The recent mass closing of oxygen providers has caused Medicare to release a new policy addressing how patients can obtain oxygen equipment after their oxygen provider files for bankruptcy. However, the new policy would keep a patient waiting in a hospital for days while providers research court documents to find if the patient's previous company filed for bankruptcy and repossessed the patient's oxygen equipment. Then, if the oxygen provider can get the necessary court documents and is willing to go through the review process, they may choose to provide oxygen equipment so the patient can be discharged from physician care.

A smoke screen?

Unfortunately, Medicare has not addressed the fact that when most oxygen providers close, they do not file for bankruptcy. Patients, who have had oxygen equipment and services from a company that closed, are left without any options when they have a current need for replacement or upgraded equipment and ongoing maintenance and services.
Last month the Accredited Medical Equipment Providers of America, released a report that in many counties, the October 2nd requirements of mandatory accreditation and minimum $50,000 surety bond, combined with the January 2009, 36 month cap on oxygen and 9.5% cut in reimbursement has caused a 50% reduction in Medicare's oxygen providers. According to Medicare's website, in Los Angeles County, CA there are only 120 oxygen providers remaining, compared to the 258 which existed in April 2008. During the same time, Miami-Dade County, FL oxygen providers dropped from 401 to 205.

Difficult to find an Oxygen Provider

If a patient ever had an oxygen system before, even for a single month from a company that has closed, they will find it extremely difficult to obtain another oxygen system and services from one of the remaining area providers. This is because their Medicare claim will automatically deny. During the denial appeals process, the provider is required to submit a pick-up ticket from the patient's previous supplier and if a judge eventually pays a claim, the provider will likely have to go through the entire denial process each month the patient is receiving equipment, additional gaseous tanks or liquid reservoirs and services.
Additionally a patient may also find it difficult to find another oxygen provider because the 36 month cap rule only pays the oxygen provider the balance of 36 monthly payments. For example: if a patient had oxygen from a provider that closed after 24 months, the new company would only be paid 12 additional months (the balance of the 36 months). Between months 37 and 60 the new oxygen provider would only be paid an average of $25 once every 6 months for routine or non-routine service calls, replacement equipment, filters, cannulas, tubing and additional equipment and services if the patient moves out of the area.

Who is filing for bankruptcy?

Following Medicare's guidelines it is very difficult to find any suppliers that have recently closed and have actually filed for bankruptcy. The U.S. Trustee Program, a division of the U.S. Department of Justice, has a Voice Case Information System (VCIS) to search for companies that have filed for bankruptcy. The AMEPA office reviewed 50 companies that have left the Medicare program since last year, including one in Delray Beach, FL which had an auction last month. Not one of those companies had filed for bankruptcy. According to a report by Ed Flynn, Executive Office for U.S. Trustees firm, the average total debt levels for companies filing for chapter 7 or 11 bankruptcy is $82,852. After proposing an oxygen policy which significantly limits a patient's access to oxygen equipment and services, Medicare needs to be asked the following questions:
"Is a company that owes a few thousand dollars in debt going to file for bankruptcy?"
"What happens to the patient who needs oxygen equipment and services after their previous company closes without filing for bankruptcy"

Why are they doing this?

Sean Schwinghammer, Executive Director for both the Florida and Texas Alliance of Home Care Services (FAHCS and TAHCS), may have an explanation for Medicare's new bankruptcy policy. "This new policy may be a proactive measure in anticipation of bankruptcy filings by some of the larger national oxygen suppliers."

HME News reported in July 2009 that as of March 31, 2009, Rotech had about $507.4 million in long term debt outstanding and that they were exploring strategic transactions including filing for bankruptcy protection. Additionally, it was reported in September 2009 that American Home Patient announced a forbearance agreement with NexBank on $226.4 million in debt that was to be repaid September 1.
Schwinghammer added, "At the rate that oxygen providers are closing, it may only be a matter of time before these giants fall as well. There is no doubt that Medicare realizes that with increases in requirements and reductions in reimbursements, they have created a situation in which companies cannot survive."
From CIGNA Government Services:

To document that the equipment was lost due to supplier bankruptcy, the new oxygen supplier must submit supporting documentation to the contractor for review.

For a Chapter 7 bankruptcy, the supplier must submit:
Court records documenting that the previous supplier filed a petition for a Chapter 7 bankruptcy in a United States Bankruptcy Court,

For a Chapter 11 bankruptcy, the supplier must submit:
Court records documenting that the previous supplier filed a petition for a Chapter 11 bankruptcy in a United States Bankruptcy Court; and

Documents filed in the bankruptcy case confirming that the equipment was sold or is scheduled to be sold.

These documents should include:

1. The Court order authorizing and/or approving the sale; or

2. Evidence that the sale is scheduled to occur or has occurred, e.g., a bill of sale, or an asset purchase agreement signed by the seller and the buyer; or

3. A Court order authorizing abandonment of the equipment.

Upon receipt of a claim for replacement of oxygen equipment lost due to bankruptcy, the contractor will request the supporting court documents from the supplier in order to evaluate whether the equipment can be considered lost. A new 36 month rental period and a new reasonable useful lifetime will not begin unless this documentation is made available to the contractor and, in the case of a Chapter 11 bankruptcy, the contractor is able to verify that the oxygen equipment that was being furnished to the beneficiary was one of the assets that was liquidated.

A Change Request (CR) and a MLN Matters Article will be forthcoming that will incorporate the information contained in this listserv message.

Click to read the entire Oxygen Policy