OIG advisory dings existing and proposed home oxygen arrangements of DME supplier

The OIG issued a negative advisory opinion earlier this month. A DME supplier requested confirmation that providing free home oxygen before patients qualify for Medcare coverage, and overnight oximetry testing services free of charge, would not be considered illegal remuneration to a person in a position to order or purchase covered goods or services.

At first blush, one wonders why this request was ever submitted in the first place.  Most advisories conclude — unsurprisingly, based on the arrangements presented — that while the arrangement technically is not within a safe harbor, the government believes that adequate safeuards against inappropriate overutilization/remuneration are in place and so the arrangement will be permitted.  The writing of the advisory is surely influenced by the ultimate outcome already determined by the OIG, but the arrangements described in this opinion seemed particularly doomed to failure from the outset.

CMS and Congress have come down hard on the DME suppliers in general, and oxygen suppliers in particular.  (The same may be said for various state Medicaid programs as well.)   

Consider, for example, the September OIG report on reimbursement for oxygen concentrator rentals.  Among other things, the report notes that the acquisition cost of an oxygen concentrator is under $600, yet DME suppliers are paid equipment rental payments for up to 36 months — which may total over $7,000 (beneficiary copayments may exceed $1,300 over 36 months), and which are not justified by the industry position that the apparent unreasonable profit is appropriate and is required in part to cover inflation and maintenance costs. 

The industry position is further detailed here, and includes the typical complaints that the government is using old cost data, and that the sample of beneficiaries surveyed by OIG is too small to be statistically valid and is not representative.  In addition, the implication that most, if not all, oxygen concentrators are used by beneficiaries for more than 36 months is disputed.

The OIG report notes that 25% of all Medicare DME expenditures are oxygen-related.  And while DME expense pales in comparison to inpatient hospital expenditures (the industry offers the comparison of $7 and change per diem for home oxygen, vs. $4,500+ per diem for Medicare inpatient hospital expense; the numbers may be accurate, but are they comparable?), over the years CMS has focused on provider and supplier groups whose services consume successively smaller chunks of the Medicare dollar and at the aggregate level the DME dollars are significant.

There are industry- and CMS-supported changes on the legislative agenda for the future, and with the changed face of Congress it will be interesting to see what happens.

The background helps to contextualize the advisory request (oxygen suppliers seeing themselves as being under attack), but doesn’t explain to my satisfaction the request itself. 

A better solution (which is already in place with respect to certain other covered services) — perhaps one being pursued by the industry in tandem with the advisory request — would be making determinations of medical necessity for home oxygen retroactive, so that beneficiaries who truly require home oxygen therapy may be provided the oxygen before the paperwork goes through.  Suppliers would then be at risk only for oxygen provided to those beneficiaries who do not eventually receive a finding of medical necessity.

— David Harlow