MEDICARE PROPOSED RULE REVAMPS O2 REIMBURSEMENT
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CMS:“…this equates to an average reduction in (oxygen/equipment) payment…of approximately 22 percent.”
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On July 27, CMS released proposed rule 1304-P, which effectively revamps the oxygen classification system by splitting stationary and portable oxygen contents into two separate payment classes.

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The proposal calls for a third payment class for new technologies, such as portable concentrators and home transfilling systems. 1304-P also calls for additional supplier requirements "to safeguard beneficiaries", such as requiring that all suppliers continue furnishing oxygen equipment or capped rental items throughout the entire rental period. (The proposed rule also updates the Home Health Prospective Payment System Rate for calendar year 2007.)

The changes apply to provisions within the Deficit Reduction Act of 2005 (Section 5010B), which caps Medicare oxygen reimbursement at 36 months and then transfers equipment title to the beneficiary. One requirement of the reimbursement change is that it be “revenue neutral”. Medicare suggests it has taken money from one area (e.g., stationary concentrators) and applied it to other payment categories. However, CMS, on pages 117-119 of the proposal, which discusses suppliers who offer liquid and gaseous equipment, summarizes “Therefore, this is the level of monthly reimbursement that would be lost after the 36-month period for suppliers that furnish oxygen and oxygen equipment to beneficiaries in these situations and who continue to furnish contents to these beneficiaries. Based on current fee schedule amounts for all oxygen and oxygen equipment, this equates to an average reduction in payment (from $199.36 to $156.07) of approximately 22 percent.”

Under the payment methodology, CMS proposes the following new national monthly rental rates on Jan. 1, 2007:

  • Stationary payment: $177
  • Portable add-on: $32
  • Oxygen generating portable equipment add-on for portable concentrators or transfilling systems: $64
  • Stationary contents delivery: $101
  • Portable contents delivery: $55

CMS claims key aspects of the proposal as it relates to supplying oxygen and equipment and impact to Medicare beneficiaries, include:

  • CMS will utilize its authority to establish payment classes for oxygen.
  • CMS will ensure that beneficiary access to the latest technology.
  • CMS will continue the payment for delivery of contents for liquid and compressed gases.
  • CMS will develop supplier safeguards for the beneficiary.
  • CMS will pay suppliers for repair and service of beneficiary equipment.

However, VGM believes the proposal, if effected, will:

  • Limit beneficiary access to ambulatory oxygen
  • Limit beneficiary access to innovation and new technology
  • Limits beneficiary freedom to relocate on a permanent or temporary basis prior to transfer of title of ownership
  • Limit beneficiary access to choice of suppliers
  • Limit beneficiary access to 24/7 service, and maintenance support

Tom Pontzius, president of Nationwide Respiratory, provides further comment with regard to the limits noted above.

The proposed rule change (DME provisions only; Home Health PPS deleted) can be found here.

A backgrounder on the DME portion can be found here.

Comments will be received by CMS until September 25, 2006. Please ensure you make comments. Comments may be made at: http://www.cms.hhs.gov/erulemaking

Please contact VGM at 800.642.6065 or Nationwide Respiratory at 877.233.3079 if you have questions or if we can be of any assistance.

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