agencies have to say? Calls for comment elicited no response from Bill Thomas, R-Calif., chairman of the House Ways and Means Committee; Nancy Johnson, R-Conn., chairman of the House Ways and Means’ subcommittee on health; Thomas Scully, administrator, CMS; and Tommy Thompson, secretary, U.S. Department of Health and Human Services.

But if Savitsky is correct, will that newfound respect translate into better reimbursement for HME as a whole? Industry observers are not so sure that it will – and that could be because the specter of fraud still hangs heavily over the industry.

The Making of a ‘Crook-ed’ Image

THE INDUSTRY CAN credit the current strict government oversight to its sins of the past, observers say. And, although fraudulent providers only account for a minute percentage of HME businesses, the amounts and ease with which they defrauded the Medicare program primed the industry for Congressional scrutiny. That scrutiny particularly intensified when those in Washington began agonizing about the fiscal solvency of the Medicare Trust Fund.

Prior to 1997, which saw passage of the Balanced Budget Act, the industry’s image was virtually non-existent, industry players say. This was mainly because few people in Congress even knew that HME existed, a fact evidenced by the loose government guidelines for HME that made it ripe for fraud.

“Over the last 20 years, up until four years ago, I don’t think the government really knew we existed, and if so, only on a very minor scale,” said Jane Bunch, owner of Marietta, Ga.-based HME billing-consultant firm Jane’s Billing & Consulting, and an HME provider. “Back even 10 years ago, you didn’t hear of FBI raids in a [durable medical equipment store], you didn’t hear about the Department of Justice, we didn’t worry about the [Office of Inspector General], we didn’t worry about anybody. Never in 15 years did anyone walk through our doors, not for an audit, not for an interview, nothing. So it’s only been, I’d say, the last two years that we’ve become increasingly viewed by the government as crooks.”

Savitsky recalls hearing that the No. 1 white-collar crime committed in America is health care fraud. And that, he says, is how the government has viewed the HME industry.

“In the last couple of years, I think the government in general has taken this very negative look at all of health care,” Savitsky says. “There really hasn’t been any segment of the health care industry that the government hasn’t looked at with an eye for expense and fraud and abuse.”

Michael DeCarlo, an attorney for Washington, D.C.-based firm Dickstein Shapiro Morin & Oshinsky, agrees. From 1991-96, DeCarlo was director of regulatory affairs for the National Association for Medical Equipment Services, a forerunner of AAHomecare.

“The watchword throughout has been the concern over fraud and abuse, and a lot of the horror stories that were brought to Capitol Hill by the Office of Inspector General and the Department of Justice were [DME] stories,” he says. “It was a reflection of the ease with which individuals could go to the carriers – who were the insurance companies contracted to handle Medicare claims – get a billing number, gather patient numbers or Medicare numbers, find a willing physician to sign a [prescription] for an item and set up billing mills.”

The ease with which the system could be exploited was mind-boggling, according to DeCarlo. No fees were set for items other than payments for reasonable charges. “The carriers earlier tried to put a lid on how much they would pay for reasonable charges,” he says, “but until we got some fee schedules in place, it was difficult to set parameters on fees, which then tended to increase by a percentage of the previous year’s billings, so it was a self-inflating system.

“And the carriers weren’t real good at giving a coverage policy,” he continues. “You initially had a carrier in every state, or almost every state, and they all had different medical policies about what they would pay for in terms of equipment, so there was a lot of confusion and a lot of capacity for [cheating] the system and overcharging the system, which unscrupulous people took advantage of.”

Bunch well remembers the days of loose regulations and high reimbursement. “Ten years ago, we did whatever we wanted to do,” she says. “I mean, if you wanted to fill everything out [on a certificate of medical necessity] and sign it, that was OK. Nobody would’ve ever checked you or known. And a lot of providers did that, and then the government became very strict with us and started doing audits and gave the FBI, OIG and DOJ money and training to investigate DMEs.

“As a consultant, I tell my clients, ‘You’ve got to do it this way or you’re not going to be in business long.’ And some of them look at me and tell me they’ve been doing it this way for 20 years and they aren’t going to change. I say, ‘Fine. Twenty years ago, you didn’t have the FBI, OIG and DOJ looking at DMEs. You do whatever you want to do.’

“And one of them I just told that to had the FBI bust his doors wide open. But once it goes criminal all I can do is hold your hand and weep with you. It’s just a matter then of whether a health care attorney can keep him out of prison or not.”

Poor Image, Poor Reimbursement

HOW GOOD WAS reimbursement before the HME industry was thrust into the fraud and abuse spotlight? In 1992-93, the industry norm was $400 a month for a concentrator under Medicare. It was also almost $60 for portable oxygen.

Bunch remembers getting $450 to $500 a month from private insurance for a concentrator and $85 a month for a portable, plus $15 per tank for a refill. “Those were standards in the industry,” Bunch says. “I look at 1996 and [reimbursement] starts declining. Ever since then, we’ve seen nothing but decreases. You’ve got your 0.3 percent cost-of-living increase, but when you add all of the documentation work, we really didn’t get an increase.

“It’s like they say, ‘OK, here’s your 0.3 percent increase, but we want this supporting documentation, we want copies of all your test results, we want the patient’s medical records from the doctor’ … What increase did we get? We just had to go out and hire another staff member just to take care of documentation. Anytime we get anything, we get an added burden with it, offsetting what we thought we just got.”

By the end of 1996, HME was no longer falling through the cracks in Congress. Savitsky calls 1997 pivotal because the BBA was passed and the consumer price index, which had provided a yearly “raise” in rates, was axed. “It had a tremendous effect because we always have to go back to Congress now and get them to increase the rates as opposed to it being an automatic type of thing.”

Savitsky and AAHomecare are pushing Congress to reinstitute the index. It’s imperative, Savitsky says, if an HME business is to continue to function properly because it takes into account certain variables that cost providers money.

“You’re in a business where you’ve got a lot of people costs,” he says, citing office staff that often increases as the paperwork burdens grow. “And then you’ve got maintenance of equipment and trucks, and gasoline prices that change dramatically over a period of time. So how can you have a program that doesn’t have some sort of built-in increase recognizing that there’s always going to be some factor that’s going to increase from the year before? There’s a service component and the recognition of the service component is very important.” (See the service component story on page 83.)

Knowledge Equals Understanding

WHETHER OR NOT Savitsky and AAHomecare will be successful in pushing through the restoration of the index is to be seen. But there are hopeful signs – two years of givebacks from Congress in reparation for the BBA ’97, for example – that the industry is held in more esteem these days.

Observers note that the industry’s efforts to educate Congress and other policymakers about the HME business appear to be showing dividends.

“There’s no one better than people in the industry to convey the message to members of Congress about what is happening in their business and how that business needs to be helped either through legislation or regulation or oversight,” Savitsky says.

He cites as an example a recent roundtable discussion with the House Ways and Means Committee’s Thomas.

“He spoke of a situation where he heard delivery techs were going out and picking up oxygen tanks that still might contain some oxygen,” Savitsky says. “It disturbed him that the techs vented the remainder of the oxygen, and he was referring to it like it was some sort of fraudulent act. To him, the techs were taking tanks that had good, valuable oxygen in them that has been paid for and they were venting it so they could then resell a full tank.

“One of the providers … was able to tell him that it’s actually a regulation that we’re not allowed to fill a tank that’s half full. We must vent that tank when we pick it up from a patient’s home. And this was an opportunity to educate him about that.”

Such communications between Washington players and HME providers have helped the industry, experts say, so it is no longer universally viewed as a band of fraudulent miscreants.

Still, despite the HME industry’s apparent image rebound in Washington, it doesn’t necessarily translate into reimbursement relief. Industry players caution HME providers against expecting too much more in the way of givebacks from Congress.

“I think there’s a lot of talk about getting the 15 percent cut set aside, but I don’t think that’s going to happen because the surplus that made it a possibility now appears to be evaporating,” DeCarlo says. “[Congress] cut taxes and the economy is starting to falter and the question becomes, should Congress do something that’s not fiscally prudent in a shrinking revenue base … I don’t think they will. I think what you got in the last Congress is all you’re going to get in terms of rollbacks to the ’97 cuts.”

Bunch, too, is cautious. “The reimbursement climate is changing, but ever so slightly,” she says. “We’ve gotten some very minor increases in equipment. We won’t see any increases in oxygen because of the freeze placed on it, which stays in effect until 2004. We’ll have to see then what happens to oxygen. Now with the more-stringent testing, who knows what’s going to happen to home oxygen because of the past abuse.”

For more information, go to http://thomas.loc.gov.

– J.P.P.

Competitive Bidding Still Looms

THE HOME MEDICAL equipment industry’s image in Washington as a fraud-ridden health care industry niche has caused heavy reimbursement oversight through legislation over the past five years, particularly via the Balanced Budget Act of 1997, which brought about what many consider the industry’s biggest threat-competitive bidding.

“The biggest bear on the horizon is competitive bidding,” says Michael DeCarlo, an attorney for Washington, D.C.-based firm Dickstein Shapiro Morin & Oshinsky. “If we step back from the cuts and [consumer price index] freezes we’ve looked at, which has just been a way for the government to get a handle on the incremental increases in the fee schedules, we see that competitive bidding is a fundamental shift in the way that prices are determined and how providers get paid. Not only is it a possible new system, but it’s a possible new way of setting fees and prices at a level that’s lower than what the industry’s currently used to.”

And while many HME providers view competitive bidding as the industry’s apocalypse, the government, which successfully applies the methodology in several other government segments, believes it will work with HME.

“Lots of projects get done by the government in [the competitive bidding] fashion, and lots of companies work in the competitive bid environment, so it’s a very appealing notion to the government,” says David Savitsky, chairman of the American Association for Homecare, Alexandria, Va. “But I think the experience is that a lot of the companies that bid in the projects didn’t get the volume that they thought they were going to get, and they found that companies that were not part of the winning list were still able to secure orders, which siphoned away business from those that did win the bid. Obviously, we’re opposed to it and it’s not the kind of thing that is successfully bid out like other competitive bidding scenarios. But the notion could catch on.”

Savitsky has good reason to believe that.

“We had a meeting with [Rep. Bill Thomas, R-Calif., chairman of the House Ways and Means Committee] and it was a wide-ranging conversation with him about some things that have to do with the industry today and what’s going to happen in this Congressional session, but we also were talking to him about some future ideas,” Savitsky says. “He didn’t specifically mention the term competitive bidding, but when he was describing a certain vision for the industry, it certainly sounded a heck of a lot like competitive bidding to me. This is a critical juncture for the industry because we just don’t know where it’s going to go.”

– J.P.P.

A Better Self-Image

SO, IF THE actions of a few bad apples in the home medical equipment industry have tainted Washington’s perception of HME, how can the overwhelming majority of honest providers repair the reputation?

“A big problem in our industry that has caused us to get the name we have is not fighting or standing up for our industry,” says Jane Bunch, an HME owner and billing consultant for more than 15 years. “I was on the Oxygen Coalition Committee and in meetings in Washington, I was the only one standing and talking at times. People just don’t stand up for our industry. You call 10 providers right now and ask them if they’ve read the new oxygen draft policy and they’ll say no. Our industry has got to learn to support itself and stand up for what it believes in.”

Bunch uses the American Medical Association as an example for the HME industry to follow. “Look at the AMA,” she says. “It can get something passed in a heartbeat because it won’t stand for it. Something comes down that it doesn’t like, they’re up there with the congressmen with the biggest lobbyist they can find. What do we do? We wait for it to get passed and then say, ‘How did that happen?'”

And Bunch firmly believes in providers educating legislators by inviting them to their businesses and even on patient calls.

“I’ve stepped on fish bowls on the floor and sat down next to a pile of dirty diapers trying to see my patients,” Bunch says, reflecting on one patient visit she made accompanied by her congressman. “And he realized that it wasn’t all sports and glamour, and I wasn’t carried around in a limo. Until providers start writing their congressmen, taking the industry seriously and start staying up on the latest legislative issues, things aren’t going to change. If the government keeps rolling over us and we keep taking it without standing up for ourselves, it will keep rolling over us because it can.”

– J.P.P.

COPYRIGHT 2001 PRIMEDIA Business Magazines & Media Inc. All rights reserved.

COPYRIGHT 2003 Gale Group

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