Medicare:

Home Oxygen Program Warrants Continued HCFA Attention

HEHS-98-17: Published: Nov 7, 1997. Publicly Released: Nov 13, 1997.

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Pursuant to a congressional request, GAO reviewed the appropriateness of Medicare's reimbursement rates for home oxygen, focusing on: (1) its comparison of Medicare and Department of Veterans' Affairs (VA) payment rates; (2) concerns about access to liquid oxygen systems and lightweight portable equipment for patients who are highly active; and (3) standards for the services associated with meeting patients' home oxygen needs.

GAO noted that: (1) Medicare's fee schedule allowances for home oxygen exceeded GAO's adjusted estimate for the competitive marketplace rates paid by VA by almost 38 percent; (2) the rate reductions mandated by the Balanced Budget Act of 1997 will bring Medicare's fee schedule more into line with the competitive marketplace costs for home oxygen; (3) concerns have been raised that these reductions could reduce Medicare beneficiaries' access to portable units; (4) under Medicare's modality-neutral payment system, home-based liquid oxygen systems, which patients can use to refill portable units, do not offer suppliers the attractive profit margins associated with lower-cost oxygen concentrators; (5) lightweight, less cumbersome portable systems, which may increase patient mobility, are more expensive than traditional portable gas cylinders; (6) GAO's analysis shows that VA patients were receiving more portable units and refills than Medicare patients were, even though VA's payment rate, adjusted for comparability, was lower than Medicare's; (7) the upcoming reductions in Medicare allowances may lead some suppliers to provide Medicare patients with the least costly systems available, regardless of their patients' needs; (8) the Department of Health and Human Services (HHS) could use its authority under the recently enacted legislation to establish separate reimbursement rates for oxygen concentrators, liquid systems, regular portable units, and lightweight portable units, as long as the impact on overall Medicare costs is budget neutral; (9) the evolution in technology and costs of oxygen delivery systems--and the clinical indications for initiating and terminating the use of more expensive, lightweight portable units--warrant further examination by HHS and the Health Care Financing Administration (HCFA) before deciding whether Medicare's reimbursement system should be restructured; (10) HCFA has not established standards to ensure that home oxygen suppliers provide Medicare patients even basic support services; (11) oxygen suppliers who serve Medicare patients need only comply with basic registration and business requirements associated with obtaining a Medicare supplier number; (12) in contrast, VA encourages its medical centers to contract with suppliers who are accredited by the Joint Commission on Accreditation of Healthcare Organizations or comply with its standards; (13) VA patients typically received more frequent service visits than Medicare patients; and (14) the Balanced Budget Act requires HHS to establish service standards for Medicare home oxygen suppliers.

Recommendations for Executive Action

  1. Status: Closed - Implemented

    Comments: CMS, through a contractor, has conducted a long range study to monitor beneficiaries' use of, and access to, stationary liquid oxygen systems and gas portables. CMS has also studied access issues related to two competitive bidding projects that include oxygen. Both of these undertakings show that access to oxygen has not been negatively affected, and is not an issue of concern.

    Recommendation: The Administrator of HCFA should monitor trends in Medicare beneficiaries' use of and access to stationary liquid oxygen systems and liquid and gas portables.

    Agency Affected: Department of Health and Human Services: Health Care Financing Administration

  2. Status: Closed - Not Implemented

    Comments: CMS, through a contractor, has conducted a long range study to monitor beneficiaries' use of, and access to, stationary liquid oxygen systems and gas portables. In 2001, CMS' provider education staff will work with its policy component to develop an appropriate education campaign. CMS has not reported any further action since 2002.

    Recommendation: The Administrator of HCFA should monitor the availability and costs of new and evolving oxygen delivery systems, including lightweight portable systems and oxygen conserving devices, and work with the medical community to: (1) evaluate the clinical benefits associated with the use of such equipment; (2) identify the patient populations most likely to benefit from the use of such equipment; and (3) educate prescribing physicians about existing options in oxygen delivery systems and their right to prescribe the system that best meets their patients' needs.

    Agency Affected: Department of Health and Human Services: Health Care Financing Administration

  3. Status: Closed - Implemented

    Comments: CMS, through a PRO contractor, has conducted a long range study to monitor beneficiaries' use of, and access to, stationary liquid oxygen systems and gas portables. Based on the PRO study, CMS has decided that no restructuring of the payment system is needed.

    Recommendation: The Administrator of HCFA should advise the Secretary of HHS whether a budget-neutral restructuring of the Medicare reimbursement system for home oxygen is needed to provide patient access to the more expensive home oxygen systems, and whether Medicare controls can be implemented to ensure that the use of such systems is limited to patients that can benefit from their use.

    Agency Affected: Department of Health and Human Services: Health Care Financing Administration

  4. Status: Closed - Implemented

    Comments: In August 2006, CMS published quality standards for suppliers of home oxygen and other durable medical equipment, prosthetics, orthotics, and supplies. These standards, among other things, require home oxygen suppliers to provide respiratory services 24 hours a day, 7 days a week as needed by the beneficiary and follow delivery and set-up practice guidelines established by the American Association for Respiratory Care.

    Recommendation: The Administrator of HCFA should work with the medical community, the oxygen industry, patient advocacy groups, accreditation organizations, and VA officials to promptly finalize service standards for Medicare home oxygen suppliers.

    Agency Affected: Department of Health and Human Services: Health Care Financing Administration

 

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