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Week of March 18, 2024

HEADLINE NEWS Lawmakers Consider Cutting Reimbursement for Part B Drugs WASHINGTON--Before slashing reimbursements for inhalation and infusion drugs, Medicare should consider the hidden costs of providing these drugs, the American Association for Homecare told a group of U.S. Senators last week. Testifying before the Senate's Finance Health Subcommittee on March 14, Tom Connaughton, AAHomecare's president and chief executive officer, urged lawmakers to consider the service costs--which include delivery, patient training, monitoring and government compliance measures--involved in providing these unique drugs to Medicare beneficiaries. "The acquisition cost of the drug is only a fraction of the overall cost of caring for these patients at home," Connaughton said. Because inhalation and infusion drugs fall under Medicare's Part B umbrella, which covers durable medical equipment, "there is no recognition of the professional services and other functions that are widely recognized as necessary to providing inhalation and infusion drug therapies in the home in a safe and effective manner," he continued. Nonetheless, Tom Scully, administrator of the Centers for Medicare and Medicaid Services, is asking Congress to bring Medicare's reimbursements for these drugs in-line with actual drug costs by changing the reimbursement formula. Currently, CMS reimburses inhalation and infusion drugs at a rate of 95 percent of the average wholesale price, or AWP. However, many studies have found that the AWP far exceeds--in some cases by as much as 65 percent--what most doctors and suppliers pay for the drugs, Scully told the subcommittee. In fact, two government studies, released on the same day Scully and Connaughton testified before the Senate, concluded that Medicare could save as much as $543 million annually by cutting reimbursements for the inhalation drugs albuterol and ipratropium bromide. "We understand that unlike most drugs covered by Medicare, albuterol [and ipratropium bromide] usually [are] provided by suppliers rather than administered by physicians," the U.S. Health and Human Services Department's Office of Inspector General said. "These suppliers obviously need to make a profit from the products they provide, yet the spread between what Medicare reimburses for [these drugs] and the price at which suppliers are able to purchase [these drugs] is significant." In light of these and other findings, "we need to take action this year to implement an appropriate payment system," Scully testified. With or without Congress' help, CMS plans to act immediately on the AWP issue, Scully said. "The Administration wants to work with Congress on a legislative remedy that benefits from competition in drug pricing. However, I am sure you will agree that needed improvements in Medicare's drug payment system are overdue, and the Administration is prepared to take action." Despite these strong words, Scully signaled a willingness to consider service costs when reimbursing inhalation and infusion drugs. "We need to be certain that Medicare pays providers appropriately for their services when they furnish drugs to beneficiaries," he said. Echoing these sentiments, Sen. John Rockefeller, D-W.Va., chairman of the health subcommittee, said, "We need to correct Medicare's payment for these drugs and ensure that providers are paid the right amount to administer these drugs." Rockefeller also called on providers to educate lawmakers about the costs of providing inhalation and infusion drugs. "Providers need to furnish us with data on their actual costs associated with administering drugs as soon as possible," he said, explaining that Congress plans to act on the AWP issue this year. To read OIG's recent reports on AWP and the costs of inhalation drugs, go to http://oig.hhs.gov/oas/oas/hcfa.html. New Oximetry Testing Policy Eases Burden for M+C Beneficiaries, Providers BALTIMORE--A new policy from the Centers for Medicare and Medicaid Services will drop the oxygen retesting requirement for beneficiaries transferring from the Medicare + Choice program to the fee-for-service program, a CMS official told HomeCare last week. After July 1, 2002, oxygen patients switching from M+C to fee-for-service can use the results from their most recent oximetry test to obtain initial certification, according to transmittals 1740 and 1742, published on Feb. 13 and March 1 on CMS' Web site. "The policy is not in effect right now because of limitations in our system," the official explained. "But after July 1, the policy will apply regardless of the date of service on the claim." In light of this information, Medicare's Region B durable medical equipment regional carrier, Administar Federal, has suggested that providers hold all oxygen claims for beneficiaries who are switching from M+C to fee-for-service until July 1. To read these transmittals, go to http://www.hcfa.gov/pubforms/transmit/transmittals/comm_date_dsc.htm. Study Finds Early Signs of Diabetes in Obese Children BOSTON--Last week, The New England Journal of Medicine published another in a series of studies linking obesity to type 2 diabetes. This time, however, the subjects were 167 obese children and adolescents from multiethnic backgrounds. Thirty minutes after undergoing a two-hour glucose-tolerance test, one quarter of the 55 obese children tested--and 21 percent of the 122 obese adolescents tested--showed signs of impaired glucose tolerance, according to lead author Ranjana Sinha. Additionally, 4 percent of the obese adolescents exhibited silent type 2 diabetes, which means they already had the disease, but exhibited no obvious symptoms. In light of these findings, Sinha concluded that "impaired glucose tolerance is highly prevalent among children and adolescents with severe obesity, irrespective of ethnic group." To learn more about this study, go to http://content.nejm.org/cgi/content/short/346/11/802.

PROVIDER NEWS NHHC Posts Record Second Quarter Revenue, Income SCARSDALE, N.Y.--National Home Health Corp. announced record revenue and earnings for the second quarter ended Jan. 31, 2002. Revenue for the quarter was $20.47 million, an 11 percent increase from the $18.48 million mark posted for the same period a year ago. Net income for the quarter was $1.42 million, or 26 cents per share, compared to a net income $959,000, or 18 cents per share, posted for the same quarter a year ago. "We are very pleased with these operating results," said Steven Fialkow, president and chief executive officer of NHHC. "Our record revenue for the quarter is the company's ninth consecutive quarter of revenue growth." MANUFACTURER NEWS Midwest Medical Acquires Perigon Branches ST. LOUIS--Midwest Medical Supply has acquired six distribution branches from Foothill Ranch, Calif.-based Perigon Medical Distribution, including locations in Hartford, Conn.; Waukesha, Wis.; Carmel, Ind.; Phoenix; Salt Lake City; and Caster, Wyo., according to a Midwest Medical press release. These branches will increase Midwest Medical's annual revenue, which currently is approximately $80 million, the company said.

SPOTLIGHT Health Care Costs to Skyrocket Through 2011, CMS Projects BALTIMORE--If recent predictions from the Centers for Medicare and Medicaid Services are correct, U.S. health care spending could double during the next decade, reaching $2.8 trillion by 2011 and accounting for 17 percent of the nation's gross domestic product. To meet these predictions, health care spending will grow at an average annual rate of 7.3 percent between now and 2011, CMS said in a March 12 report published in the journal Health Affairs. However, while CMS expects prescription drug spending to experience consistent double-digit growth during the next decade--making prescription drugs the fastest-growing health care sector--the agency predicted that overall Medicare and Medicaid spending will decelerate after 2002. "By 2003, annual Medicare spending growth is expected to fall 5.5 percentage points to 4 percent, and annual Medicaid spending growth is expected to fall 3.5 percentage points to 7.8 percent," CMS said in a press release. In the private sector, spending growth rates will swing like a pendulum, according to CMS. This year, the growth rate for private health care spending will peak at 9.4 percent, reflecting rising household incomes, the shift to less-restrictive forms of managed care and higher prices caused by weakened competition. Then, beginning in 2003, growth in private health care spending will decline gradually, "reflecting slower per capita real income growth, a revival of more restrictive forms of managed care, a rise in the uninsured population and an increase in the use of consumer cost-sharing," the report said. The past decade has marked a significant drop in Americans' out-of-pocket health care costs, CMS continued. But this trend could wane. "As employers continue to shift costs to employees, and the uninsured population rises, these declines are expected to be much slower than experienced during the 1990s," the agency added. To compile this report, CMS' Office of the Actuary used historical National Health Expenditure data through 1999, as well as a model framework that includes statistical, economic and judgmental factors, the agency said. For more information on this report, go to http://www.healthaffairs.org.

SOURCES SAY HARRISBURG, Pa.--As the federal government prepares to offer prescription drug benefits to millions of Americans, lawmakers are looking closer than ever at prescription drug prices . . . and pharmacies are chafing under the scrutiny. At the same time, more than a dozen states are considering reducing Medicaid reimbursement rates for prescription drugs to bring reimbursements in-line with actual drug costs. Currently, the government calculates drug reimbursements based on the average wholesale price, or AWP, which studies have found to be significantly higher than what most doctors and suppliers pay for prescription drugs. But America's drugstores already are stretched to the breaking point, as Karen Rugen of Rite Aid recently told The New York Times. "We're going to have to re-evaluate our participation in Medicaid," she said. "We believe everyone should have access to medical care. It's just hard to do it below your costs." WASHINGTON--Treating the health problems resulting from obesity costs Americans more than treating smoking-, drinking- or poverty-related conditions, according to a recent study from the Rand Corporation. "The study reveals that obesity is linked to very high rates of chronic illnesses--higher than living in poverty, and much higher than smoking or drinking," said lead author Roland Sturm. "Rand's findings suggest that weight reduction should be an urgent public health priority. The prevalence of obesity, and its strong association with chronic conditions, indicate that weight reduction would mitigate the effects of obesity on the occurrence of specific diseases and would significantly improve quality of life." OAKBROOK TERRACE, Ill.--Home medical equipment providers may want to consider conducting emergency preparedness drills, according to the Joint Commission on Accreditation of Healthcare Organizations. "There is currently no requirement for conducting an emergency preparedness drill in organizations that provide only home health or home medical equipment services," JCAHO said in its Jan./Feb. newsletter. "However, freestanding ambulatory infusion providers and hospice organizations must comply with Standard EC.2.8.2, 'Drills are conducted regularly to test emergency preparedness.'" Additionally, there are three emergency preparedness standards common across all home care segments, the organization said.

INDUSTRY BRIEFS John Eisenberg, director of the Agency for Healthcare Research and Quality in Rockville, Md., died March 10. Eisenberg, 55, had suffered from a yearlong illness caused by a brain tumor. A memorial fund that will support health care initiatives for research, education, service and policy has been created in Eisenberg's name. Contributions may be made to The Dr. John M. Eisenberg Healthcare Fund of the Community Foundation for the National Capital Region, 1112 16th St., NW, Suite 340, Washington, DC 20036. The U.S. Bankruptcy Court for the District of Delaware has approved Arlin Adams as Chapter 11 trustee of Denver-based Coram Healthcare. Adams, an attorney, is retired from the U.S. Court of Appeals for the Third Circuit. Camp Healthcare, Atlanta, has hired Fred Levine as its Western region sales manager. Levine, who began his career with Camp in 1991, has more than 10 years' sales experience in the health care industry. Elizabeth Duke has been named administrator of the U.S. Department of Health and Human Services' Health Resources and Services Administration. Duke has been acting administrator of Rockville, Md.-based HRSA since March 2001. From 1997 to 2001, she was deputy assistant secretary for administration in HHS' Administration for Children and Families. Norcross, Ga.-based Pediatric Services of America has appointed Scott Lindsay to the newly created position of vice president of pharmacy services. Previously, Lindsay was vice president of ancillary services for the Visiting Nurse Health System in Atlanta. PSAI also appointed Julie Bowman as vice president of home medical equipment services. Bowman, who is the company's compliance officer, previously was the regional vice president for home medical equipment services. She replaces Jim Henderson, who is retiring. Amigo Mobility, Bridgeport, Mich., has named Frank Gorski its director of sales. Gorski is responsible for the development of domestic and international health care and commercial sales for the company, and for Amigo's seven sales representative groups.

IN OTHER NEWS The Washington-based Health Insurance Association of America has published HIPAA Action Items for Home Care Providers, the first in a planned series of Health Information Portability and Accountability Act compliance texts and courses to be released by HIAA in the coming months. The workbook includes a definition of home care's HIPAA responsibilities, instructions on creating a HIPAA implementation plan, and sample documents for business associates, patient notification and consent. To order HIPAA Action Items, call (800) 828-0111 or use the online order form available at http://www.hiaa.org. Also, HIAA is offering a discount to home care providers on the registration fee for its HIPAA Symposium, April 2-3, at the Chicago Westin O'Hare. Call (703) 968-8863 to register or for more information. Bannockburn, Ill.-based Option Care's specialty pharmacy division, OptionMed, has entered into an agreement with Blue Cross Blue Shield of North Carolina whereby OptionMed will provide certain injectable prescription drugs to BCBSNC's participating physicians for patient administration in their offices. Physician participation in the program is voluntary. Terms of the agreement were undisclosed. Under an agreement with the Antitrust Division of the U.S. Department of Justice, the Federal Trade Commission now has responsibility for clearance procedures for antitrust matters involving health care. The agreement was announce March 7 and is expected to increase the efficiency and effectiveness of each agency's antitrust activities. Viasys Healthcare of Conshocken, Pa., has entered into an agreement to market and distribute Golden, Colo.-based HealthTech's MedGem product. The MedGem device is a portable, hand-held calorimeter that measures respiratory airflow and oxygen consumption, and determines resting metabolic rate. The home care industry soon will be better represented at the Oakbrook Terrace, Ill.-based Joint Commission on the Accreditation of Healthcare Organizations. Beginning in July, a home care professional will be invited to attend and participate in meetings of the JCAHO board of commissioners in a non-voting capacity. Also, a JCAHO board member will be selected to serve as the home care program liaison and to attend meetings of the Home Care Professional and Technical Advisory Committee and the program's four users groups. And, a group of home care leaders, including the chairperson of the Home Care PTAC and the leaders of each of the four users groups, will meet annually with the executive committee of the JCAHO board to share information or issues of concern related to the home care field. JCAHO is accepting nominations for the home care representative to attend its board meetings. Nominators may send their candidate's resume to Laura Reeder, director, board and committee activities, by e-mail to [email protected], by fax to (630) 792-3090, or by mail to Joint Commission, One Renaissance Blvd., Oakbrook Terrace, Ill. 60181.

STOCKS Investment firm Prudential has initiated coverage on three health care companies: Valley Forge, Pa.-based AmerisourceBergen at a "buy" rating; Dublin, Ohio-based Cardinal Health at a "buy" rating; and San Francisco-based McKesson at a "buy" rating. Company High Low PE Ratio 3/8/02 3/15/02 Change Allied Healthcare (AHPI) 4.28 3.00 104.50 4.02 4.00 (0.02) American HomePatient (AHOM.OB) 1.70 0.16 N/A 0.74 0.70 (0.04) AmerisourceBergen (ABC) 72.00 42.00 31.11 66.32 70.05 3.73 Apria Healthcare (AHG) 29.85 19.50 18.18 22.70 23.90 1.20 Cardinal Health (CAH) 77.32 56.67 33.34 65.19 69.06 4.13 CareCentric (CURA) 3.00 0.46 N/A 0.95 0.90 (0.05) Chad Therapeutics (CTU) 4.35 0.69 N/A 4.17 3.83 (0.34) Coram Healthcare (CRHEQ.OB) 0.76 0.13 N/A 0.55 0.53 (0.02) Gentiva Health Services (GTIV) 25.50 15.60 28.08 23.45 23.78 0.33 Invacare (IVC) 41.25 28.50 31.77 33.70 35.72 2.02 Johnson and Johnson (JNJ) 64.69 40.25 34.99 63.66 64.60 0.94 Lincare Holdings (LNCR) 34.39 22.25 21.67 26.03 26.63 0.60 Matria Healthcare (MATR) 40.00 12.25 27.31 27.00 22.82 (4.18) McKesson (MCK) 41.50 23.40 90.68 33.38 37.22 3.84 National Home Healthcare (NHHC) 19.85 6.10 12.97 11.62 11.95 0.33 Option Care (OPTN) 22.15 6.81 22.27 15.51 17.15 1.64 Pediatric Services of America (PSAI) 14.10 4.69 18.48 13.00 11.55 (1.45) Praxair (PX) 61.11 36.50 22.56 60.31 59.98 (0.33) ResMed (RMD) 62.20 35.20 85.00 37.81 39.50 1.69 Respironics (RESP) 37.88 23.79 25.98 30.61 31.00 0.39 Transworld Healthcare (TWH) 4.83 2.21 N/A 3.75 3.76 0.01 Tyco (TYC) 60.09 22.00 12.63 34.95 33.41 (1.54) Walgreen (WAG) 44.85 28.70 44.44 39.46 40.00 0.54

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