Funding Update

Revised LCD, New Fee Schedules Create Tenuous Time in Mobility & Rehab

As this CHAIRS! supplemental issue was going to press along with Mobility Management's November issue, Congressional elections were still several weeks away. The mobility and rehab industries were using that precious time to tell elected and would-be elected officials why the new Medicare fee schedules for power mobility devices (PMD) would spell disaster to Medicare beneficiaries… and also to consumers with other funding sources, who would pattern their own policies after those of the Centers for Medicare & Medicaid Services (CMS).

A revised local coverage determination (LCD) for PMD was issued Sept. 20, followed by fee schedules Oct. 2. Mobility and rehab manufacturers immediately protested payment cuts ranging from 21 to 41 percent or more, and disability advocacy groups warned that many people who need mobility and rehab equipment would be denied access to it, in part because equipment suppliers would be forced out of business by such severe pay cuts.


Some of us are going to die because we're going to get pressure sores and going to get septic. The rest of us are going back within the four walls of our house. —David T. Williams, author, PMD user and former director of government affairs, Invacare Corp. Williams was asked his thoughts about the revised PMD LCD.

"The Medicare mobility benefit as we knew it is gone," said Andrew Imparato, president/CEO of the American Association of People with Disabilities (AAPD). "CMS has chipped away at the benefit over the last three years, and this latest step ensures that people living with disabilities will get little help from Medicare when they need a power wheelchair to remain independent and out of institutions."

Soon after, the American Association for Homecare (AAHomecare) and its Re/hab & Assistive Technology Council (RATC) formally asked the Department of Health & Human Services and CMS to withdraw the fee schedules and postpone the Nov. 15, 2006, implementation date that was issued along with the revised LCD.

"We… believe that the new payment levels are far too low to support appropriate access to PMDs for Medicare beneficiaries, especially in light of the new coverage, documentation and quality standards that suppliers will be required to meet," AAHomecare said in its letter to HHS and CMS. "In fact, the new fee schedules significantly undermine the progress CMS has made to date in these other areas and pose what may be insurmountable barriers to access for Medicare beneficiaries."

'Unsustainable' Payment Reductions

"I think it's a travesty," said Darren Jernigan, Permobil's director of government affairs, when asked about the new fee schedules. He added facetiously, "The LCD eliminated downcoding (transferring certain beneficiaries from a higher level of PMD to a lower one), but now they should put it back in, because Group 2 (fee schedule) is paying more than Group 3. That's the joke of it all."

Jernigan added that some of the industry concern is based on CMS' previous assurances that high-end rehab equipment would not be affected in that way. "We kept getting so much lip service," he said. "(CMS said) 'No, the high-end stuff, we're not going to fool with it. We're not going after that; it's the lower-end stuff on the market that we're going for' over and over again. So they come out with accreditation standards, and you have to have certification to protect the end-user at the high-end level. (But) then they come up with allowables so that some in Group 2 are more than Group 3. What's the point? If you're not going to pay for it, why do all this stuff? Maybe it's for Medicaid and private insurances to follow, I don't know."


CMS calculated pricing based on a flawed methodology. —Seth Johnson, VP of government affairs, Pride Mobility Products

"The fee schedule is terrible," agreed Don Clayback, The MED Group's VP of networks. "It's really a disaster in terms of the outcome. When you take a step back and look at the big picture, (the goal) was to set up codes that match the technology, and it looks like we did that, although people may agree to disagree about how many codes we've got. But basically, we spread out the technology and we got the right codes, so that piece worked out fine. But then when it came down to pricing, (CMS) blew it. The pricing — particularly for the Group 3 chairs, which are for more complex clients — is 30 to 40 percent reduced from where it was historically."

Clayback added that the revised LCD also needs additional work. "There are still problems with the LCD, and this pricing only accents the problem. Depending on how you calculate it, there's a 20- to 40-percent reduction in the various codes, and there just isn't the margin to handle those kind of reductions, particularly for the complicated client who requires evaluation time and trial time from an equipment standpoint, and all the things that go along with a more complex wheelchair."

Said Seth Johnson, VP of government affairs for Pride Mobility Products and chair of AAHomecare's RATC: "Our main concern with the fee schedules is that they're totally inadequate and unsustainable for manufacturers and suppliers in the industry. CMS calculated pricing based on a flawed methodology. We've been meeting with CMS for well over a year and a half now on an alternative methodology to gap-filling. CMS readily admits in conversations that the gap-filling methodology is flawed; however, they utilized that methodology to come up with these prices."

Johnson said he expressed his concerns to Secretary of Health and Human Services Michael Leavitt after the fee schedules were announced: "(Leavitt) said the reason they released the pricing so far in advance of the implementation date was to provide an informal mechanism for the industry to comment on the fee schedules. The secretary said CMS is interested in receiving input from the industry on the fee schedules, and that there would be nothing formally released indicating that, but the amount of time we have between (the Oct. 2 fee schedule release) and implementation provides adequate time to provide comments to CMS."

Is Nov. 15 Realistic for Implementation?

Given the uproar over the fee schedules, is a Nov. 15 implementation date still realistic?

"The LCD is wrong, now the pricing is wrong," Clayback pointed out. "CMS has to delay this, and let's get both things right. They made some improvements on the LCD, but when it comes to the more involved client, there are still major problems with the policy."

Among Clayback's remaining concerns with the revised LCD are downcoding issues: "They indicated that they would not be downcoding products from one category to another. Well, they improved a little bit on that, but to me, there is still a downcoding question in the LCD. We've talked to them about it, and they've said, 'Don't worry about (downcoding), that's not what we're going to do.' But we need to get that in writing. Right now as it stands, the only thing we have in writing is that clarification of the LCD, and there are still downcoding questions. There's the issue relative to the stand/pivot (transfer ability) — they still have to define that more clearly — and there's no recognition of disease progression, if you have a person who needs a chair now, and is going to need a different kind of chair based on their condition a year from now. There's absolutely no reference to that."

Clayback said the issue of progressive conditions has been raised to medical directors, but he reported that their response has been "'Well, you can just do those through individual consideration.' Translated, that means (a supplier is) going to put out a very complicated and expensive wheelchair and it's going to get denied once, and they'll have to submit it again. And it'll be denied twice, and they'll have to submit again. Maybe on that third time, after 12 to 18 months, they'll finally get paid for it. To me, for someone to actually give that as a response to the problem with the LCD, that doesn't translate into a solution. Let's get this corrected now so suppliers and consumers don't have to deal with all that uncertainty… The issues that we've raised have only been partially addressed."

"I sincerely doubt that it'll be implemented Nov. 15," Jernigan said, but he added, "It'll be soon. (CMS has) to get something in before next year because of competitive bidding."

Jernigan pointed out that the alarmingly low fee schedule numbers are even more frightening if competitive bidding is factored in. "When you throw competitive bidding into the match, (reimbursement levels) will go even lower," he said. "Another theory is, though, that if the allowables are so low that no one can exist on them, then competitive bids will actually be higher than the allowables, because the people bidding aren't going to bid that low. If you've got three bids and the lowest one is above the allowable — somebody's got to (win), somebody's got to provide (the equipment), right? And (CMS is) going to take the median: There's a floor and a ceiling, so (the winning bid) is going to be in the middle. If that's the one they go with… it's strange."

The Gap-Filling Flaw

The fee schedules are so far off, industry insiders say, because of the gap-filling methods CMS used to determine the numbers.

"They're using gap-fill methodology," Jernigan said, "and at the same time, they're saying, 'That's flawed. We're not going to use gap-filling anymore.' But yet, they're still doing it. We gave them wholesale pricing, and they said that's what they would use. But they gap-filled it — they deflated it to 1986 prices and then inflated it using the CPI (consumer price index). And they got this way out-of-whack number that's 30 percent below what pricing should be."

"Cost-of-doing-business studies have been provided to CMS," Johnson said. "They clearly show the profit margins for PMD providers coming in between 5 and 7 percent on average, and there are quite a few below that. So clearly, when you're talking about 30- or 40-percent reductions, this is not sustainable and is completely unjustified. They need to pull these rates back and recalculate them." (See the gap-filling sidebar.)

November Elections & Beyond

Despite the understandable industry concern over the LCD and then the fee schedules, Jerry Keiderling, VP of U.S. Rehab, said, "We have some very good rapport taking place with CMS between industry groups and interested parties. I think the conversations are good. They listen to some of what we have to say, they listen to all of what we have to say, depending on the day. And I think they're interested in making it right."

So why such big discrepancies between CMS and the mobility/rehab industries? "When it comes to putting it down on paper, things go astray," Keiderling said. "What they say doesn't necessarily come out in the written word. Is that on purpose? I for one don't believe so. Both parties, I think, ultimately have very similar goals: to take care of the beneficiary, to get them the equipment they need at the time that they need it. Trying to define who's going to get what, when and how — a lot of time in the verbal language, it seems very clear and it works. But when it's put into writing, depending on who's doing the typing, who's doing the translation from the verbal to the print, some of that goes away."

Keiderling added that he sees CMS "as an entity that needs to be nurtured a little more on the education side. As a group — rehab dealers of the nation — we're not out to steal money from the government. We're out here to take care of these beneficiaries in the best way we possibly can with the proper equipment they need. CMS and the rehab industry see eye to eye as far as taking care of the beneficiary. It's getting the business practical through the administration process — or getting them to tie together."

So how will the next few weeks — including potentially crucial mid-term elections — affect the mobility and rehab industries?

"Democrats have a track record of social policy," said Jernigan. If Republicans lose control of the House or Senate or both, he predicted, "You're going to see a lot of things put in place. You're going to see the MMA (Medicare Modernization Act, which includes provisions for competitive bidding) be revisited. Ears will be a lot more open than now, especially with (House Ways & Means Committee) Chairman (Bill) Thomas (retiring). And so there's always that. If that does happen, call me back in 30 days — and let's talk about what will happen then."

What Is Gap-Filling?

What Is Gap-Filling?

In the wake of potentially disastrous new fee schedules for power mobility devices (PMD), the term "gap-filling" has been uttered among mobility/rehab manufacturers and suppliers as the ultimate profanity. That's because the Centers for Medicare & Medicaid Services (CMS) has freely admitted gap-filling's flaws as a method for determining PMD fee schedules, but went ahead and used it anyway.

Of course, this isn't the first time the industry has grumbled about gap-filling. In fact, just a couple of years ago, gap-filling made rehab headlines because CMS used the methodology to compute fee schedules for wheelchair cushions. Back then, Dave McCausland (The ROHO Group) and Rita Hostak (Sunrise Medical/National Coalition for Assistive & Rehab Technology) described gap-filling this way in a Mobility Management article:

Section 1834 of the Social Security Act requires that payment for DME be made on the basis of fee schedules. Many items in the original fee schedules were based on the average reasonable submitted charges for the item during the period 1986-1987. However, for those items where supplier charges were not available, CMS developed "gap-filling" methodology. Gap-filling is designed to approximate historic reasonable charge. As more time passes since 1987, the less likely it is for historic data for that period to be available. Today, gap-filling methodology is used almost exclusively. The steps included in this method are as follows:

  1. If 1986 to 1987 retail price lists are not available, gap-filling first applies a deflation factor to the submitted retail price for each product assigned to a specific code. The actual deflation rate is based on the year of the retail price list that was submitted.
  2. Next, the median (middle) price of the deflated retails is identified. The median price is then increased to the current date using annually approved "Update Factors" based on CPI (consumer price index) increases and any legislative mandates. This amount becomes the basis for the allowable.
  3. The next step adds any applicable DME state sales tax. The median price within this array is once again identified.
  4. The allowable ceiling is the updated median price, and the floor is 85 percent of that.

This article originally appeared in the November 2006 issue of Mobility Management.

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