BALTIMORE – Spending on power mobility devices (PMDs) has taken a nosedive ever since CMS implemented a demonstration project that requires providers to submit prior authorization requests before supplying equipment.
In an update posted April 23, CMS indicates that spending per month on PMDs in seven demo states fell about 50%, from about $15 million in January 2012 to $7 million in December 2012. In non-demo states, spending also fell, from about $23 million in January 2012 to about $17 million in December 2012.
“We believe many national suppliers have adjusted their billing practices nationwide and are now complying with CMS policies based on their experiences with prior authorization in the demonstration states,” the update states.
CMS kicked off the demo in September 2012 in seven states: California, Illinois, Michigan, New York, North Carolina, Florida and Texas.
As of March 2013, CMS says prior authorization requests have been submitted for more than 12,000 Medicare beneficiaries. About half of those requests did not qualify for the benefit. CMS says of those 12,000 requests, 700 were submitted electronically.
Also included in the update:
• CMS says its contractors are conducting reviews of prior authorizations in a timely manner: no more than 10 business days for initial submissions and 20 business days for resubmissions.
• CMS says industry feedback has been positive thus far. Several providers have suggested the process provides a more predictable cash flow. These providers would like the process to be expanded to other states and equipment.
• CMS says it has received no complaints from beneficiaries.
“CMS will continue to closely monitor and evaluate the effectiveness of the demonstration,” the update states. “CMS plans to analyze demonstration data to assist in the investigation and prosecution of fraud.”
WASHINGTON – The HME industry needs to hit the ground running now that a new bill to replace competitive bidding with a market-pricing program (MPP) has been dropped, say stakeholders.
“This is not the beginning of the battle, this is the meat of the battle,” said Joel Marx, AAHomecare chairman. “There is no turning back.”
Right out of the gate, H.R. 1717, the “Medicare DMEPOS Market Pricing Program Act of 2013,” had 25 co-sponsors. Reps. Tom Price, R-Ga., and John Larson, D-Conn., introduced the bill April 24.
Price introduced a similar bill in the previous Congress. That bill eventually gained 94 co-sponsors.
“We’re hoping we can rack up a bunch of additional co-sponsors really quickly,” said Cara Bachenheimer, senior vice president of government relations with Invacare. “Those previous co-sponsors should immediately be signing back on.”
The biggest weapon in the industry’s arsenal: The list of Round 2 contract suppliers, released April 11, which reveals a small number of total contract suppliers and a small number of local contract suppliers in bid areas. Industry stakeholders are working with state associations to flesh that out with data.
“We need to package that up, state by state,” said Bachenheimer. “Then they can see their local providers have been passed over in favor of these—in many cases—brand-new, inexperienced companies.”
For H.R. 1717, the “pay for” is split between reduced interim payments for providers in Round 2 areas until MPP is implemented and unspent federal funds, stakeholders say. Price’s previous bill called for interim payments equal to the single payment amounts, but with reduction in reimbursement of, on average, 45%, that wasn’t an option, stakeholders say.
“This doesn’t hold the HME industry responsible for the whole 45%,” said Jay Witter, vice president of government affairs for AAHomecare. “This sends a signal to Congress that we are serious about paying for a better system, but that we are not solely responsible for the terrible Round 2 results.”
In another effort on the competitive bidding front, Rep. Robert Wittman, R-Va., has submitted language to the Appropriations Committee that would stop funding for the competitive bidding program until MPP is passed. With the introduction of H.R. 1717, that may no longer be necessary, say stakeholders.
“It was a positive step that he put that out there,” said Wayne Stanfield, president of NAIMES. “It shows members are concerned and they are reaching out in whatever ways they can think to stop this.”
Catching the industry by surprise last week: the announcement by Sen. Max Baucus, D-Mont., that he would not seek re-election. Baucus chairs the influential Senate Finance Committee, which oversees Medicare and Medicaid.
Still, the announcement shouldn’t have much impact on current efforts to stop competitive bidding, say stakeholders.
“He’s still there for two more years, he’s still the chairman, and he’s still important,” said John Gallagher, vice president of government relations for The VGM Group.
ALEXANDRIA, Va. – In the biggest sign of industry unity yet, AAHomecare and NAIMES announced April 26 that they will merge into one organization.
“This is a time when we most need to have the industry all on one page,” said Wayne Stanfield, NAIMES president and CEO. “This will create a better, more focused and reenergized trade association.”
The merger, effective May 22, will bring about 140 new members under the AAHomecare umbrella, increasing its membership to about 600 members.
That’s a boost for the association, which has struggled with declining membership rolls in recent years.
“There’s no question when you add 140 new members who are energetic and passionate that this will bring a new energy to AAH,” said AAHomecare Chairman Joel Marx.
The association has also seen some upheaval in the past few months, with the departures of several high-profile staffers, most recently the March announcement that President/CEO Tyler Wilson would step down when his contract expires in September. Those departures and the merger are not connected, says Marx.
“Every organization needs new blood and new ideas and this is a great opportunity,” he said.
Stanfield, who, along with Wayne Sale, launched NAIMES in 2007 as a grassroots advocacy and support organization for independent providers, will join AAHomecare as vice president of provider relations. His immediate goals in his new role include working with state associations to create a district-level grassroots advocacy program, as well as reaching out to allied professional associations in pharmacy, home infusion and long-term care.
“I think everybody attacked everything from a different direction,” said Stanfield. “If we are able to work with all those groups, I think that will be a very positive step forward.”
AAHomecare last week also announced that it has tapped Kim Brummett as its new senior director of regulatory affairs. Brummett has worked at High Point, N.C.-based Advanced Home Care for 15 years. She is also chairwoman of the Jurisdiction C Advisory Council and sits on several industry committees and boards.
ELYRIA, Ohio – Invacare in April submitted two audits to the Food and Drug Administration (FDA) for approval, but it’s an accomplishment that has been overshadowed by another poor earnings showing.
Invacare reported April 25 that net sales for the first quarter of 2013 decreased 4.9% to $337.6 million compared to the same period last year. In the North America/HME segment, where the company has been hardest hit by a consent decree that limits manufacturing at its Taylor Street manufacturing facility, Invacare reported net sales decreased 13.6% to $152.2 million.
“We know this is a difficult time for our shareholders, as it is for our associates and management,” said President and CEO Gerry Blouch during a conference call. “Management owns 15% of stock—it’s our company and our money and our future—so we take this very seriously.”
In the fourth quarter of 2012, when the decree went into effect, Invacare reported nets sales for North America/HME decreased 8.8%.
Things went from bad to worse earlier this year, when, after feedback from the FDA, Invacare had to modify a documentation process that allows it to continue providing power wheelchairs under the decree. The result: The number of new orders that were fulfilled in the quarter with appropriate verification of medical necessity (VMN) documentation would have represented only 4.1% of its unit volume of shipments from the facility in the same period last year.
“Unfortunately, (the additional documentation) has been a bridge too far for many (providers),” Blouch said. “New orders fulfilled for the first quarter with appropriate VMNs were progressively weakened.”
On a positive note, Invacare expects to hear back from the FDA about the two audits, which were conducted by a third-party, in two weeks. Once approved, the audits will pave the way for the company to resume making parts and components that are needed to manufacture products at other facilities; and resume design activities.
Both will give Invacare a much-needed boost, particularly the first. Sales in Asia/Pacific have suffered because the company has been unable to supply facilities there with microprocessor controllers for wheelchairs. Invacare reported net sales for the first quarter decreased 27.6% to $137.6 million for this segment.
By the end of the second quarter, Invacare expects to complete and submit a third audit to the FDA. The agency then has 30 days to schedule its own audit and 45 days after it completes its audit to write up a report.
“How long they’ll be here—I don’t think we know,” said CFO Rob Gudbranson.
Investors asked how Invacare plans to maintain its provider relationships when, for the better part of this year, it will be handcuffed in many ways by the decree. “How confident are you that you’ll be able to resume this business?” one asked. Blouch said Invacare customers are loyal and appreciate the company’s efforts on its behalf, like lobbying representatives in Ohio to take a leading role in exempting complex rehab from competitive bidding.
“We’re optimistic that once we’re back in business those relationships will not have chilled and we’ll be in good shape,” he said.
Until then, Invacare continues to try to take some of the sting out of the sales slump with various cost containment measures. The company recently laid off 68 employees at its Taylor Street facility, and going forward, it plans to do everything from minimizing travel expenses to delaying its move into negative pressure would therapy.
Invacare may also try to raise some cash by selling off non-core businesses. Earlier this year, the company completed the sale of Invacare Supply Group to AssuraMed for $150.8 million. Execs declined to tell investors which businesses may be for sale.
“They’re small businesses…but they’re substantial enough,” Gudbranson said.
SAN DIEGO – Despite pervasive reimbursement pressures, ResMed officials have reported solid earnings for the third quarter and outlined “major growth horizons” for the company’s future.
During an earnings call with investors on April 25, newly minted CEO Mick Farrell detailed ResMed’s plan to drive market penetration in three markets: sleep disordered breathing, COPD and heart failure.
“We are more excited than we have ever been,” he said.
ResMed reported $383.6 million in revenues for the quarter ended March 31, a 10% increase compared to the same period in 2012. It reported a net income of $84.9million, a 31% increase. Revenues in the Americas, specifically, were $215.2 million, a 13% increase.
In sleep disordered breathing, where ResMed already has a significant presence, officials plan to grow the market through education and awareness (it’s only 5% to 15% penetrated, they say) and grow market share with the help of two new masks in the fourth quarter (with more to come in fiscal year 2014, they say).
“We plan to stay ahead of the game by constantly innovating,” said Peter Farrell, executive chairman. “We’re going to provide in the near future smaller, quieter and more comfortable masks.”
ResMed officials say they made a significant stride in the COPD market April 25, when they launched a non-invasive ventilation device cleared by the Food and Drug Administration to treat the disease.
“In the hospital and homecare vent and humidification market, we have a leadership position in Western Europe, but in the U.S. market, there’s significant room for share growth,” Mick Farrell said. “There’s multiple hundreds of millions of dollars of potential.”
In heart failure, ResMed is still in the process of conducting a study to determine whether or not managing CSR-CSA (Cheyne-Strokes respiration with central sleep apnea) with the company’s adaptive servo-ventilation technology increases survival rates and decreases hospitalizations.
One of few gray clouds on the horizon: Medicare’s competitive bidding program. ResMed officials told investors that they’ve been having many conversations with provider customers in the past few weeks about how to attack the, on average, 47% blow to reimbursement for CPAP devices.
“The more sophisticated HME providers understand that there’s a volume opportunity if they’ve won a contract and what they need to do to drive efficiencies into their businesses,” said Jim Hollingshead, president of the Americas.
Investors also wanted to know: Will ResMed cut prices in response to reimbursement pressures?
“There’s a traditional 3% to 5% annual reduction in pricing,” Mick Farrell said. “Could this push (the reduction) a little beyond that, certainly.”
ResMed also reported $1.1 billion in revenue for the nine months ended March 31, a 10% increase compared to the same period in 2012. It reported a net income of $234.1 million, a 32% increase.
WASHINGTON – Both the HME industry and CMS came under fire April 24 during a congressional hearing to review provider business practices and Medicare audits.
The hearing was the first for the Subcommittee on Financial & Contracting Oversight, which is led by Sen. Claire McCaskill, D-Mo.
“One significant concern is the prevalent practice among some medical equipment companies to aggressively call, email and write Medicare beneficiaries to directly market their products,” McCaskill said, citing a doctor from Chesterfield, Mo., who was recently “besieged by faxes from companies asking her to sign prescriptions from these patients so that the companies can bill Medicare.”
Two HME providers—Jon Letko, president of Milford, N.J.-based U.S. Healthcare Supply; and Dr. Steve Silverman, president of Boca Raton, Fla.-based Med-Care Diabetic and Medical Supplies—were invited to testify but declined. AAHomecare submitted a statement for the record.
“I continue to believe that these companies can provide us useful information that would assist the subcommittee in its oversight,” McCaskill said. “We will continue to discuss the possibility of these witnesses appearing in front of us at a future date.”
In the latter half of the hearing, McCaskill, a former auditor herself, took CMS’s auditors to task for recovering only $34 million of roughly $10 billion in improper payments identified in 2011.
“How much of their contract is based on how well they do and how much of it do they get regardless of whether or not they’re complete failures at it?” she asked.
Testifying at the hearing were two representatives from CMS: Peter Budetti, deputy administrator and director of the Center for Program Integrity; and Laurence Wilson, director of the Chronic Care Policy Group. When McCaskill asked for data separating improper payments due to fraud versus those due to technical errors, Budetti could not supply the information.
“The way that the statistical sample is structured and the way that it measures improper payments is not a very sensitive tool in terms of actually looking at fraud,” he said.
McCaskill was not satisfied with Budetti’s response.
“Well then why do we have it?” she asked. “Why are we auditing anything?”
WASHINGTON – CMS is pushing back the start date for edits to the Provider Enrollment, Chain, and Ownership System (PECOS). In a bulletin, CMS cited “technical issues” for delaying the May 1 start date. The edits, once implemented, will deny claims that contain the names of physicians not enrolled in PECOS. CMS said it would advise on a new implementation date in the “near future.” In the meantime, informational edits will continue to be sent for those claims that would have been denied had the edits been in place.
Former TSS employees sue over stock plan
NEW BRAUNFELS, Texas – The Scooter Store founder Doug Harrison and others who manage the company’s employee stock ownership plan (ESOP) now face a lawsuit by former employees. Three former employees filed a class-action lawsuit on behalf of 2,938 plan members in U.S. District Court for the Western District of Texas on April 23, seeking to recover damages and all other forms of relief as a result of “the defendants’ multiple breaches of fiduciary duty.” According to the lawsuit, those breaches include: 1.) Harrison “usurped opportunities” available to the ESOP when he sold or otherwise transferred or conveyed his shares on or after Feb. 1, 2011, to Sun Capital Partners and these shares were placed under the ownership of Sun Scooter Store; 2.) Harrison, in coordination with TSS Holdings, TSS and Houlihan Lokey Financial Advisors, manipulated the price per share for the common stock so that he and/or his family members could sell their shares at prices above fair market value; and 3.) Harrison, Principal Life Insurance Company and First Banker Trust Services failed to diversify the assets in the ESOP when they knew that the value of the common shares was very likely to diminish in value substantially from 2011 through to the present. The lawsuit also claims that $7.5 million in cash in the ESOP as of Dec. 31, 2011, has not been accounted for. The ESOP has 13.48% equity in The Scooter Store, according to the company’s recent bankruptcy filing. Members who are vested can sell their shares when they retire or leave the company. While The Scooter Store, the company, is not named as a defendant in the lawsuit, it also faces two lawsuits, another from former employees and one from the city of New Braunfels.
The outcome of those lawsuits is up in the air as The Scooter Store proceeds with the bankruptcy process.
TSS, CMS reach agreement
NEW BRAUNFELS, Texas – The Scooter Store has reached an agreement with CMS that lifts a payment freeze on the company, according to an article from mysanantonio.com. The company can now receive payments from CMS, allowing it to avoid liquidation, according to the article. After The Scooter Store filed for bankruptcy April 15, CMS said it was entitled to freeze payments to the company to offset millions in overpayments, the article noted. Under the agreement, The Scooter Store will continue to repay CMS $83,000 a month, a figure that will increase to $125,000 a month starting July 1, according to the article. A judge approved the agreement April 25.
Senate panel backs Tavenner nomination
WASHINGTON – Marilyn Tavenner, Barack Obama’s nominee to oversee CMS, received the unanimous backing of the Senate Finance Committee Tuesday, according an article from Reuters. The panel’s support could pave the way for a vote by the full Senate that could make Tavenner the program’s first official administrator since 2006. A former hospital company executive and nurse, Tavenner has been CMS’s acting administrator since 2011, and has broad bipartisan support. Among Tavenner’s supporters is House Majority leader Eric Cantor, R-Va., who introduced her at an April 9 confirmation hearing.
HHS proposes increased rewards for reporting fraud
WASHINGTON – The Department of Health and Human Services (HHS) has proposed increasing to $9.9 million the rewards paid to Medicare beneficiaries and others whose tips about suspected fraud lead to the recovery of funds, according to a press release. The rewards are part of a proposed expansion for the Senior Medicare Patrol Program, which is designed to educate beneficiaries on how to prevent, detect and report Medicare fraud and abuse. “Today’s announcement is a signal to Medicare beneficiaries and caregivers, who are on the frontlines of this fight, that they are critical partners in helping protect taxpayer dollars,” stated Kathleen Sebelius, secretary of HHS. Under the proposed changes, a person that provides specific information leading to the recovery of funds may be eligible to receive a reward of 15% of the amount recovered, the release noted. The changes are modeled on an IRS program that has returned $2 billion in fraud since 2003.
Washington state passes CRT bill
OLYMPIA, Wash. – The Washington state legislature has approved HB 1445, a bill that creates a separate benefit category for complex rehab technology (CRT) within the Medicaid program, according to a press release from NCART. The bill, similar to a CRT bill currently being pursued at the federal level, passed unanimously in the Senate (46 to 0) and overwhelmingly in the House of Representatives (92 to 3). Helping to pass the bill: a state CRT workgroup comprised of manufacturers, providers, consumers and clinicians, the release noted. The bill has three main objectives: protecting access for complex needs patients to necessary technology and services; improving safeguards for the delivery and provision of CRT; and providing patients the opportunity to avoid institutionalization. The legislation is expected to be signed into law in mid-May and take effect Jan. 1, 2014, according to the release.
AOPA: Victims 'will walk and run again'
ALEXANDRIA, Va. – The American Orthotic and Prosthetic Association (AOPA) is leading a coalition to provide access to care for uninsured/underinsured amputee victims of the Boston Marathon bombings, according to a press release. Members and partners of AOPA have pledged to give these amputees and those with related mobility impairment the necessary access to artificial limbs, customized bracing and mobility assistive devices. They would like to ensure that all victims “will walk and run again,” according to the release.
The Strategic Partnerships Division of Harrington Management Group (HMG) has introduced a new direct-response marketing model for certain product categories in the HME industry. HMG provides the proprietary material and ad placement service, and handles all inbound calls…Philips Respironics has launched a new mobile self-management system for obstructive sleep apnea (OSA) patients. The SleepMapper, a web-based solution, allows patients to access personalized feedback, education and interactive tools…Convaid, a manufacturer of custom pediatric wheelchairs, was recently awarded the 2013 Long-Term Investor Award by the city of Torrance, Calif. The award recognized Convaid for its service and contributions to greater Los Angeles County, and for its innovative strategies and partnerships with the city…The Food and Drug Administration (FDA) has cleared ResMed’s variable positive airway pressure (VPAP) device for the treatment of COPD. The ResMed VPAP COPD, which will be sold in the United States, is designed to mitigate acute symptoms for COPD suffers, reducing hospital readmissions…With 22 mergers and acquisitions completed last year, Thomson Reuters has ranked The Braff Group as the leading healthcare M&A advisor for 2012. This was the second year in a row that The Braff Group received top billing.
U.S. Rehab, The VGM Group’s alliance for complex rehab providers, has promoted Greg Packer to president. Packer, whose background includes stints in sales management positions at Pride Mobility Products and Biocore Medical Technologies, has been with VGM since 2009…CarePoint Medicalhas hired Ronald Reed as vice president of business development. Reed will be responsible for helping the company expand into new categories and grow its revenue base…At its 2013 Spring Convention & Exhibition earlier this month, the Midwest Association for Medical Equipment Services (MAMES) presented its “Above and Beyond Award” to John Gallagher, vice president of government relations for Waterloo, Iowa-based The VGM Group; and Lehn Straub, formerly of Lincoln, Neb.-based Jim’s Home Health.
Through its acquisition of complex rehab provider Rehab Health Care (RHC), National Seating & Mobility (NSM) has added four new branch offices in Virginia. Founded in 1986, RHC provides products and services in four Virginia cities: Norfolk, Richmond, Fishersville and Charlottesville.
YARMOUTH, Maine – Industry attorneys sum up the bulk of the activity in the wake of CMS’s announcement of the contracts suppliers for Round 2 with one word: subcontracting.
“It’s the biggest thing going on,” said Edward Vishnevetsky, an associate with Munsch Hardt in Dallas. “Providers want to know, how do we create proper subcontracting agreements?”
The interest is coming from both contract and non-contract suppliers, attorneys say, but more often than not, the latter is initiating the activity.
That’s because subcontracting is one of the only ways, at this point, for non-contract suppliers to stay in the Medicare game when Round 2 goes into effect in 91 areas on July 1, attorneys say.
“Non-contract suppliers get the benefit of maintaining their relationship with their referral sources and patient base, which can benefit them for other kinds of activities,” said Neil Caesar, president of the Health Law Center in Greenville, S.C. “Everybody’s doing it.”
For contract suppliers, subcontracting is a good way to get their foot in the door in areas and/or for products that are new to them, attorneys say.
“They need the subcontractor’s referrals,” said Jeff Baird, chairman of the Health Care Group at Brown & Fortunato in Amarillo, Texas. “They know that the subcontractor has hospitals that are loyal to it.”
In the nine areas in Round 1, which went into effect Jan. 1, 2011, subcontracting worked well, attorneys say, but it’s more of a tactical move than a profit center.
“Neither party makes much money,” Baird said. “No matter how you slice and dice it, both parties are dividing up a smaller pie.”
In addition to subcontracting, attorneys say they’ve seen an increase in the number of contact suppliers making acquisitions, mostly through asset purchases.
“I’m seeing a realignment in the industry,” Baird said. “In the CBAs, I’m seeing bigger players that are gobbling up smaller players who were awarded contracts.”
Still, the bulk of the activity remains in subcontracting, attorneys say.
“Whereas in Round 1, there was often a decision to be done with it, the majority of what I’m seeing in Round 2 is strategic moves for sustenance,” Caesar said.
According to the competitive bidding implementation contractor (CBIC)*, the supplier standards limit subcontracting agreements to:
1. Purchase of inventory;
2. Delivery and instruction on the use of Medicare-covered items; and
3. Maintenance and repair of rented equipment.
Services like intake and assessments, coordination of care, submission of claims, ownership responsibility and product safety must be provided by the contract supplier.
MIAMI – Sanomedics International, a medical technology holding company, has acquired Prime Time Medical, a Largo, Fla.-based HME provider, for $3 million, according to a press release.
The acquisition is Sanomedics’ third in the HME industry.
“Prime Time Medical is another step in our continual process of expanding our portfolio while we implement our growth strategy,” stated Keith Houlihan, co-founder and president of Sanomedics.
Sanomedics seeks to acquire sleep therapy operating businesses to develop a portfolio of products and services in this growing market. Its goal: to provide sleep apnea patients with an “end-to-end” service platform, according to the release.
Prime Time Medical, a provider of mobility devices, portable oxygen concentrators, compressors, diabetic supplies and respiratory products, posted about $5 million in revenue for 2012, according to the release.
The acquisition is tentatively scheduled to close April 24, 2013.
FLETCHER, N.C. — These days it’s not unusual to hear HME providers talk about eliminating expenses, but Marcus Suess has a particularly lofty goal: eliminate electricity costs.
“As competitive bidding and reductions in reimbursement continue, we should be prepared to offer lower prices and be more competitive,” said Suess, president of All-States Medical Supply. “If we can remove our electricity costs, that will help.”
So in February, the mail-order provider of diabetes and other supplies installed a net-zero solar panel system. The panels generate kilowatts of energy, which All-States then sells to local power company Duke Power. In turn, Duke Power sells energy back to the provider.
Although the amounts of energy generated vs. the amounts of energy consumed by All-States will vary depending on factors such as the use of air conditioning, at press time, the solar panels were generating double the amount of energy that the provider was consuming. All-States paid nearly $10,500 in electricity costs in 2012, and the provider expects to recoup that cost in 2013.
“At the end of the year, Duke should be basically paying us the same as we are paying them,” said Suess.
Suess described the upfront investment as substantial, although state and local tax credits totaling about 65% helped. He expects the system to take five years to start paying for itself.
“It is definitely a risk, and it was a risk we made before this last round of competitive bidding,” he said. “We were certainly unsure of our place in the HME field, but we knew we’d be around regardless.”
All-States hosted a community open house in April, inviting members of the local chamber of commerce, the healthcare community, and those interested in green energy.
“Even though we don’t sell locally, the point is for people to start knowing who we are in the community, as well as educate people on the benefits of solar energy,” said Tanya Fletcher, director of marketing.
LAKE WALES, Fla.– 3B Medical thinks its timing couldn’t be better. The company, which late last year became the North American sales arm for BMC Medical, a Beijing-based manufacturer of CPAP devices and other sleep therapy products, believes it has the answer to Medicare’s whopping 47% cut, on average, for that product category as part of Round 2 of competitive bidding. Here’s what Susan Craig, sales manager, had to say about how 3B Medical plans to shake things up with a lower-cost alternative, something that, until now, has been missing from the sleep therapy market.
HME News: 3B Medical is a start-up, but BMC has been around for a while, right?
Susan Craig: BMC started in sleep diagnostics (polysomnography equipment) in the mid- to late 1990s and entered the sleep therapy market (CPAP, Auto-CPAP and Bi-level CPAP devices) in 2007.
HME: What was the motivation behind forming 3B Medical and the company’s decision to sell BMC’s CPAP devices in the United States?
Craig: The CPAP market is a huge market and it’s underpenetrated. We thought we could bring their devices in and sell them here as a quality device at a good price point.
HME: I read somewhere that 3B Medical offers CPAP devices that are 30% to 40% less expensive than those of the leading manufacturers in this space. How are you able to do that?
Craig: We don’t have high overhead. If you look at a Respironics or a ResMed, they’re huge companies. We don’t have an R&D budget—BMC does that. We don’t have a sales staff—they’re independent reps under contract. We don’t have a huge marketing budget—it’s more of a grassroots effort.
HME: You’ve covered price; now talk about quality.
Craig: What marks our line is that even our most basic model is full featured with our proprietary RESlex technology, which allows exhalation relief for easy breathing. The iCode is another feature. It’s a button on the device that you press to get a value that you plug into a web site to get compliance data.
HME: 3B Medical’s timing is good, with the Round 2 payment amounts set to take effect July 1.
Craig: Absolutely. Things are moving along for the company progressively, positively and exponentially. We’re seeing a lot of interest right now and we expect that to only increase in July. To stay in business, providers have to look at alternatives to the more expensive devices out there.
NEW BRAUNFELS, Texas – The Scooter Store announced today that it plans to sell substantially all of its assets under section 363 of the U.S. Bankruptcy Code.
As part of those efforts, the provider has filed a voluntary Chapter 11 case in the U.S. Bankruptcy Court for the District of Delaware.
“Unfortunately, historical overhangs coupled with an increasingly complex regulatory environment and mounting economic pressure in the healthcare sector have significantly impacted the company’s ability to operate under its current model,” stated Martin Landon, CEO. “The company is using the Chapter 11 vehicle to seek to create a new, financially healthy provider that operates in strict accordance with all legal, contractual and regulatory requirements, which would help the company complete the business turnaround that we were brought in to do.”
Under a new model, The Scooter Store would use its local distribution businesses to maintain its core product offering, but it would operate with a streamlined footprint and a new focus on working with healthcare professionals, according to the release.
The Scooter Store has received commitments for debtor in possession (DIP) financing to allow it to maintain operations and current workforce levels throughout the restructuring process. It has already filed a variety of first-day motions seeking approval to pay employee wages, and honor customer warranties and programs, according to the release.
“The commitment for debtor in possession financing is a vote of confidence in our planned path forward by our lenders,” stated Lawrence Young, chief restructuring officer, in the release.
The Scooter Store’s suppliers can expect to be paid for goods and services delivered after the filing, according to the release.
The provider seeks to retain Morgan, Lewis & Bockius and Young Conway Stargatt & Taylor as counsel; and the investment banking firm Morgan Joseph TriArtisan to assist in the sale process.
PORT WASHINGTON, N.Y. – Drive Medical announced today that one of its subsidiaries has acquired certain assets of Mason Medical, a move that expands its presence in the pressure prevention market.
“The addition of Mason’s product offerings will greatly enhance Drive Medical’s ability to meet the needs of customers and patients with additional innovative, functional products in the pressure prevention area,” stated Harvey Diamond, chairman and CEO of Drive Medical, in a press release.
Mason Medical’s product line includes low air loss products, alternating pressure and lateral rotation air mattresses, gel overlays, and multi-layered foam mattresses. It also includes a line of wheelchair cushions.
Drive will continue to manufacture certain Mason Medical products in the United States, as well as overseas, and providers will continue to purchase and order the products as they always have, according to the release.
Financial and other terms of the transaction were not disclosed.
BALTIMORE – Industry stakeholders believe CMS may have shot itself in the other foot when it released the names of the 799 suppliers who won 13,126 contracts as part of Round 2 of competitive bidding.
“There are glaring problems with this list,” said Wayne Stanfield, president and CEO of NAIMES. “CMS has failed on every level: They have selected unqualified companies; they have given hundreds of contracts to suppliers that have no ability to fulfill them. It goes on and on.”
The list of contract suppliers follows the release on Jan. 30 of the single payment amounts—an almost unbelievable 45% and 72% below the fee schedule, on average, for HME and diabetes supplies, respectively.
Stakeholders say the “glaring problems” in the 307-page list include the small number of contract suppliers (799 for 91 areas in Round 2 vs. 356 for nine areas in Round 1) and the small number of local contract suppliers in any given bid area (some estimate a one-to-four ratio of local to non-local suppliers).
“If you take Apria (in Pearl City, Hawaii) out of the CPAP category in Honolulu, the next company that comes up is 3,000 miles away in California,” said Rob Brant, CEO of AMEPA. “One is 6,000 miles away in Florida.”
CMS says it awarded 90% of contracts to suppliers that are “already established in the bid area, the product category or both.” Stakeholders say it was a calculated move to report the information this way. By contrast, in Round 1, the agency broke it down: 76% of contracts to suppliers already furnishing the items in the bid areas, and 97% of contracts to those with experience with the items.
“They’re lying through their teeth,” Stanfield said.
Stakeholders are also taking CMS to task for awarding 63% of the contracts to small suppliers, those with $3.5 million or less in gross revenues. While this may seem like a positive, when you consider how few contract suppliers there are and how few of them are local, it becomes alarming.
“I don’t know how they’ll serve the sheer volume of beneficiaries,” said Cara Bachenheimer, senior vice president of government relations for Invacare.
Stakeholders plan to weave all of this into a powerful case for delaying the start of Round 2 on July 1 and, ultimately, replacing competitive bidding with a market-pricing program (MPP).
“It’s going to provide us with some good ammunition,” Bachenheimer said.
BALTIMORE – CMS released a list of 18 contract suppliers for the national mail-order program for diabetes supplies April 9, but it’s a list that could look different when July 1 rolls around, say industry sources.
“Several of the companies have been put up for sale, and we know of one or two that have already been sold,” said Tom Milam, an industry consultant and former provider.
Right now, at one end of the spectrum are large and well-known companies like CCS Medical, which received more than $45 million in Medicare payments for test strips in 2011, according to the HME Databank; Arriva Medical ($18.7 million); and United States Medical Supply ($25.7 million). Expect to see a few more familiar names among the contract suppliers, suppliers say, with two or three other large companies that didn’t get contracts looking to buy back into the market.
At the other end of the spectrum are companies like Kohll’s Pharmacy ($51,000). David Kohll has received several offers from buyers, but he’s not selling.
“The amount I am getting offered is probably more than I would make by doing it myself,” said Kohll, owner of the Omaha, Neb.-based pharmacy. “But, I am a pharmacist and I have been doing this for decades. I don’t want my patients to be forced to go somewhere else.”
Big or small, contract suppliers say they are ready.
“We knew it was going to be a stretch, but a lot of the costs companies incur are in operations, so if you streamline, you have a chance,” said Erin Anthony, director of specialty services operations for CCS Medical. “We also took a close look at our formulary and made sure we were partnered with the right manufacturing partners.”
For Round 2, CMS required bidders to include brands that have at least 50% market share and prohibits them from encouraging beneficiaries to switch brands.CCS, for its part, plans to offer popular products from Bayer, Roche and Lifescan, and all of the contract suppliers list at least one major brand.
Still, with reimbursement at $10.41 for 50 test strips, some sources expect an aggressive push toward lower-priced products.
“We are going to be compliant with the market share rule, but I don’t think that will hold for a lot of companies,” said Marcus Suess, president of All-States Medical Supply. “There’s just no way, if they are just going to do diabetes, to live with that price point.”
When it all shakes out, expect the market to be dominated by three top players, says one source.
“There will be a second tier with some decent-sized companies and after that, it drops off quite a bit, but we think all those companies will see growth,” said the source.
WASHINGTON – Sen. Charles Shumer, D-N.Y., has agreed to introduce a Senate companion bill to create a separate benefit for complex rehab, Don Clayback, executive director of NCART, announced April 10.
The news came just as complex rehab stakeholders were preparing to hit the Hill to promote H.R. 942 as part of the first-ever National CRT Leadership and Advocacy Conference.
“The timing couldn’t have been better,” said Clayback. “Having a bill in both chambers sends the message that there is already broad support for the separate benefit. And we’re in a perfect position—right at the start of the congressional session, with a key senator already behind us.”
Reps. Joe Crowley, D-N.Y., and Rep. Jim Sensenbrenner, R-Wis., introduced H.R. 942 in March. Stakeholders expect Schumer to drop his bill this month.
Having that kind of support made the 220-plus congressional visits conducted during the event by 170 attendees all the more powerful, says Simon Margolis, executive director of NRRTS
“Whenever we mentioned Sensenbrenner, Shumer and Crowley, we got a very positive response,” he said. “This is the first year people have reported no negatives.”
The two other arms of the event—a leadership day and a Medicaid advocacy update—were well received, said Clayback.
“The energy in the room was very compelling,” he said. “We had very good speakers and some great interaction.”
A panel of industry presidents and CEOs kicked off the leadership day, followed by educational sessions on key topics, including surviving audits, getting third party contracts, conducting repairs, and collecting evidence to support complex rehab’s effectiveness.
The Medicaid update brought attendees up to speed on a pilot program that NCART launched in December to gauge the impact of fighting denied claims for complex rehab. Attorneys Lewis Golinker and Garth Corbett, representing NCART, reported that they have reversed nine out of 10 denials so far, and plan to appeal the tenth.
ORLANDO, Fla. – Rotech Healthcare announced April 8 that it has filed voluntary petitions for reorganization under Chapter 11 of the U.S. Bankruptcy Code.
As part of its reorganization plan, Rotech will eliminate about half of its secured debt, the company stated in a press release.
“Today’s actions will enable us to create a capital structure that will provide a foundation for sustained profitability and future growth,” stated Steven Alsene, president and CEO of Rotech, in the release. “This effort is being undertaken to fix our balance sheet and will not affect our operations. Given the support of our secured stakeholders, we expect the reorganization process to conclude quickly.”
With widespread consensus among key stakeholders, Rotech plans to receive confirmation and successfully complete the reorganization within 90 to 150 days.
Additionally, in what Rotech says is a vote of confidence, Silver Point Finance, the holder of an existing $23.5 million term loan, has agreed to provide debtor-in-possession financing of up to $30 million. Rotech will use this financing for ordinary working capital purposes and to ensure normal operations during the Chapter 11 process, according to the release. On April 10, it was granted its first-day motions, which are designed to ensure normal daily operations during the process.
According to Rotech’s bankruptcy filing, the creditors holding the largest unsecured claims are ResMed ($13.2 million), Respironics ($7.3 million) and Invacare ($2.2 million), among others. The company’s equity security holders include Wynnefield Partners (3.8 million shares), Deutsche Bank (2.3 million shares) and Deerfield Capital (1.8 million shares).
WASHINGTON – Sen. Claire McCaskill, D-Mo., has scheduled a hearing to address HME marketing tactics, according to a press release. In advance of the hearing, entitled “Oversight and Business Practices of Durable Medical Equipment Companies,” McCaskill is encouraging those who have experienced aggressive sales tactics from HME companies, such as “repeated telephone calls and aggressive sales pitches,” to call her office and share their stories. “It’s clear talking to folks in and out of Missouri that what’s going on in this industry deserves scrutiny,” she stated in the release. “These sales tactics are costing taxpayers money.” The hearing, slated for April 24, is the first for McCaskill’s new panel: the Subcommittee on Financial & Contracting Oversight. Witnesses testifying before the panel will include representatives from CMS, along with individuals representing companies in the HME industry, according to the release.
Apria completes debt refi
LAKE FOREST, Calif.—Apria Healthcare has secured a term loan credit facility of $900 million, according to a press release. Additionally, the company has issued notices of redemption for $700 million of its outstanding 11.25% senior secured notes (series A-1) due 2014 and $160 million of its outstanding 12.375% senior secured notes (series A-2) due 2014.
N.Y. members of Congress to CMS: Delay Round 2
WASHINGTON – A bipartisan group of New York lawmakers has asked CMS to delay the expansion of competitive bidding. A letter signed by 19 New York members of Congress expresses “concern” with Round 2 of the program, set to kick off July 1, particularly with respect to the recently announced single payment amounts. CMS has designed a program, the letter states, “that does not hold bidders accountable for their bids, does not ensure that bidders are qualified to provide the products in the bid areas, and produces bid rates that are financially unsustainable over the long term.” The letter also blasts a lack of transparency from CMS. “Congress has repeatedly asked CMS for detailed information regarding the competitive bidding system and CMS has failed to provide even basic information about the program,” the letter states.
CPAP treatment improves productivity, study finds
BERLIN, Germany – CPAP treatment bolsters productivity at work for those suffering from sleep apnea, according to a study conducted by the European Respiratory Society and the European Sleep Research Society. Using the Endicott Work Productivity Scale, a questionnaire designed to assess workplace productivity, and the Epworth Sleepiness Scale, a questionnaire that measures daytime sleepiness, researchers found that 35 of 45 sleep apnea patients who adhered to CPAP treatment for three months showed significant improvement at work. The 10 patients who did not comply with the treatment showed no significant improvement, the study found. “Previous research has shown the potential benefits of CPAP to patients’ health and quality of life and our findings add to this body of evidence,” stated lead author Evangelia Nena, MD, PhD. The study will be presented April 11 at the Sleep and Breathing Conference in Berlin.
M&A: Home Care Medical, Valley Respiratory
New Berlin, Wis.-based Home Care Medical, a provider of HME, respiratory care and home infusion products, has acquired HomeCare Resources, based in Sheboygan, Wis. The acquisition gives the company a third retail store in southeastern Wisconsin. Home Care Medical will expand the offerings at HomeCare Resources, which specializes in CPAP therapy, mobility aids, bathroom therapy and other HME, to include oxygen therapy, ventilator management, rehab technology, and bracing and compression garments…Phoenix-based Valley Respiratory Services, a provider of HME, power mobility devices and respiratory services, has acquired RTA Homecare, adding three new locations in Mesa and Casa Grande, Ariz., according to a press release. With the new acquisition, the company now owns seven locations throughout Arizona.
Vendor short takes
Invacarewill release its financial results for the first quarter of 2013 before the market opens on Thursday, April 25. In a conference call scheduled that same day at 8:30 a.m. EST, the company plans to discuss its earnings and give an update on certification audits relating to its consent decree* with the Food and Drug Administration (FDA) at its Taylor Street wheelchair manufacturing facility…For the first time in its 37-year history, Convaid has a new look. The company has launched a new logo and tag line. Coming this summer: a new website. “Convaid has also redefined its mission to help create a better life for special needs youth and their families by exemplifying compassion, customization and being the best in class,” according to a press release…QS/1 has released a tool to help pharmacies better serve Medicare Part B customers, and comply with regulations and audits. QS/1’s Medicare Part B Compliance Documentation allows pharmacies that use NRx or PrimeCare Pharmacy Management Systems to retain the documents required for audits.
BALTIMORE – CMS proceeded with its competitive bidding program today by releasing the names of 799 contract suppliers for Round 2.
CMS awarded 13,126 contracts to 799 suppliers in 91 competitive bidding areas for certain HME. Additionally, it awarded contracts to 18 suppliers as part of its national mail-order program for diabetes supplies.
On July 1, these contract suppliers will begin providing DME at new payment amounts that are, on average, 45% below the current fee schedule for certain HME and, on average, 72% below the current fee schedule for diabetes supplies.
The contract suppliers for HME have 2,988 locations to serve Medicare beneficiaries in the competitive bidding areas. The suppliers for diabetes supplies have 52.
CMS awarded 90% of contracts to suppliers that are already established in the competitive bidding area, the product category or both. Small suppliers, those with gross revenues of $3.5 million or less as defined by the program, make up 63% of the contract suppliers.
In all, CMS received 48,424 bids from 2,641 suppliers during a 60-day bidding period from Jan. 30 to March 30 last year.
CMS expects competitive bidding to save an estimated $25.7 billion between 2013 and 2022.
Now that the names of the contract suppliers are public, CMS will begin educating suppliers, beneficiaries and referral sources about competitive bidding.
For a list of contract suppliers:
For a fact sheet:
For CMS’s press release:
ELYRIA, Ohio – In a big sign that an agreement with the Food and Drug Administration (FDA) is dampening sales, Invacare has announced that it has laid off an additional 68 employees at its manufacturing facility on Taylor Street.
Sales have been impacted by a provision in the agreement that requires providers to document that a wheelchair or seating system made specifically by Invacare is medically necessary for a particular condition.
“We didn’t know what to expect and now, with a few months under our belts, we know it’s a struggle for people to complete the forms,” said Lara Mahoney, director of investor relations and corporate communications. “We’re still out there educating people about the forms and there are people who want to fill them out, but we have to take this step to align our workforce.
“Our new orders aren’t what they were a year ago,” she added.
This most recent layoff follows the layoff of 143 employees in December, when Invacare announced its agreement with the FDA. The company now employs about 150 at the facility compared to about 350 a year ago.
Between the first and second layoffs, Invacare had shifted employees at the facility from full-time (five-day shifts) to part-time (three-day shifts), but that wasn’t enough, Mahoney said.
“These are talented associates, so we were trying to make adjustments to the business based on production demands and keep as many employees as we could,” she said. “But we realized we needed to reduce the number of employees rather than spreading them across shifts.”
Mahoney declined to quantify the decrease in sales, noting that Invacare execs will “give color” to that on April 25, when the company releases its first quarter earnings. She also declined to comment on whether or not, once the FDA agreement is lifted, Invacare will resume prior employment levels at the facility.
“Our first priority is to demonstrate compliance to our third-party auditor and then to the FDA,” she said. “Once we have the FDA’s approval, we will resume operations and then resume our marketshare.”
Invacare expects to complete two audits in the first quarter and a third audit in the second quarter. After completing the second audit, the company may resume design activities.