Medicare: Comparative Information on Medicare and VA Patients, Services, and Payment Rates for Home Oxygen

Published by the Government Accountability Office on 1997-06-06.

Below is a raw (and likely hideous) rendition of the original report. (PDF)

Ulaed states
General Accounting   OfEce
Washington,  D.C. 20648

Health,   Education   and Human Services Division

June 6, 1997
The Honorable William M. Thomas
Chairman, Subcommittee on Health
Committee on Ways and Means
House of Representatives

Subject: Medicare: Comnarative Information on Medicare and
         VA Patients, Services. and Pavment Rates for Home Oxvgen

Dear Mr. Chairman:

In fiscal year 1996, almost 480,000Medicare beneficiaries received home
oxygen at a cost of about $1.7 billion. Studies within the Department of Health
and Human Services (HHS) and legislation introduced previously in the
Congress proposed reductions iu the Medicare payment levels for home
oxygen, but to date no rate reductions have been implemented through the
regulatory processes of HHS’ Health Care Financing Admi&tration (HCFA) or
through legislation.     -

We recently reported to the Senate Committee on Finance that Medicare’s fee
schedule allowances for home oxygen are signiiicantiy higher than the rates
paid by the Department of Veterans Affairs (VA&l Our analys& showed that
even after adding a 30-percent adjustment to VA rates to account for
differences between the Medicare and VA programs, Medicare would have
saved over $600 million in fiscal year 1996had it reimbursed oxygen suppliers
at the aqjusted VA rates.

As agreed with your office, we are providing you with additional information on
our analysis of the Medicare and VA payment rates. Specifically, this
colrrespondence addresses questions and criticisms raised by the home oxygen
industry about (1) the comparability of the Medicare and VA home oxygen
patient populations used in our analysis, (2) differences in the frequency and

‘Medicare: Comntison of Medicare and VA Pavment Rates for Home Oxvpen
(GAO/HEHS-97-12OR,May 16, 1997).
                  GAO/HEHS-97-16lR          Medicare and VA Pa&en-   for Oxygen
B-277168                                .

quality of services Medicare and VA expect from their suppliers, (3) differences
in the use of portable oxygen equipment and supplies by Medicare and VA
patients, and (4) the rates paid for home oxygen by other insurers.         -

In summary, the medical criteria used by Medicare and VA to determine patient
eligibility for home oxygen use are the same. Experts confirmed that there are
no clinical or demographic differences between Medicare and VA home oxygen
patients that would affect their trestment. Our analysis showed that suppliers
serving VA patients must meet accreditation standards, comply with the service
and quality requirements of their contracts, and are subject to quality controls.
Medicare does not have comparable requirements for its home oxygen
suppliers. Regarding access to portable equipment, only 75 percent of the
Medicare population is provided portable equipment compared with over 97
percent of the VA patients in our sample. The VA patients also received more
refills for their portable equipment than the Medicare patients in our sample.
Finally, we did not compare Medicare’s home oxggen payment rates with those
of other insurers primarily because we could not find any other insurer with a
sufficiently large patient population on home oxygen.


The medical criteria for patients with pulmonary insufliciency are the same for
Medicare and VA Both Medicare and VA use criteria established by the
American Thoracic Society that conform to clinical practice guidelines
established by the American Association of Respiratory Care. Some VA
patients receive compressed gas for the treatment of other ailments such as
cluster headaches, but we excluded from our analysis aU VA patients using only
compressed gas. We included only VA patients who were using an oxygen
concentrator or a liquid oxygen system for the treatment of pulmonary
insufiiciency and who were required to meet the same eligibility criteria as
Medicare patients on home oxygen.

Throughout our review, we asked medical practitioners, including pulmonary
specialids and respiratory therapists, whether there were any lmown clinical or
demographic differences between Medicare and VA patients with pulmonary
insufficiency thatwould affect the costs of providing home oxygen therapy to
those two patient populations. The answer was consistently no. No individual
or organization could provide us with any evidence that the Medicare and VA
patient populations would require different oxygen therapy treatment for
pulmonary insu&iency.     A clinical study of the hospitalization rates or other
patient outcomes among VA and Medicare patients receiving home oxygen was

2              GAOEIEHS-97-151R Medicare and VA Payments for Oxygen

beyond the scope of our study, and to our knowledge no other organization has
performed such a study.


Although VA’s adjusted payment rate for home oxygen is lower than Medicare’s
average fee schedule allowance, we did not find any evidence that VA patients
receive fewer or lower quality services. In fact, VA medical centers have
specific service requirements that oxygen suppliers must follow, while
Medicare has not established standards for the frequency or quality of services
for home oxygen suppliers.

In our review of about 550 Medicare patient records, we found that 49 percent
of the patients received at least one clinical assessment by their supplier’s
respiratory therapists within a 3month period. Another 30 percent, while not
receiving a clinical assessment, were visited by the supplier for the purpose of
checking the orrygen equipment For 20 percent of Medicare patients whose
records we reviewed, there was no evidence in the suppliers’ recordsthat the
patient had been visited by their supplier within that 3-month period for either
a clinical assessment or an equipment check 3n 1994, HHS’s Office of
Inspector General reported on the level of services provided Medicare
beneficiaries using oxygen concentrators2 They found that 17.5 percent of
Medicare beneficiaries did not receive an equipment check within a 3-month
period, while over 60 percent did not receive any other patient services, such
as a clinical assessment, during that same time period.

In contrast, VA has published a program guide for all VA medical centers to
follow in administering their home owgen programs, and each oxygen supplier
under contract with a VA medical center must follow the service requirements
set forth in its consact. Of the 46 VA medical centers in our sample, 43
medical centers, or 93 percent, require that the supplier perform a patient
assessment and/or an equipment check at least once every 3 months. Of these
43 medical centers, 36 required monthly patient assessments or equipment
checks. The remaining three medical centers required that visits be conducted
in accordance with the oxggen equipment manufactun&        speciiicalions or in
compliance with standards established by the Joint Commission on
Accreditation of Healthcare Organizations (JCAHO).

“Oxvgen Concentrator Services, HHS OIG, OEI-O3-91-01710 (Washington, D.C.:
HHS, Nov. 1994).

3             GAO/HEHS-970151R Medicare and VA Paybents             for Oxygen

Consistent with VA central office policy, each of the 46 VA medical centers in
our survey required that firms providing their patients with home oxygen
equipment and services be accredited by JCAHO or comply with its standards.
To maintain accreditation, every 3 years a supplier must demonstrate to JCAHO
surveyors that the iirm is sustaining a level of performance that indicates it is
providing its patients with quality care.

VA does not rely on JCAHO as the only quality control check on its oxygen
suppliers. For example, VA policy is to schedule random home visits for a
minimum of 10 percent of VA patients on home oxygen each year. The
purpose of these visits is to ensure that VA patients are receiving good quality
care and that the supplier is providing the proper equipment and services as
specified in its contract Furthermore, each VA medical center is required to
establish a Home Oxygen Therapy Clinic Team to monitor and evaluate the
program on a continual basis. This team is composed of representatives from
the various hospital departments involved with the home owgen program.

In contrast, the Medicare program has no such quality controls in place.
Medicare does not require its suppliers to be accredited by JCAHO or any other
accrediting organization. To be eligible to supply home oxygen equipment and
services to Medicare ben&ciaries, a company must obtain a supplier number
from the National Supplier Clearinghouse and follow basic business practices
such as Glling orders, delivering goods, honoring warranties, maintaining
equipment, disclosing requested information, and accepting returns of
substandard or inappropriate items from beneficiaries. Other than the broad
requirement that the equipment be properly maintained, Medicare has no
specialized standards that relate to the provision of home oxygen

During our visits to oxygen suppliers, we asked them if they varied the type of
care they provided their patients on the basis of the source of reimbursement
for their services. They typically answered that they had established policies
for providing home oxygen and that those policies applied to all patients
whether their care was being paid by Medicare, VA, Medicaid, or private


The use of portable oxygen equipment by patients who are on home oxygen
can increase the costs of servicing those patients because, depending on the
type of equipment used, the patient may require more frequent service calls to
replenish oxygen contents for portable tanks. We found that VA patients in our

4               GAO/HEHS-97-15ll.t     Medicare and VA Paym&ts        for Oxygen
sample were receiving more portable equipment and oxygen contents than
Medicare patients, even though VA’s adjusted payment rate is lower than
Medicare’s average fee schedule allowance.

Medicare claims databases show that, for about 75 percent of the Medicare
patients on home oxygen, Medicare is also billed for a portable unit. In
contrast, in our sample of approximately 5,000 VA patients, over 97 percent
were provided portable equipment. Liquid oxygen is frequently used for
patients who are highly mobile, since some patients can refill their liquid
portable units from stationary liquid reservoirs in their homes. We found that
16 percent of the VA patients we sampled were using liquid systems, and 14
percent of all Medicare patients are on liquid systems. For those patients who
use gas portable units, we found that, on average, the VA patients in our
sample received about 4 cylinders per month In contrast, the Medicare
patients whose records we reviewed received an average of about 2 cylinders
per month.

For our comparison of Medicare and VA payment rates, we included the cost of
all supplies and services provided to the approximately 5,000 VA patients in our
sample, including the cost of all portable systems and their contents. ‘ Even
though VA provides almost all of its home oxygen patients with portable’units,
and Medicare was billed for portable units for only about 75 percent of its
home oxygen patients, the cost of VA’s home orrygen program was substantially
less than Medicare’s cost


We did not compare Medicare’s home oxygen payment rates with those of
other private insurers primarily because we could not Cnd any other insurer
with a sufficiently large patient population on home owgen. Furthermore, the
coverage criteria for home oxygen not only varied from company to company
but also varied within the same company on the basis of the type of coverage
purchased by an individual or a group health plan Before comparing the
Medicare rates with the private insurer rates, each client’s policy and coverage
would have to be evaluated to determine its comparability with Medicare.
Even after such an evaluation, very limited data would be available for the

To obtain a full picture of private insurance reimbursement rates for home
oxygen for comparison to Medicare, we would also want to include information
on the rates negotiated between managed care firms and oxygen suppliers.
However, none of the managed care plans that we contacted were willing to

5             GAO/ElEES-97-151B      Medicare and VA Payments for Oxygen
    discuss payment levels they had negotiated with suppliers because they
    considered that information proprietary.


    We made draft copies of this correspondence available for review by officials
    at HCFA and VA HCFA officials suggested some changes, and we modified the
    text to reflect their comments. VA officials stated that the draft accurately
    described the VA home oxygen program.

    As agreed with your office, we will make no further distribution of this letter
    until 3 days after its date. At that time, we will make copies available to other
    congressional committees and Members of Congress with an interest in this
    matter, and to the Secretaries of Health and Human Services and Veterans

    Please call William Reis at (617) 5657’8 or me at (202) 512-7114 if you or
    your staff have any questions about the information in this letter. Other ’
    contributors to this document were Frank Putallaz and Suzanne Rubins.          _I

    Sincerely yours,

    Wtiam J. Scanlon ”
    Director, Health Financing and
        Systems Issues


    6              GAOAEHS-97-151E        Medicare aid VA Payments for Oxygen
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