44% of Homecare Pharmacies Will Stop Providing Inhalation Drug Therapy for Seniors if the Medicare Dispensing Fee is Cut Significantly, USA

Main Category: Caregivers / Homecare
Article Date: 03 Oct 2005 - 10:00 PDT

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Nearly half (44 percent) of homecare pharmacies will stop providing home inhalation drug therapy to older and disabled Americans who need it if there is a substantial cut to the Medicare dispensing fee for this therapy. Half (50 percent) said they would curtail services to Medicare beneficiaries and 3 percent said they would go out of business altogether as a result of a substantial cut to the fee.

These are some of the conclusions of a national follow-up survey of homecare pharmacies commissioned by the American Association for Homecare (AAHomecare) conducted during August and September 2005 by Muse and Associates, a Washington-based research firm. Also, AAHomecare notes serious flaws in the Health and Human Services Office of Inspector General (OIG) report, released yesterday, that grossly understates the service components of home inhalation drug therapy.

Muse and Associates Survey of Homecare Pharmacies

The homecare pharmacies reported in the Muse survey that their total dispensing costs for services they provide related to nebulized inhalation drugs are $66.55 for a 30-day supply and $138.80 for a 90-day supply. Fewer than one percent of shipments used the 90-day supply schedule. Most homecare pharmacies (77 percent) do not use the 90-supply at all. The survey gathered responses from 82 homecare pharmacies, which together provide inhalation drug therapy to more than half of all of the Medicare beneficiaries who use inhalation drug therapy.

"This updated Muse survey data indicates that the dispensing fee should be increased from the current $57 per monthly supply for this essential respiratory therapy that nearly one million seniors and disabled Americans need," said Kay Cox, President and CEO of the American Association for Homecare. "There is no data that supports a cut in the dispensing fee for 2006."

In the Muse survey, inhalation services were grouped into seven major categories that represent 117 distinct inhalation therapy services. The survey respondents indicated that all seven major service categories should be accounted for in the dispensing fee.

Office of Inspector General Report on Services Provided for Inhalation Drug Therapy

AAHomecare notes serious flaws in yesterday's OIG report, "Review of Services Provided by Inhalation Drug Suppliers." The OIG report fails to include the core services for dispensing such drugs. For example, the OIG did not include:
pharmacy related work needed to fill an order, order processing, packaging and shipping, delivery, billing and coding, quality control, as well as administrative and overhead costs. Thus, the OIG report is of limited value in determining the appropriate level for the Medicare dispensing fee.

While the above core services were not included in the OIG study, they constitute most of the cost of dispensing inhalation drugs. To illustrate this point, reference can be made to the Government Accountability Office (GAO) Study of October 2004, "Appropriate Dispensing Fee Needed for Suppliers of Inhalation Therapy Drugs," (p. 9). The GAO collected cost data on various inhalation dispensing fee services, and the core services above accounted for about 85 percent of the cost of the total services rendered. It is not surprising that the OIG concludes that only a limited number of services were provided when they captured only about 15 percent of those services and related costs in their survey instrument.

In addition, the OIG study was hampered because the OIG conducted a paper review only. The OIG did no field work such as interviews and on-site visits. The flaw in a paper review is that many of the services they examined are not required to be documented - for example, ongoing patient education. But the OIG excluded any service for which there was not specific documentation.

Finally, the OIG's survey instrument was flawed. First, it did not state that documentation was required in order for a service to be counted. More importantly, the survey instrument asked for information on only 11 poorly defined services. If the OIG had taken more care to compile a complete list of services (as in the survey by Muse and Associates), the responses would have been more extensive and complete.

To summarize, the OIG greatly overstates its conclusions about a general lack of dispensing fee related services, primarily because it excluded from its study the core services of providing inhalation drug therapies, as well as billing and administrative costs. Since the OIG studied only a small fraction of the costs of dispensing such drugs, it is of limited value in determining future dispensing fee levels.

Earlier in the year, the American Association for Homecare expressed strong opposition to a proposed cut in the Medicare dispensing fee for home inhalation drug therapy. In its proposed 2006 physician fee schedule released in July, the Centers for Medicare and Medicaid Services (CMS) suggested that there would be a cut in the dispensing fee, which is currently $57 per monthly supply.

In 2004, AAHomecare worked very closely with both the GAO and CMS in an effort to ensure that the dispensing fee covered the costs of home inhalation drug therapy for Medicare beneficiaries. Last year, AAHomecare commissioned a study by Muse and Associates of 109 pharmacies. The study's findings emphasized that the 2005 Medicare reimbursement formula based on average sales price (ASP) would under-reimburse the actual cost of providing two key drug therapies by $68.10 per monthly supply. AAHomecare shared with the GAO and CMS information about patient-management, pharmacy, compounding, delivery, and administrative costs of providing these drug therapies and argued the therapies cannot be provided to Medicare patients at the ASP formula without a substantial dispensing fee. In the proposed rule for the 2005 physician fee schedule issued in August, CMS proposed an 89 percent reimbursement cut for the drugs, using the ASP formula, for albuterol sulfate and ipratropium bromide. The drugs are commonly prescribed to treat diseases like chronic obstructive pulmonary disease (COPD). In recognition of the dispensing costs associated with home inhalation drug therapy for Medicare beneficiaries, CMS announced in November, 2004, a $57 monthly dispensing fee for inhalation therapies for the 2005 fee schedule and a 90-day fee of $80.

Homecare provides tremendous value for Americans' healthcare dollar. AAHomecare is the only national association that represents every line of service in the homecare community, including home health and home medical equipment providers, respiratory and infusion therapy, telemedicine, and rehab and assistive technology. Representing more than 3,000 member locations nationwide, the American Association for Homecare is dedicated to advancing the value and practice of quality, cost-effective health care services where consumers prefer them - at home.

Michael Reinemer
michaelr@aahomecare.org
VP, Communications
American Association for Homecare
625 Slaters Lane, Suite 200
Alexandria, VA 22314-1171
http://www.aahomecare.org

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