Adaptive Maneuvers for Home Services

Even through downward pricing pressures, Apria Healthcare leads the home services and equipment industry by adapting its business model and responding to changes in reimbursement

When did shifts in reimbursement for home respiratory services begin?

Raoul Smyth: In 1997, Medicare began a series of reimbursement cuts totaling 30 percent for oxygen alone. Under the 2005 Deficit Recovery Act, payments for oxygen equipment were capped after three years, until patients became eligible for new equipment after an additional two years.

By 2013, the Medicare Competitive Bidding Program—mandated by Congress in 2008—was implemented, and rates were reduced by approximately 30 percent more for almost all metropolitan areas. In 2016, Medicare is implementing similar rate cuts for rural areas.

What has the impact of all these changes been on the industry?

Smyth: Only 20 percent of our business is through Part B Medicare, but many of our competitors rely on Part B for 60 percent or more of their business. Those competitors may be losing 20 percent of their revenue this year. Some companies may not survive because they didn’t start adapting to the shifts in reimbursement early enough. We made changes, such as no longer providing certain types of durable medical equipment and de-emphasizing Part B in our sales strategy.

But there seem to be new cuts and new requirements every year, so there’s always an added degree of volatility. Plus, insurers and the government are wringing savings out of the system by finding “imperfections” in the extensive paperwork that’s now required. We can almost always meet the documentation demands, but sometimes the effort costs more than the service we’re trying to be reimbursed for.

“It’s been a very delicate balancing act between what makes sense from a business perspective, what’s required by insurers and regulators, and staying true to one of our major goals: enabling patients to be cared for at home, not in the hospital.”

How are patients affected?

Smyth: Many managed care plans now have such high deductibles that patients never receive any reimbursement unless they get very sick. We often end up billing them directly throughout an entire year.

As a result, we’ve revised our bills to be easier to understand, we provide better online resources, and we work more efficiently to resolve customer complaints—we get twenty times more calls about billing than we used to.

We’ve also had to strengthen our patient agreements and educational materials in order to help patients understand their financial responsibilities in this environment.

With such long-term downward pressure on pricing, how does Apria continue to be successful?

Smyth: We adapted over time until we formalized our Apria Essential Care Model. It provides a consistent clinical approach for complying with all Medicare and insurance protocols and requirements while simultaneously providing necessary levels of home care and support to patients and customers.

How does Apria’s service compare to what you offered in 1997?

Smyth: It’s not as high-touch as it used to be, but we’ve added more technologically advanced equipment that still allows patients comparable levels of service.

We’ve also worked hard to make our delivery process more efficient and consistent. We relinquished some unprofitable portions of the durable medical-equipment business, but have invested more in advanced-equipment technology.

We also expanded our respiratory care lines for patients using high-acuity equipment. It’s been a very delicate balancing act between what makes sense from a business perspective, what’s required by insurers and regulators, and staying true to one of our major goals: enabling patients to be cared for at home, not in the hospital.

How large of a role has improving basic efficiencies played?

Smyth: The new environment has made that absolutely essential. The challenge, of course, is doing it without compromising patient care. We’ve outsourced some back-office operations and consolidated customer service and revenue management to a few centralized locations. That’s standardized our processing and billing and enabled our 300 branches to focus more on equipment delivery, support, and clinical care.

Has technical innovation played a role as well?

Smyth: It has. One example is ApriaLink, a proprietary portal that allows referral sources to track the status of their patient orders, setups, and deliveries. It’s also a channel for addressing support documentation issues. At present, we’re the only company in the industry offering this feature.

What do you think would help stabilize the industry and the pricing structures?

Smyth: There are many, many different elements that have created the current situation, but part of the problem is that the legal structure around billing and payments is still based on the old low deductibles. Until that’s corrected, it will continue to be difficult to adapt to all the other ongoing changes.