Pay for performance

FORD CITY, Pa. - Officials at Klingensmith Healthcare believe they can see the future of HME, and most smaller HMEs with limited resources aren't going to be around to experience it, said President Dave Knepshield.

"These DME guys can't do it," he said. "It's not competitive bidding that is going to get rid of these guys; it's what's next down the line."

What's down the line, Knepshield said, is this: Beginning in 2012, courtesy of the new healthcare reform bill, Medicare will reduce or withhold reimbursement to hospitals for patients readmitted within 30 days. HME providers who develop disease state management programs that prevent these readmissions stand to rake in a lot of business.

Klingensmith, a five-location HME in western Pennsylvania, began developing such a program last December for COPD patients. If the program works, it could be a way, finally, for providers to get paid for their services, and such payments will help offset competitive bidding and other reimbursement cuts, say company officials

"Hospitals are scrambling," Knepshield said. "They have no idea what they are going to do. They have no way of controlling readmissions. They can't even coordinate what goes on in their own hospitals let alone the patient's home. We went to hospitals and the first five CEOs we showed said, 'Oh, my God. This is incredible.'"

So far, Klingensmith has spent $500,000 developing the program, which includes a variety of education and follow-up during the patient's first 30 days at home. Of the 110 COPD patients who have participated, only four (3%) have been readmitted to the hospital. Nationally, about 22% of COPD patients are readmitted to the hospital at a cost of $12,000 to $24,000 each, Knepshield said.

To continue the program, Klingensmith will eventually have to be paid for its services, said Kim Wiles, the provider's vice president of respiratory services.

"The program has taken a lot of upfront cash--it's a commitment," she said. "This is the first phase, but when we start looking at the amount of money that we've saved, at that point we can put a price on it. The key is for people to see our value."

In developing its program, Klingensmith officials used the Internet to scour clinical literature that examined why COPD patients were readmitted to the hospital.

"We found out that there was a common theme," Knepshield said. "It was the intense follow-up with training, oversight and making sure the patient knew exactly what was going on with them at any point in time. We designed the program based on (the literature)."