Study: Reimbursement Model for Home Medical Equipment is ‘Unsustainable’

The study, led by the American Association of Homecare, reveals that Medicare reimbursement rates cover less than 90% of the cost of home medical equipment.

Maureen Kingsley

In the face of an aging population, baby boomers reaching eligibility age for Medicare, and a continuing cultural desire to spend senior years at home rather than in nursing facilities, a new study concluded that Medicare reimbursement rates for home medical equipment are inadequate.

On average, the government program covers only about 88% of the overall cost of home medical equipment for providers, according to the study released by the American Association for Homecare (AAH), a group that represents providers of home medical equipment and services. 

"The data are remarkably consistent in showing that the reimbursement-to-cost ratio is significantly less than 100%," Allen Dobson, PhD, one of the study's authors, says in a press release. "No matter how the data is sliced, by organization size and/or product category, the current reimbursement model does not cover provider costs. That is likely unsustainable over the long term."

The study, Analysis of the Cost of Providing Durable Medical Equipment to the Medicare Population: Measuring the Impact of Competitive Bidding, found that "the current Medicare competitive bidding program for home medical equipment is producing financially unsustainable rates, and faults the bidding program for its lack of transparency," according to an AAH press release. Its authors take the position that CMS does not adequately consider all costs associated with supplying home medical equipment to Medicare beneficiaries when it assesses the viability of bids. 

Average reimbursement of the equipment surveyed was less than 90% of the overall cost of providing the products "when all operational costs and the cost of goods are considered," AAH's press release states. Non-liquid oxygen earns the highest reimbursement rate, at 94.6%, while continuous positive airway pressure equipment and associated supplies take the lowest position, at a 67.83% rate. Other equipment rating particularly low includes standard wheelchairs with footrests, at 71.35%; standard medical beds, at 69.58%; and standard wheelchairs with elevating leg rests, at 80.55%. None of the surveyed products earned 100% reimbursement.

To bolster its case that the current Medicare competitive bidding program (CBP) for home medical equipment is "financially unsustainable," AAH points to a Government Accountability Office (GAO) report released to the public last month that finds that the number of beneficiaries using home medical equipment services and supplies fell nearly three times as fast in competitive bidding areas (-17%) as in non-competitive bidding areas (-6%) after implementation of two CBP phases that began July 1, 2013. (Under the CBP, administered by CMS, only competitively selected contract suppliers can furnish certain durable medical equipment at competitively determined prices to beneficiaries in designated competitive bidding areas.) In that report, AAH adds, GAO also notes "instances of access problems and delivery delays which may be increasing beneficiary hospital use."

For their part, CMS officials maintain that CBP has helped limit fraud and abuse, and may have "curbed unnecessary utilization of some CBP-covered items in competitive bidding areas." They add that available evidence from the agency's monitoring efforts indicate that the two CBP phases that began in July 2013 have had "no widespread effects on beneficiary access."

Dobson, however, maintains that the GAO findings are "consistent with" AAH's study results. "Taking both of these studies together," he says, "it's evident that the competitive bidding process should be carefully examined and monitored to determine if problems encountered warrant fundamental changes to the program in order to avoid the possibility of severe dislocation to the home medical equipment industry and the patients it serves."

Maureen Kingsley is a contributor to Qmed. 

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