AMARILLO, TX – The percentage of Medicare beneficiaries signing up with Medicare Advantage (“MA”) is now almost 50% and will continue to increase. As this percentage increases, addressing problems in the MA space will become increasingly important for DME suppliers. For example, if in several years the percentage of Medicare beneficiaries signed up for MA sits at 70%, in order for DME suppliers to have access to most of their Medicare patients, the suppliers will need to secure MA contracts.

As DME suppliers have interacted with Medicare Advantage Plans (“MAPs”), a number of challenges have arisen. This article discusses the challenges.

Key Challenges

• Prior Authorization (“PA”) – When a Medicare beneficiary obtains an item from a DME supplier, the supplier may believe the beneficiary is covered by traditional Medicare. The supplier will obtain a PA from the DME MAC. Not infrequently, the supplier will later determine that the beneficiary is covered by a MAP. When the supplier submits a claim to the MAP, it is not uncommon for the MAP to refuse to recognize the PA and deny the claim.
• Appeal Rights – When a DME supplier determines that the MAP is not complying with the terms of the MAP’s contract with CMS…or with the MAP’s contract with the supplier…the supplier has no substantive appeal rights. The law states that if the supplier desires to appeal, it (i) must first obtain written authorization from the MAP enrollee and (ii) waive its rights to expect payment from the enrollee.
• Vertical Integration – Over the past 15 years, pharmacies have been subjected to challenges arising out of vertical integration in the PBM space. A PBM will have a “Retail Panel” in which it allows a large number of retail pharmacies to participate. A pharmacy on a PBM’s Retail Panel must be a patient walk-in facility. To qualify for the Retail Panel, the pharmacy can engage in little to no mail-order and can dispense few specialty drugs. The profit margin for general retail prescription drugs is low. Separately, a PBM will have a Mail-Order Panel. This is comprised of pharmacies that dispense maintenance drugs to patients with chronic conditions. This type of mail-order business is more profitable than a general retail business. Most PBMs own a mail-order pharmacy. They allow very few competing mail-order pharmacies on the Mail-Order Panel. Also separately, PBMs have a “Specialty Panel.” Specialty drugs are high dollar and generate higher profit margins for pharmacies. As with mail-order pharmacies, most PBMs own specialty pharmacies. And as with mail-order pharmacies, PBMs allow very few competing specialty pharmacies on the Specialty Panel. The PBMs’ actions have (i) relegated many pharmacies to dispensing low margin retail drugs for walk-in patients and (ii) prevented pharmacies from dispensing higher margin mail-order and specialty drugs. This, in turn, has forced many independent pharmacies out of business.

The vertical integration in the PBM/pharmacy space is analogous to the vertical integration we are beginning to see in the MA/DME space. Insurance companies and third-party administrators (“TPAs”) are beginning to own their own DME business. If the movement towards vertical integration in the MA/DME space continues to pick up steam, DME suppliers may find themselves in the same position as retail pharmacies.

• Lack of CMS Oversight – Statutorily, CMS has the authority to oversee actions by MAPs. However, to date CMS has not exercised its oversight authority. MAPs operate without much guidance from CMS. This leads to a number of problems, including the following:
• A goal of a MAP is to pay as little as possible to health care providers, including DME suppliers. This allows the MAP to “pocket the spread” between (i) what it receives from Medicare and (ii) what it pays to providers. A way to reduce what it pays to DME suppliers is for the MAP to enter into a contract with only one DME supplier…or perhaps with two or three suppliers. By limiting the number of DME suppliers on the MAP’s panel, the MAP can persuade the DME suppliers (that are allowed on the panel) to accept less money from the MAP. The rationale is that the one supplier (or the two or three suppliers) will be compensated for the lower reimbursement by higher volume. This scenario results in (i) reduced access to care by MA enrollees and (ii) reduced quality of care.
• The reimbursement to DME suppliers by many MAPs is not sustainable. Unless the MAPs’ hands are forced, they will continue to pay unsustainable amounts.
• History has shown that MAPs will pay little to no attention to concerns raised by DME suppliers regarding reimbursement rates
• It is likely that MAPs will pay attention to concerns raised by MAP enrollees and/or by their physicians. However, DME suppliers have a good track record of taking care of enrollees even when reimbursement is too low…meaning that complaints by enrollees and physicians are infrequent.
• The only reasonable avenue to force MAPs to increase reimbursement, on a nationwide basis, is for CMS to mandate actions by MAPs.
• Access to Care – When MAPs select DME suppliers to join their panels, the MAPs do not focus on (i) particular products/services that the enrollees need, nor (ii) the geographical location of the enrollees. Normally, MAPs will simply add one or a couple of large DME suppliers to their panels…because the suppliers represent that they can “cover the whole state.” This is unrealistic. For example, a DME supplier in Dallas may not have the ability to take care of MAP enrollees in East Texas or in the Rio Grande Valley.
• Coverage and Documentation – Too often, the MAP’s coverage and documentation requirements are more restrictive than those handed down by traditional Medicare.
• CMS Contact – When as a result of a MAP’s actions, a DME supplier needs intervention by CMS, there is no principal CMS contact for the supplier to reach out to.

Conclusion
There is no easy fix to these challenges. While the legislation setting up MA is voluminous, the legislation (i) focuses on the rights of Medicare beneficiaries and (ii) provides little guidance on how MAPs should work with health care providers (including DME suppliers). AAHomecare’s Payer Relations Council is proactively (i) examining these challenges and (ii) formulating steps to address them. However, resolving these challenges will take a great deal of time and effort.

Jeffrey S. Baird, JD, is chairman of the Health Care Group at Brown & Fortunato, PC, a law firm with a national health care practice based in Texas. He represents pharmacies, infusion companies, HME companies, manufacturers and other health care providers throughout the United States. Baird is Board Certified in Health Law by the Texas Board of Legal Specialization and can be reached at (806) 345-6320 or [email protected].

AAHOMECARE’S EDUCATIONAL WEBINAR

Medicare Advantage Plans: Government Oversight and Industry Advocacy

Presented by: Laura Williard, American Association for Homecare & Jeffrey S. Baird, Esq., Brown & Fortunato

Tuesday, January 31, 2023 

1:30-2:30 p.m. CENTRAL TIME
Medicare Advantage Plans (“MAPs”) have had tremendous growth in enrollment in recent years. Almost 50% of Medicare beneficiaries are covered by MAPs and this is expected to continue to grow at a rapid pace. Working with MAPs has proven to be challenging for suppliers in their ability to access networks, negotiate rates, and work through a sometimes-non-existent appeals process. And so DME suppliers quite naturally ask what the federal laws are that govern MAPs. On the one hand, federal laws governing MAPs are quite extensive. However, only a small portion of the federal laws pertain to the relationship between the MAPs and the providers/suppliers that serve the patients covered by the plans. Much of the law is aimed to (i) protect covered lives and (ii) set minimum requirements for coverage, networks, complex reimbursement mechanisms. This program will discuss the current MAP environment and the federal laws that govern them. The program will further discuss how these laws affect DME suppliers as they provide services to patients covered by MAPs. The program will then pivot to discuss the most important issues DME suppliers must face as they work with MAPs. Finally, the program will discuss the work being done to educate Congress, CMS, and the industry and the resources available to help DME suppliers navigate these plans.

Register for Medicare Advantage Plans: Government Oversight and Industry Advocacy on Tuesday, January 31, 2023, 1:30-2:30 p.m. CT, with Laura Williard and Jeffrey S. Baird, Esq.

Members:  $99
Non-Members:  $129