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by: Mike Moran - Wednesday, March 24, 2010

Here's a $64,000 question: If Medicare continues to cut reimbursement for home respiratory services, what will providers do to offset those cuts? This came up the other day during a conversation I had with Lou Kaufman, the vice president of patient/clinical services for Roberts Home Medical, a mid-Atlantic powerhouse that employs roughly 40 home respiratory therapists.

Here's what Lou had to say:

"If reimbursement continues to decrease, what will be the next things that homecare companies need to cut? They have already cut delivery to the bare bones with high-tech portable systems, computer routing and trying to get patients to pick stuff up.  You have to have someone answer the phone and take the order. You have to have someone send the bill to the insurance company and collect the money. You have to have somebody to deliver it. What do you not need?

"The RT. That's a value added, and homecare companies decrease profitability to maintain it—what we believe to be a higher quality product, taking better care and safer care of our patients. But a number of companies have either gotten rid of all of their therapists, or significantly decreased their rank.

The question is, for a company who has been using therapists, if that comes about, do you stop using conserving devices? Or do you continue to provide them and not titrate the patient?

"If you continue to use them without titrating, then the patients will be hypoxemic. If you stop using them, the patients are going to have less ability to be out of the home for longer periods of time. Or they are going to have to carry larger or more cylinders with them. None of that is a good situation, and there are studies out there that show that patients who are active, and continue to be active outside the home and use their oxygen all the time, have the best quality of life and the longest lives.

"The one thing we can be absolutely be sure of is that things are going to change, but I don't know how."

Mike Moran

by: Mike Moran - Friday, March 19, 2010

Check out this email I received a few weeks ago from a provider I've known for a while and respect:

I continue to be uncomfortable with the headline of your (blog), Golden Commode. This was a derogatory term used during the 70s and early 80s by Medicare and others to point out perceived abuses and inappropriate advantages that providers took of the billing system then in place.  It is not a term that I used and I have always seen it as offensive.  It may be accurate of an unflattering past, but the important part of the statement is "past". Today, with the over regulation, increased documentation, payment reductions, under appreciation, expanded professionalism and service levels provided by those in our health care sector, we would be better served to put this term to rest.

A week later, I received a similar email from another good industry source:

The title of your blog... offends most providers in the HME sector.  In addition to the obvious problem is the fact that for many of the policymakers in Washington, it simply reinforces a myth that if it ever were true is certainly not true today. This is exactly the misperception that kills us--that we're overpaid for a simple piece of hardware, which you could throw off the back of a moving truck. For outsiders, it delivers a dangerous idea. For providers, it's a painful joke at their expense.

I must say, that in the two or so years that I've been blogging under "Notes from the Golden Commode," other than the two emails above, I can only remember one person who complained about the title of my blog. I hope most providers took it in the spirit that I intended: That it is fun to be a little irreverent and to poke gentle fun at yourself from time to time. For those who did not, I apologize.

As the emails above point out, in naming my blog "Notes From the Golden Commode" I neglected to consider that a bunch of people at CMS and inside the Beltway still have a very low opinion of the HME industry.  I wonder: Do you think they grit their teeth and become even more determined to bury the industry every time the see "Notes From the Golden Commode?" That would be crazy, but you can't put it past them.

I understand why some HME providers, trying to distance themselves from the industry's "unflattering past" may not like the title "Notes From the Golden Commode," but I don't get these hostile policymakers. The era of the Golden Commode is long dead. Years of reimbursement cuts and increasing standards have professionalized the industry. Policymakers  played a major role in this transformation. So why do they continue to see the industry in a negative light? What do they want?

If I manage to discover the answer to this, I'll report back.

Meanwhile, say goodbye to "Notes From the Golden Commode" and hello to "Executive Session."

-- Mike Moran

by: Mike Moran - Friday, March 12, 2010

Deutsche Bank, one of the largest banks in the world, is up to something.
Check out this phone conversation I had this morning with Darren Lehrich, a bank official.
- Hello, this is Darren.
- Darren. Hi. My name is Mike Moran, and I'm an editor at HME News. We're a business publication that covers the HME industry.
- Yes.
- An HME provider recently forwarded me a letter that I think you are sending out to folks to get a sense of what they plan to do in the Round One rebid.
- Ah, okay.
- I was wondering if I could ask you a couple of questions about the letter.
- Um, I'd prefer not to comment.
- No comment?
- Yeah. I'd prefer not to comment.
- Okay. That's fine, then. That is all I wanted to check on.
- Okay. Thank you. Bye.
- Okay. Thanks, Darren. Bye.

The tone of the conversation was a little odd. Darren  sounded like he'd been caught doing something wrong. You'd think a guy who goes around asking for important company information (see below) might be a tad more open. Of course, Deutsche Bank has a market cap of about $26 billion and is probably investigating some potential big deal, which, naturally, it does not want to discuss.

As one provider who received the survey told me: "I suppose it follows the thought of "if you don't ask you don't get" but it's asking for some very private information considering that round 2 is nearing. Needless to say, I'm not completing it."

I'm going to poke around a little bit on this to see what I can find out, but in the meantime, here's Darren's letter and survey.

February 9, 2010
Dear Branch Manager,

My name is Darren Lehrich and I am an investment analyst at Deutsche Bank. In my capacity here at Deutsche Bank, I carry out industry research on the health care sector, and I pay particular attention to the respiratory services industry.

In an effort to gain a better perspective on the upcoming Round One DMEPOS Competitive Bidding roll-out, we would like to enlist your help to complete at brief "two minute" survey. The survey includes basic information about your branch, as well as your perspectives on the bid pricing for specific DMEPOS codes for Round One.

We respect your privacy and therefore all of the individual responses will be kept confidential and will not be divulged, except as aggregated responses.

We appreciate your time in filling out this survey. We have included a $2 bill for this "two minute survey" and a self-addressed stamped envelope for you to return the completed survey to us. We would be happy to email the final results of the survey to you; simply fill out the email address section at the end of the survey. If you have any questions, please contact me at (212) 250-2629 or Darren.Lehrich@db.com.

Thank you!
Darren Lehrich
Managing Director

The survey then asks the following 14 questions:

1. Position at branch?
Branch Manager; sales/marketing staff; clinical staff; other.

2. Number of active patients serviced by branch:
0-100; 101-200; 201-300; 301-400; 401-500; 500+

3. Ownership structure of branch:
For-profit; Not-for-profit

4. Branches corporate structure/affiliation?
Chain (national or regional); Hospital/Health system; independently owned

5. City and state of operation

6 Has your branch submitted bids in CMS's DMEPOS Competitive Bidding Round 1 Rebid?
Yes; No.

7. What were your bids for the following codes in the most recent Re-Bid?
E1390 Oxygen Concentrator
E0431 Portable Gaseous Oxygen System
K0738 Portable Gaseous Oxygen System, Rental
E0443 Portable Oxygen Contents (1 months supply)
E0601 CPAP Device
E0470 Respiratory Assist Device, Bi-Level
A7034 Nasal Interface
E0562 Humidifier, Heated
07030 Full Face Mask

8. Did your branch submit bids in CMS's prior (2008) Round 1
Yes; No

9. If your branch participated in the Re-bid and prior (2008) Round 1, was your Re-bid amount higher or lower for the following codes vs. the Original Round 1, and by how much?
E1390 Oxygen Concentrator
E0431 Portable Gaseous Oxygen System
K0738 Portable Gaseous Oxygen System, Rental
E0443 Portable Oxygen Contents (1 months supply)
E0601 CPAP Device
E0470 Respiratory Assist Device, Bi-Level
A7034 Nasal Interface
E0562 Humidifier, Heated
07030 Full Face Mask

10. If your bids are not selected in Round 1 Competitive bidding, what will be the most likely strategy for your branch?
- Run-off existing business and wind-down.
- Acquire a competitor that was a successful bidder
- Attempt to sell your business
- Relocate to a different market in your state
- Don't know/other

11. Do you think it likely that Congress will delay Competitive bidding for a second time?
Yes; No

12, What is your branch's expected revenue growth in 2010?
Less than 0%
1%-2%
3%-4%
5%-6%
7%+

12. Do you foresee more or less competition in your market during 2010?
More; Less; Same

13. What was your branch's 2009 EBITDA margin?
Negative; between 0% and 5%; between 5% and 10%; between 10% and 15%; greater than 15%

14. If you would like a copy of our final report, please fill in your email address.

— Mike Moran

by: Mike Moran - Thursday, March 11, 2010

A couple of weeks ago, an "old home care rep" named George Soutiere sent me a tribute to his good friend Chuck Fierce. I never knew Chuck, who passed away last fall, but I suspect a lot of folks in the HME industry probably did. Here's the tribute George emailed me.

A Tribute to Chuck Fierce:

October 27th of 2009 — The California Home Care community lost a valued friend. Chuck passed away after a short illness in Los Alamitos, California.

Chuck spent his whole career in the medical market in southern California. His career spanned 43 years starting in 1966 opening the 1st home care store for Dilday Ambulance in Long Beach, CA. In 1974 he joined Invacare Corp as a field sales rep and followed as western regional manager in 1976.

In 1980 he purchased the assets of AllCare Medical in Whittier, CA and operated that company until 1984 when he and Barry McKinley purchased the rep group Daniels Medical Sales and represented many of the major home care manufacturers in the 13 western states region.

In 1991 Chuck and Mike Parker of Phoenix Arizona started Parker-Fierce Marketing and continued great success until 2006 when Chuck and his son Casey and a wife Martha started Fierce Marketing a manufacturer's representative company in Los Alamitos and covered all of California, Arizona and Hawaii.

Chuck was a true pioneer in the home care development in California and always put his customer ahead of any other activity. He truly serviced his clients every need. Casey Fierce and his loving wife Martha will carry on a truly successful company in his absence. Chuck will always be remembered as a true pioneer in home health care in California.

R.I.P.

Mike Moran

by: Mike Moran - Friday, March 5, 2010

Be warned: This story could get your blood boiling and ruin your weekend.

A provider called me up the other day with another horror story about the NSC. As you no doubt know, a bunch of HME providers voluntarily revoked their supplier numbers last fall, when it became apparent they would not be accredited by the Oct. 1, 2009.

They did that expecting that the NSC would reinstate their numbers once they became accredited. Unfortunately, like the provider who called me, they have no idea when the NSC will reinstate their numbers.

Here's what this provider, I'll call him Mr. Blue, had to say:

"I called the NSC yesterday because it had been three weeks since I filed my reactivation, and I was told the application has not even been looked at. I was going to contact my congressman so I decided to do a follow up call with the NSC and ask them what the timeframe was for being reactivated. And according to the woman at NSC, Medicare has put a gag order on the NSC and will not allow them to discuss timeframes, backlogs, anything with anyone."

"I told the women, 'You mean that Medicare is coming in and telling you that you cannot provide any information?' She said that, 'As it relates to the this, we cannot.

"I said, 'Who is the person that my reactivation has been assigned to?'  And she said, 'We don't know. It is still just sitting there.'"

This kind of inattentive, unconcerned government behavior doesn't surprise Mr. Blue.

"I worked for the VA for 10 years, and the  reason I quit is because my supervisor said to me, 'Why are you getting upset? You'll still get your paycheck in two weeks, don't worry about this stuff.' I decided I did not want to go through life like that."

Mike Moran

by: Mike Moran - Wednesday, March 3, 2010

HME providers have recently peppered industry consultant Wallace Weeks with questions related to how they can best diversify their product and payer mix.

"They have been looking at cash sales supposedly for years, but they seem to be more earnest about those kinds of transactions now," Weeks said.

The only problem, he added, is that for some, it might be too late to reap the benefits of diversification. Here's why.

Say an HME provider generates $2 million a year in sales. Because Medicare is becoming less and less profitable, he decides to reduce his dependence on Medicare from 40% to 20%. To do that, without giving up any Medicare business, he has to dilute his Medicare business by adding $2 million worth of other business.

"That's a staggering amount and you can't generate that kind of change in 12 or 18 months," Weeks said. "There are a lot of financial issues that can be fixed in a company if you have 18 months, but diversification is not one of them."

For most providers, meaningful diversification requires two to four years, he said.
And just how diversified should most providers be?

"My recommendation is to have a small enough portion from any payer so that no payer can kill you," Weeks said.

And what if a provider decides to focus on a particular product and/or payer?

"When you put all your eggs in one basket, whatever it is that could be a threat to that basket, you have to see it as soon as it is on the horizon and act then. You can't wait until it is at the door."

Mike Moran

by: Mike Moran - Thursday, February 25, 2010

I'm "working" from home today. I don't usually do that, but last week my wife and I took the kids on vacation to Arizona, and I caught the worst cold (or maybe it is the plague) of my life. That seems like some kind of perverse joke, doesn't it? Go on vacation to a warm climate to escape Maine's frigid winter and get very sick.

Anyways, as I was lying on the couch this morning doped up on Tylenol, Sudafed and Robitussin (cough suppressant and expectorant),  reading through back issues of Newsweek, I ran across an article by Robert J. Samuelson, the magazine's resident economic curmudgeon. It doesn't matter what is going on in the world (a bull market, low interest rates, growing exports, etc.), Samuelson always manages to see the glass as half empty. And when the news is bad, look out! That's when he is at his best, sowing seeds of gloom and doom that make you want to hide under the covers.

He can be a bummer, but he's also usually right.

In this particular article, Samuelson extrapolates Greece's precarious financial condition to the rest of Europe and to the United States. Greece has piled up mountains of debt, mostly by over-committing to social programs, and could very well default on its debt payments. Every advanced society, Samuelson writes, faces a similar problem: "burgeoning costs as populations age, an over reliance on debt financing and pressures to reduce borrowing that create parallel pressures to cut welfare spending. High debt and the welfare state are at odds."

As I read Samuelson's Greek Tragedy, I thought about the HME industry—really, all healthcare providers. Everyone has been lobbying and working like crazy to minimize the impact of healthcare reform. But in the long run, this work will only buy providers time—time to change their business models to accommodate a new era of austerity. In some cases, lobbying may preserve the status quo a bit longer, but if you accept what Samuelson is saying, deep cuts to Medicare, Medicaid and Social Security are inevitable.

All this reminded me of a line from "Lord of the Rings." In a particular perilous moment, when all looks lost, the good wizard Gandalf and the hobbit Frodo Baggins, have this short exchange:

Frodo: "I wish none of this had happened."

Gandalf: "So do all who live to see such times, but that is not for them to decide. All we have to decide is what to do with the time that is given us."

Fast forward from Middle Earth to 2010. At a recent industry event, I talked to a provider who about four years ago invested heavily in non-delivery oxygen technology. Since then, he's reduced his delivery costs 62%. He also just opened a new location. Given the challenges the industry has faced recently, he seemed a little sheepish about his great success. "I would not say this out loud," he said, "but business is great."

I'd say this guy made good use of the time given him.

The moral of this story is, I think, that the changing healthcare market does not have to signal the end of your world—just the end of the world as you know it.

Mike Moran

by: Mike Moran - Friday, February 12, 2010

I had an energetic conversation recently with a guy who called to bend my ear on out-of-control health care spending in the United States and the home medical equipment industry.

I won’t give this person’s identity away, but while he is not part of the HME industry, he has a ton of health care expertise and is someone worth listening to. I like talking to “outsiders” because they often look at HME issues in a different way or confirm what we already suspect. Both perspectives are valuable.

Here are some excerpts from our conversation:

—    “HMEs are catering to an older Medicare reimbursed clientele. I think the real action in the future is going to be in the younger clientele, supplying technologies for use in the home that facilitate home management of chronic conditions or early diagnoses and self treatment.”

—    “As an industry, HME has to have an answer and value proposition where people are focused on wellness, prevention, home monitoring. Is there a way for HME to reach out and be part of that solution rather than be focused on the elderly?”

—    “I walked into a DME suppler for the first time a couple of years ago, and it had that weird, hinkey kind of feeling. If felt kind of old, and walking in here to get a CPAP machine it felt like I just crossed over to being a old person.”

—    “Medicare is $37 trillion in the hole. If I’m a DME provider with 40% of my business in Medicare, what do I do?”

—    “If Medicare goes in and gets a commode, how much does it pay? If you ask the person to pay out of pocket for the whole thing, what would be the price they’d pick? They would not pick a price close to the full price. This should highlight for everybody that we’ve got a fundamental mismatch in the value proposition. Everyone is fine if they are spending other people’s money, but they are fundamentally getting a product that they do not value at its cost. That is unsustainable.”

—    “How many Hoverounds would they sell if people had to pay for them out of pocket? ‘It’s free to you. We’ll process all the paper work.’ It just makes me angry. Because I know my children are paying for that, and my children have no voice in this. The AARP is the second largest employer in Washington D.C. We are screwed.”

—    “I was so damn happy when the reform thing went belly up with Brown getting elected in Massachusetts. Not that we don’t need to change something and have reform, but we don’t need to reform access. We don’t need to add 30 million or 40 million people to a fiscally unsound program. We need to go back and solve the cost problem, It’s all about cost.”

— Mike Moran

by: Mike Moran - Wednesday, February 3, 2010

At some point in this country, people are going to rise up against senior citizens. The gray hairs won't be attacked or thrown into jail, but they will be thrown dirty looks, and the AARP will be viewed at as a detriment to the long-term health and prosperity of the United States. Unless something drastic happens, that day is coming.

In Monday's New York Times, columnist David Brooks, in an article titled "The Geezer's Crusade," cited these disturbing statistics:

-   According to Julia Isaacs of the Brookings Institution, the federal government now spends $7 on the elderly for each $1 it spends on children.

-   In 2009, for the first time in American history, every single penny of federal tax revenue went to pay for mandatory spending programs, according to Eugene Steuerle of the Urban Institute. As more money goes to pay off promises made mostly to the old, the young have less control.

-   For decades, federal spending has hovered around 20 percent of G.D.P. By 2019, it is forecast to be at 25 percent and rising. The higher tax rates implied by that spending will mean less growth and fewer opportunities. Already, pension costs in many states are squeezing education spending.

You see what Brooks is getting at, right? There's just no way that as a country we can continue to take from the young and give to the old. That's not just plain wrong--it's criminal. It's also a recipe for disaster. Does anyone really believe that if we continue to saddle our young people with this kind of growing financial debt that their future--the future of the United States--will be anything but bleak?

To fix this situation, the United States is going to have to swallow some strong medicine.

The worse part about all this is that if Washington had a spine, politicians could have taken steps long ago to head of this day off reckoning.

This backlash against our seniors is already happening. I hear people regularly say how crazy it is to spend a ton of money on old people just to keep them alive for an extra year or two. Right now these grumblings are not widespread, but I sense that this attitude is growing.

When we're forced to choose between our young and our seniors, it really is a sorry state of affairs.

— Mike Moran

by: Mike Moran - Friday, January 29, 2010

Just in from CMS early this afternoon:

The number of active DMEPOS suppliers who bill Medicare dropped from 106,707 on Sept. 1, 2009 to 92,629 on Dec. 1, 2009. That's a 13.2% reduction, and most likely reflects the number of providers who gave up their supplier numbers rather than become accredited by Medicare's Sept. 30, 2009 deadline.

HME News solicited the data from CMS in early December via a Freedom of Information Act (FOIA) request. Industry watchers surmised that thousands of providers would give up their supplier numbers rather than become accredited. This CMS data confirms that suspicion.

I think we can be reasonably confident that most of the newly inactive supplier numbers belonged to HMEs and not pharmacies. That's because pharmacies had until Jan. 1, 2010 to become accredited.

Here's the change in active DMEPOS supplier numbers by region between Sept. 1 2009 and Dec. 1, 2009:

Jurisdiction A: 22,318 to 19,275 (-13.6%)
Jurisdiction B: 21,791 to 19,077 (-12.5%)
Jurisdiction C: 39,094 to 34,038 (-12.9%)
Jurisdiction D: 23,504 to 20,239 (-13.9%).
Nationally: 106,797 to 92,629 (-13.2%)

Of these providers, here's the number that voluntarily terminated their numbers before the Sept. 30 deadline. Providers in this group most likely plan to reinstate their supplier numbers once they become accredited.

Jurisdiction A: 181
Jurisdiction A: 326
Jurisdiction A: 708
Jurisdiction A: 337

-- Mike Moran

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