Think a 32% cut is bad? Try 50%

A series of steep cuts to Medicare reimbursement for overnight oximetry threaten to consolidate the number of vendors that provide that service and, as a result, limit the options of HME providers.

Since 2008, the relative value unit (RVU), which helps determine reimbursement, for CPT code 94762 has dropped from 0.84 to 0.44, about 50%. That means, for example, reimbursement in Alabama has decreased from $23.72 in 2008 to $13.29 in 2012.

“It's not always unhealthy to have cuts force companies to look at things differently and find ways to be more efficient,” said Aaron Hale, owner and president of Middleton, Idaho-based AAA Medical Services, which provides overnight oximetry to about 1,500 HME providers nationwide. “Unfortunately, the only way we have left to cut is to reduce staff and wages. Our people now make just over minimum wage and, as an extra precaution, I'm not taking a salary this year. Something's wrong with this picture.”

Industry stakeholders don't know the rationale behind the reimbursement cuts, especially since a 27% cut to the physician fee schedule has never, to date, gone into effect, and other CPT codes in the Part B Physician Fee Schedule have remained stable.

What's more: There's one more cut for overnight oximetry scheduled for 2013.

AAA Medical is one of about 15 to 20 vendors that provide overnight oximetry. Like AAA Medical, most of those vendors are small companies. They're the ones feeling the pinch of the cuts the worst.

“We had 22 employees and we've had to let six go,” Hale said. “We're having to do the same amount of work with fewer people, which has affected our turnaround times.”

Vendors like Decatur, Ala.-based Instant Diagnostic Systems (IDS) and Coral Springs, Fla.-based VirtuOx are larger companies that have been better able to take the cuts on the chin because of their automated processes and large volumes.

“The first thing we did was to grow through it,” said Kyle Miko, co-founder and vice president of VirtuOx. “But due to reductions in reimbursement, we have had to lay off a lot of good staff and have had to automate their jobs—billing, posting, faxing, patient statements—so, unfortunately, there's not a lot of human intervention.”

No one likes to see reimbursement cuts. That's why IDS and others are coordinating meetings with CMS to discuss the cuts.

“It certainly comes off the bottom line,” said Mark Sorrells, president and CEO of IDS. “It makes this more of a marginal business.”