Editor's Note

Reaching Critical Mass

Has the industry finally hit the point where it simply can't deal with Medicare?

• By David Kopf
• Oct 01, 2016

It’s almost impossible not to notice how two key industry developments are tied directly at the hip: the plight of rural providers and their patients due to the national expansion of competitive bidding, and the reverberation that is being felt across more than just the Medicare world, thanks to that expansion.

In fact, two industry luminaries discuss both issues in this issue. Read the contribution from Jeffrey S. Baird, Esq., chairman of he Health Care Group of Brown & Fortunato, P.C. to this issue’s industry roundtable, and read AAHomecare President and CEO Tom Ryan’s Observation Deck column. Baird discusses how providers are becoming unable to take Medicare patients, and Ryan discusses the fallout from TRICARE’s recent decision to cut reimbursement based on Medicare rates as of the July 1 implementation of national bidding expansion.

The TRICARE decision is particularly disturbing. HME providers helping beneficiaries of TRICARE, an insurance program serving active duty and retired military personnel and the families, suddenly began seeing rates discounted below national competitive bidding rates for items covered by the bid program. TRICARE’s cuts began for claims after July 1, when CMS implemented the reduced reimbursement per national expansion, and came as a shock to HME providers serving TRICARE patients.

I spoke with one provider, Chris Smythe, who is the vice president and general manager of Tycon Medical Systems Inc., with locations in Norfolk and Portsmouth, Va.. Tycon started noticing that the reimbursement rates being paid by TRICARE “had just plummeted,” according to Smythe, starting with claims placed in early July, according to Tycon. The cuts came as a complete surprise. “We didn’t realize this was going to happen,” he says.

TRICARE has been a dependable, “black box” for funded patients over the years for providers such as Tycon that serve large numbers of active and retired military service members. While various competitive bidding cuts raged around Tycon, TRICARE offered one bright spot of trouble-free funding, according to Smythe.

“We’re in a heavily military area and they’ve always been a good payer,” he adds. “We have great relationships around here with referral sources in the area that provide us with TRICARE business. … So, TRICARE was the last thing we every really worried about.”

TRICARE’s rates are not only tied to Medicare reimbursement rates, but discounted off those rates. Prior to the bid expansion, this was not an issue for HME providers serving TRICARE beneficiaries, because the overarching fee schedule had not been impacted by competitive bidding. Once competitive bidding was expanded nationally and the full cuts were implemented on July 1, TRICARE appears to now be basing its reimbursement on the competitive bidding derived rates plus its discount.

“So, where a provider might have had a contract with TRICARE that said you were 30 percent below the Medicare fee schedule — and that was okay, given that Medicare competitive bidding was 40 percent [or more] below the fee schedule,” Smythe explains. “When suddenly that fee schedule dropped to competitive bidding rates, now you’re 30 percent below competitive bid rates.

“When most companies are saying that competitive bid rates are unsustainable, 30 percent below that would be laughable — if it wasn’t so dire,” he adds.

Now, let’s combine that “multiplier” effect that competitive bidding is having on the private payer space with what’s going on with the rural providers. As we reported in our September issue, providers across the nation were sharing their concerns regarding how the full, July 1 national bid expansion cuts were impacting their businesses and patients. And in this issue, we have seen the mainstream news media beginning to pick up this story.

What this is telling me is that the industry might very well be reaching the point where it simply can’t work with Medicare in the way it used to. I urge you to read this issue’s roundtable starting on page 28, because now is the time to think about new business models.

This article originally appeared in the October 2016 issue of HME Business.