How Investing in DME Could Save Billions of Dollars

Published in Government Relations on February 11, 2022

VGM and Leitten Consulting recently published an updated study, “Competitive Bidding -A Decade Focused on the Wrong Prize: The Case for Medicare Investment in DME in 2021.” This study looks at how investing in Durable Medical Equipment (DME) instead of trying to control distribution, specifically regarding chronic obstructive pulmonary disease (COPD), obstructive sleep apnea (OSA), and falls, can save the government billions of dollars, as well as allow for more providers and greater care of beneficiaries.

History of the Study

The idea for the first study came about in 2010 when Wayne Sale, a DME provider in Richmond, Virginia, met Brian Leitten while both doing work for a nonprofit. They both soon realized the need for this type of study and data. Prior to the first study, the industry was stuck on anecdotal data. VGM Government Relations was also realizing the need for crystal clear data in how we could save the government money. To help support studies like these VGM started The Last Chance for Patients Choice, a 5013(c) to help fund studies, research, and other efforts.

The culmination of these events led to four studies looking at potential cost savings to the government through investment in durable medical equipment. The most recent study looks at cost savings associated with COPD, OSA, and falls. A key takeaway in all these studies is that a little bit of investment could save big dollars in the long run.

Initial results from the studies were surprising and the amount of savings were in the billions in the areas mentioned above. But that was just in the beginning. Since then, because of the reduction in reimbursement and various rounds of competitive bidding, the data from the 2021 study was even more dramatic.

“In 2010 we saw that for every dollar that was invested in DME, the amount of potential savings for CMS was dramatic. It was on the order of magnitude of 20 to one and 10 to one,” stated Brian Leitten, CEO of Leitten Consulting.

The study was updated in 2014, 2017, and most recently in 2021. After each study, the research clearly indicates that every time CMS drives the prices down on DME, the potential of their savings if they invest in DME goes up.

CMS Has Missed the Winning Prize

The study has looked at spend and savings in two separate ways. First, for every dollar spent, X dollars can be recovered by investing in DME. Second, it looks at the overall potential for savings, the size of the forest. “CMS has been busy cutting down some trees and, and they've missed the much larger winning prize by focusing on short-term cost-cutting, which is the wrong prize. That's what we mean by the reference in the title of the study,” remarked Leitten.

CMS has been trying to save dollars on DME by eliminating fraud, which most people agree they have done. However, according to this study, CMS has also been driving costs down for the purpose of driving costs down, causing them to miss the potential forest of financial savings.

By identifying people who need DME and getting it to them proactively, the potential number of savings dollars is a large number. It's about one hundred billion dollars, annually. Over the next five years. That can be broken down into the three categories studied, but there is a significant amount in falls and mobility alone as approximately 6.3 million seniors who fall every year and injure themselves need treatment and DME. If the medical equipment was provided proactively, those falls could be eliminated or reduced significantly.

Mark Higley, VP of VGM Regulatory Affairs noted, “An interesting statistic, the entire DMEPOS Medicare spend is hovering around $11-$12 billion, and the potential savings is over $100 billion, that is an incredible difference.”

“We've found that consistently the savings that can be had by investing in DME properly at the CMS federal level, and this can generate dramatic savings, impactful savings that can make a change in their overall budget,” continued Leitten.

Investing in DME

Investing in DME properly requires a two-pronged approach. The first one is investing in physical DME; getting walkers, wheelchairs, C-PAP machines, or supplemental oxygen to Medicare beneficiaries who need it, before they need it. The second prong is making an investment in the infrastructure to help providers and insurers identify the Medicare beneficiaries who need the equipment, so they can get that equipment at or just before their time of need.

Leitten notes, “This infrastructure has not been developed by CMS. There are a number of tools that have been developed locally, regionally by different insurers. But CMS needs to make an effort to go out and bring those tools together and put together a program to educate and train providers to help them identify people who need the equipment and to get it to Medicare beneficiaries as early as they can.”

Let’s look at three key areas in this study.

Mobility DME

There is an estimate of over 6 million senior falls annually that results in injuries that require treatment. The average cost to treat a fall for a Medicare beneficiary is around $8,500. The study estimates that the annual savings potential for CMS is north of $45 billion.

It is also important to mention that in addition to the $100 billion in potential savings, there is another 20% that can be added on as savings because that is the cost that Medicare beneficiaries pay in their copayments and deductibles.

mobility savings

COPD and Supplemental Oxygen Therapy

It is estimated that 50% of Medicare beneficiaries with COPD are undiagnosed. In 2020, CMS spent $584 million on supplemental oxygen therapy equipment for Medicare beneficiaries. Of that, approximately 82% ($470 million) went to beneficiaries suffering from COPD. The average cost to provide supplemental oxygen equipment, accessories, and supplies to COPD beneficiaries was approximately $605.44. Leitten figures that for every dollar CMS invests in proactively providing oxygen to Medicare COPD beneficiaries will save CMS $23.84 and beneficiaries and insurers would save $5.96.

Side note: We found out through the study that CMS and many other government agencies are making decisions based off incredibly old data, data that is 10-15 years old, but being positioned as the most recent data. Leitten has discovered through his decade of research and updating this study that the data they use is not accurate, and it is old. Leitten has been able to identify more recent data that gives us a much better picture of what is going on and where the potential opportunities lie.

oxygen savings

OSA and CPAP Therapy

In relation to CPAP therapy, it is estimated that about 80% of people worldwide with sleep apnea are undiagnosed. In 2020, CMS spent $1 billion on CPAP equipment for Medicare beneficiaries. That is more than 10 million Medicare beneficiaries with OSA. Managing this condition costs over $25,000 per patient, because of all the exacerbations that are tied to OSA. It costs nearly $1,200 per person to treat COPD with CPAP therapy, which amounts to just under $1 million. A recent publication provided a breakdown of annual per capital health service payments for beneficiaries with untreated OSA. When adjusted to 2020 dollars, those incremental costs averaged $25,594 per beneficiary. For every dollar that CMS invests in proactively providing CPAP equipment to Medicare OSA beneficiaries, CMS can avoid $21.37 in payments to treat beneficiaries and beneficiaries and insurance companies can save $5.34 in copays and deductibles.

cpap savings

The dollar amount is important, but that isn’t the only consequence we are seeing as a result of lower reimbursement rates. There has also been a reduction in locations to service at-risk patients. Many providers have gone out of business. Some states in the United States have lost 45% of their locations to service patients.

As many people are aware, there is a break in the Competitive Bidding Round 2021 as savings were not achieved and there are many discussions happening around Round 2024. Studies like this one become extremely important for DME providers to be able to take to their members of Congress so show them how investing a few more dollars into DME can save big dollars in the long run.

This study shows that if $1 is spent on preventing falls, it saves the government $40 and the beneficiary saves $10; if $1 spent on oxygen, it saves the government $24 and the beneficiary $6; if $1 is spent on COPD, it would save the government $22 and the beneficiary $5. When you start adding all the numbers up, the cost savings are significant. This is what we need Congress to understand.

Each time this study has been done, it has seen DME prices dropping and cost of treating beneficiaries going up faster than the prices dropping. The net effect has been to increase the potential leverage of what we refer to as investing in needed DME.

Right now, would be a perfect time for the leadership of CMS to turn the corner and to go in a different direction. Start investing in DME, figure out where DME is needed, develop a comprehensive system to help caregivers and providers identify those who are at risk (those who are going to incur huge treatment costs over the next five years), and get the equipment to them that will avoid the problems.

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