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On the Editor's Desk

by: Liz Beaulieu - Friday, October 20, 2017

I’ve had a few conversations now where the people I’m talking to try to find the silver lining in the statistic that the number of DME locations has dropped about 40% since 2013, when Medicare’s competitive bidding program began to really gain steam.

That’s a brutal statistic and one that, when shared with members of Congress, has to be impactful in the industry’s efforts to get some relief from the bid program.

But a few of the people I referred to above like to look at it as, 60% of locations are still standing and with the bid program now in effect nationwide, if they’re still standing now, they should remain standing.

“We believe we’re in a pinnacle moment in time here,” said one person I talked to. “Forty percent of dealers have closed their doors, but the people who are in business today, they have the opportunity to be in business going forward. We don’t expect additional cutbacks.”

Of course, there are a whole host of questions that come up when considering this logic. Mainly: Just because a company is still standing now, doesn’t mean it’s not still standing with two broken legs, limping along with crutches, am I right?

There are other questions: What are the types of businesses that can remain standing and in what areas? Are they larger companies in more urban areas? Are they full-line or specialty providers?

To move on to another statistic, I’ve also had a few conversations with people about the fact that DMEPOS appeals have made up about 49% of total appeals at the ALJ level so far in fiscal year 2017. AAHomecare reported this week that as of August 2017, 591,962 appeals were pending, a 300% increase since 2016, and as of October 2017, 291,047 appeals were for DMEPOS. It’s hard to find any silver lining at all in that.

The two big questions here: How much money are these appeals costing CMS to adjudicate, especially when the majority are overturned; and how is it fair that DMEPOS, which represents about 2.3% of the Medicare budget, represents nearly 50% of appeals?

Like a lot of things these days, none of this makes a whole lot of sense.

by: Liz Beaulieu - Tuesday, September 26, 2017

We go live with 2016 data for our HME Databank on Oct. 1. I’ve been playing around in a test site this week, and let me tell you, the data ain’t pretty.

Take E1390, stationary oxygen concentrators. Total Medicare spend on this code in 2016 was $620,708,743, according to data obtained via a Freedom of Information Act request from CMS. In 2015: $903,973,456.

Before we move on to declines in spending in other DME, let me say that obtaining the data this year was more difficult than in past years. Our request for county-level data for total Medicare spend had to be forwarded from the Pricing, Data Analysis and Coding Contractor, which usually fulfills our requests easily and timely, to CMS’s FOIA office and then to the agency’s “central office.” It took months. But I’m glad to say that once it hit said “central office,” the data was released promptly. Thank you!

How about E0601, CPAP devices? Total Medicare spend was $115,903,964 in 2016 vs. $150,060,612 in 2015.

For E0260, hospital beds, semi-electric with mattress: $48,239,698 in 2016 vs. $65,522,841 in 2015.

A4235, blood glucose strips: $179,812,476 in 2016 vs. $222,324,155 in 2015.

K0823, standard power wheelchair: $32,579,043 in 2016 vs. $43,227,808 in 2015.

It goes on and on and on.

Another aside: The line above reminds me of the kid’s favorite book at the moment: “The Circus Ship” by Chris Van Dusen. Long story short, a circus ship crashes off the coast of Maine and the 15 animals aboard make their way to an island, where they surprise, and initially horrify, its human inhabitants. There’s a tiger in the tulips, there’s a lion on the lawn, there’s a python in the pantry, it went on and on and on. I highly recommend it.

Speaking of horrifying, when you combine this data with other data, such as the aging population (the number of Americans ages 65 and older is projected to more than double from 46 million today to more than 98 million by 2060), the increasing awareness and diagnosis of OSA (it’s estimated 75% of severe sleep disordered breathing remains undiagnosed), etc., it’s hard to make sense of any kind of declines at all.

What is going on here? That’s more of a rhetorical question, of course, because we all know what’s going on here. And something’s gotta give.

by: Liz Beaulieu - Friday, September 22, 2017

When you speak to industry attorneys, you get a wealth of information, more than can fit into a 400-word story for the November issue. So here are some outtakes from my recent conversations with Jeff Baird:

Same or separate

If an HME company wants to explore retail, it has two options, Baird says: They can do it under their existing company, ABC Medical, which has a PTAN; or a separate company, ABC Retail, which has no PTAN.

Baird says he prefers the latter option, because it eliminates a number of potential problems.

“For example, if you’re selling stuff for cash under one entity with one tax ID, you have to deal with anti-discrimination concerns between your Medicare and cash customers,” he said. “If you have a separate entity, those concerns go away.”

Additionally, if ABC Medical for one reason or another goes down in flames, ABC Retail still stands, Baird says.

“I think it scares people to set up a separate entity, but it shouldn’t,” he said.

The party’s over

Baird has long warned of “the big party going on with folks selling braces and sham telehealth arrangements.” Well, the party has come to an end, he says.

“We have now seen a number of letters, not from the NSC, but from CMS to mail-order orthotics providers saying, you know you’re selling in 30 states and in three of those states you don’t have the right licensure, so we’re going to revoke your PTAN,” he said.

Baird calls the move “pretty wicked.” In the past, a provider would get a letter from the NSC asking for a corrective action plan on how they plan to address the issue.

by: HME News Staff - Friday, September 15, 2017

A wrote a blog a few weeks back called “Head banging” about the share of Medicare spending on DME, and the concentration of Medicare spending in different areas of health care. The source was the Medicare Payment Advisory Commission’s “A data book: Health care spending and the Medicare program.”

A reader emailed me this week to point out another data point of interest in this whopping 214-page report (I told you I didn’t read it all).

Chart 6-18 features data on the “discharge destination of Medicare fee-for-service beneficiaries served in acute care hospitals, 2006-15.”

As you can see the percentage of patients whose destination was home self-care dropped from 52.3% in 2006 to 45.5% in 2015.

The reader wrote: “That means about 13% more patient are discharged to skilled nursing and home health with organized health care. Much more expensive. That’s what you get with a watered down DME industry. I ran a DME company for 28 years and we all saw this coming. It’s called cost-shifting and it’s bad for Americans.”

I wrote back: “Great point. This stat further surprises me because of all the efforts in recent years to shift care into the home. I guess 2015 was a little early for that to start having an impact, though. Will be interesting to see what the 2016-17 numbers show.”

Though I will say, now that I’ve thought about it further, those efforts I mentioned have focused on post-acute care services, which runs the gamut of anything outside the hospital, not necessarily in the home. But this reader is taking things a step further, saying everything but the home is more expensive and if discharges to the home are decreasing, health care is moving in the wrong direction.

The reader wrote back again: “We were clinical respiratory until around 2006. Reimbursement was good for oxygen and competition demanded that your services be excellent. We had a registered respiratory therapist visit our oxygen patients every three months. They checked the concentrator, they discussed portability, they took a pulse oximetry, blood pressure, etc. If the patient’s oxygen saturation was good without oxygen, we contacted physician and D/C'd oxygen. Competition and fair reimbursement allowed DME companies to keep patients from more expensive home health care agencies and skilled nursing. Now the data is proving it.  DME expenses have dropped 50% over the last 11 years—2% to 1%? I suppose congratulations to CMS for saving 50% on the smallest segment, DME. Real head smasher.”


by: Liz Beaulieu - Friday, August 11, 2017

The data is starting to trickle in for this year’s State of the Industry Report, which we’ll publish online in December. One of those pieces of data: the top 100 suppliers by amount allowed by Medicare.

It’s always the usual cast of characters in this list, mostly national players, but it’s still interesting to see the jockeying for position, as well as the changes in amount allowed, from year to year.

Right off the bat, in this year’s list, I noticed that while Lincare still had the No. 1 spot, the amount allowed dropped from $830.9 million in 2015 to $651.8 million in 2016. Can you say ouch?

Accredo Health Group, once again in the No. 2 spot, did a better job maintaining its course with $482.8 million in 2016 vs. $481.8 million in 2015.

Another national that we keep an eye on is Apria Healthcare, which dropped from the No. 3 spot to the No. 4 spot in 2016 with $224.3 million vs. $273.5 million. Other companies that dropped positions from 2015 to 2016 include KCI from No. 7 to No. 10.

One national that dropped out of, not the top 10, but the top 15 completely: American HomePatient. In 2015, it had $75.2 million in the No. 13 spot; in 2016, $57.2 million in the No. 23 spot.

I know I don’t need to go into the context of what’s behind these shifts, so here’s a glimpse of this year's data:

And here is some historical data.

by: Liz Beaulieu - Friday, July 28, 2017

In case you missed it, the Medicare Payment Advisory Commission (MedPac) in June published “A data book: Health care spending and the Medicare program.”

Durable medical equipment has no section of its own (unlike hospitals, inpatient psychiatric facilities, physicians, skilled nursing facilities, home health agencies, inpatient rehab facilities, etc.), but it was included in a number of graphs detailing trends in Medicare spending, one of which is a real head scratcher.

According to Chart 1-5, Medicare represents only 16% of the DME spend, with Medicaid and CHIP representing 15% and “other” representing 68%. Other includes private health insurance, out-of-pocket spending, and other private and public spending, MedPac says.

I asked on twitter if anyone else was floored by this, and I got a few yeses. I also got a “Pfft, that’s what happens when Medicare bennies lose access to service across the U.S.”

Yes, it would be nice to see some historical data here, preferably pre- and post-competitive bidding. Would it show, say, that Medicare represented 60% of the DME spend in 2006 vs. 16% in 2015? But the report, to my knowledge (granted, I didn’t read ALL 214 pages), doesn’t make that comparison.

The report does have some interesting historical data on another point, though: that Medicare spending is concentrated in certain services and has shifted over time, as detailed in Chart 1-2.

As you see, total Medicare spending in 2006 was $402 billion and in 2015 it was $638 billion, but DME’s share of that spending dropped from 2% to 1% during that timeframe, a 50% reduction. Note home health in a similar predicament, with 4% in 2006 vs. 3% in 20015.

So where is Medicare spend concentrating and shifting to, if not in DME and home health? Well, managed care appears to be the big winner here, increasing from 16% in 2006 to 27% in 2015, more than a quarter of all spending.

This could be a scary trend for HME providers, as evidenced by recent stories like this.

In conclusion, if Chart 1-5 is a head scratcher, then Chart 1-2 is a head banger. Now I’ll let your peruse this data for yourself. Just don’t hurt your head.

by: Liz Beaulieu - Tuesday, July 18, 2017

In these challenging days of national competitive bidding pricing and widespread auditing, HME businesses can be, understandably, an insular bunch.

But there are problems in any market. And the severity of those problems typically ebb and flow, with periods of decline and regrowth.

At this year’s HME News Business Summit, we’re here to focus on the latter: regrowth.

To regrow, a business must take action. It can’t wait for it to happen. It must make it happen.

Sometimes taking action means throwing your playbook out the window. Never think you’d outsource your billing operations to another country? Never think you’d drop-ship sleep therapy equipment and service patients remotely? For speakers Todd Usher and Joseph LaPorta, two providers, it not only made sense, it has worked.

Even pre-eminent health systems are under pressure to take action. As health care transitions from a fee-for-service to value-based model, keynote speaker Don Carroll is reshaping Cleveland Clinic’s home and transitional care services to become not only a provider of specialty referral-based services, but also a manager of population health. He’s writing a new playbook for connected care.

There are very few more action-oriented entities than private equity firms, and we’ll have three of them represented on a panel to talk about how they’re taking HME-related businesses to the next level. Less burdened by the industry’s past successes and failures, these firms have no playbooks. Almost anything is fair game.

To use a lofty quote from Gandhi: “Action expresses priorities.” What actions are you taking? And what does that say about your priorities?

Come to the Summit and find out.

by: Liz Beaulieu - Wednesday, July 5, 2017

When it comes to the HME industry, data can be hard to come by.

Almost all HME companies (on the provider side, anyway) are private now, so there’s no more gleaning, say, revenue per employee for Apria Healthcare and using that as a benchmark (in context, of course) for your revenue per employee. This reminds me, we had a session at our HME News Business Summit a number of years back, during which Don Davis analyzed the financials of some of the national HME companies, which were still public at the time—let’s just say you didn’t need toothpicks to keep everyone’s eyes open for that hour.

That’s why in the past five years or so, there’s been a big effort to fill in this void in a number of different ways. AAHomecare launched a data gathering initiative related to audits. The VGM Group launched an impact survey to collect data on the impact of competitive bidding on HME companies and their patients. The overarching goal of these surveys: using data to influence policy change.

But going back 12 years now, the Financial Benchmarking Survey conducted by HME News and Steven Richards and Associates has been consistently buzzing in the background, providing useful data to help owners drive their HME companies to succeed on a day-to-day basis.

Data points include:

  • Revenue / revenue growth
  • Revenue by payer / by employee / by payer type
  • Profitability / profit as a percentage of revenues
  • Gross profit / expenses / EBITDA
  • DSO
  • Fastest growing product lines
  • Acquisition cost trends
  • Expense benchmarks

It goes on and on. For a presentation that Rick Glass gives each year at the Summit, during which he analyzes the results of the survey, there are no fewer than 40 slides chockfull with data.

Each year, however, it gets harder and harder to draw a large enough sample to make the survey results useful to HME companies—and representative of the industry.

We know the survey is slightly time consuming. We struggle to balance making the survey easy to complete with making it meaningful—not to mention keeping the data points consistent from year to year, so there’s a historical perspective. We now have a PDF of all the survey questions, so that you can prepare your answers in advance, and then hop online to plug and play.

But, ultimately, we need your help. Help us help you, and complete the survey today. The deadline is Thursday, July 13.

by: Liz Beaulieu - Friday, June 16, 2017

With the better part of half a year now behind us (where did it go???), I thought I’d dig into Google Analytics and see what the most read stories have been so far this year.

It’s not the first time we do these lists. We do them on a yearly basis for sure, but often I’ll make lists bi-annually or even quarterly to take the temperature of what’s most important to the HME industry.

Obviously, competitive bidding has been a recurring topic in the most read stories for years. So is what the larger providers are up to.

And it’s no different this year, with this list, which covers Jan. 1 through June 15. Eight of the top 10 stories deal with competitive bidding, and the other two deal with larger providers.

What is different: The higher-than-ever level of frustration and anxiety, and the higher-than-ever level of action.

Will frustration/anxiety + action = change? It will be interesting to see what the next six months of top stories have in store.

One thing that surprises me about this list, by the way: There aren’t any stories that deal with audits. If competitive bidding is enemy No. 1, audits are enemy No. 2. But with pricing spreading nationwide last year, I think competitive bidding—and the industry—has come to a head.

Top 10 most read stories (Jan. 1 through June 15)

Tougher times ahead: Impact of rate cuts pile up

CMS adds teeth to bid program

HME infrastructure crumbles

‘Right this wrong,’ providers tell CMS

CMS does ‘whatever it wants,’ say frustrated stakeholders

Stakeholders stand ready to change bid program, with Price’s help

Pacific Pulmonary settles for $11.4M

Uncertainty kills Teijin’s bid for US HME market

Caught on tape: Criticism of bid program mixed in with criticism of Obamacare

Bid relief needs adjustment, stakeholders say

by: Liz Beaulieu - Thursday, June 1, 2017

It’s always a pleasure to speak with Weesie Walker, the executive director of NRRTS and before that a long-time clinician with National Seating and Mobility. Here’s the thing about Walker: She may be one of the most unassuming people you know, but she’s also one of the smartest.

Being as steeped in the complex rehab world as she is, naturally we talked about the urgent need for legislators (or CMS itself, for that matter) to permanently protect accessories for complex power wheelchairs from being influenced by competitive bidding pricing. As it stands, CMS will transition to bid related pricing for these accessories on July 1, a move that will result in cuts of 25% or more according to estimates and threaten the ability of clinicians to continue providing them.

The word that Walker uses most frequently to describe the possibility of this happening: scary.

“What do you do?” she wondered. “When you’re the clinician, how do you approach this with the consumer and explain to them that these cuts are preventing them from getting these accessories. And we hate that word—accessories.”

Walker hates the word because, when we’re talking about complex power wheelchairs, these accessories aren’t really accessories, or “things that can be added to something else to make it more useful, versatile or attractive.” They’re really necessities: indispensible.

Walker says the current situation reminds her of a story her husband likes to tell about a nail and a horse and a lost war. When we got off the phone, I literally googled “nail, horse, lost war.”

It turns out, Walker’s referring to a proverb called “For Want of a Nail,” which has many variations, including one that goes like this:

For want of a nail a horseshoe was lost,

For want of a horseshoe a horse went lame

For want of a horse a rider never got through

For want of a rider a message never arrived

For want of a message an army was never sent

For want of an army a battle was lost

For want of a battle a war was lost

For want of a war a kingdom fell

Long story short: The lack of a nail…caused a kingdom to fall.

In Walker’s mind, without accessories, a wheelchair will fail.

“If you don’t have, say, a head rest, it negates the function of the whole  system,” she said.

Leave it to Walker to put it so simply, yet so impressively.