March 14, 2011 | last updated June 1, 2012 9:49 am

Medical payment squeeze driving shift in strategy

For Brian Cosker, general manager of Ellsworth Medical in Windsor, the uncertain landscape of insurance reimbursement for durabale medical equipment has forced a fundamental change in his approach to business. He now focuses on goods that are paid for directly by the patients.

Despite a run of good years and a growing population of citizens more than 65 years old, Central Connecticut's durable medical equipment suppliers say they're being squeezed by decreases in reimbursements for Medicare and Medicaid, as well as private health plans.

It's so bad, Brian Cosker, general manager of Ellsworth Medical, a Windsor-based durable medical equipment supplier, has reworked his business model to concentrate on goods that are paid for directly by the patient.

That's a trend that could become an epidemic if the slide isn't halted, industry leaders say.

Medicare is imposing new limits on the number of services — like units of oxygen — that can be provided to patients, according to David Ball, president of Ball Consulting Group LLC in Boston.

Medicaid has "dramatically cut (reimbursement) rates, forcing patients to go out-of-pocket for equipment and supplies," Ball said.

And the whole payment landscape has become unpredictable.

The belt-tightening varies. For example, Medicare has put in place caps that limit reimbursement, even if a patient has needs that exceed that cap. In those instances, health care providers usually eat the excess cost.

In Massachusetts and New Hampshire, Medicaid has proposed going from cost-plus-30 percent reimbursement to cost-plus-10 percent reimbursement.

In Connecticut, Medicaid contracts with managed care plans to serve Medicaid recipients and those plans can set their own provider rates. The concern is that managed care plans will negotiate rates that are so low that some providers will be unable to provide the equipment.

Insurance plans are putting authorizations and restrictions on payment.

Prior to these policy changes, which are driven by the federal health care reform law, a patient could arrive home from a hospital and a hospital bed would be waiting. Now, doctors and discharge department have to fill out additional paperwork and verify that insurance companies will pay for so-called durable medical equipment being requested by patients or doctors.

The new system's waste-cutting, cost-controlling intentions are good, but its side effects hurt.

"You should only pay for what's medically necessary. You should review costs, but you're adding layers of complexity and paperwork," Ball said. "I've never seen the challenges so aligned against these suppliers."

Cosker of Ellsworth Medical said the four-employee company had blockbuster years between 2005 and 2011. During that time, revenue tripled as the company streamlined its product range specifically for its client base.

"These products are not covered by insurance and are paid for privately by our clients," Cosker said.

But when Cosker researched adding new product lines requested by some customers — such as oxygen, "power mobility" products, seat positioning equipment and diabetic supplies — he found it nearly impossible to make money.

"We have chosen to take an entirely different path," because of competitive bidding, Medicare cutbacks and the growing paperwork requirements associated with insurance, Cosker said.

Instead of counting on growth in what Cosker called the "traditional durable medical equipment" market — the hospital beds, monitoring equipment, oxygen supplies and other items covered by insurance, Medicare or Medicaid — Ellsworth is targeting product lines that are paid for out-of-pocket.

But medical equipment suppliers do so "at the expense of the elderly and disabled," Cosker said. "We're being squeezed into a position that limits our ability to grow in traditional DME sales," he said.

So, Ellsworth has shifted its growth strategy away from that market and toward a more certain one.

The company is relocating its administrative offices and warehouse to Bloomfield and its Windsor retail store is being renovated to add 1,500-square-feet of space that will be used to sell products that don't count on private insurance or Medicare and Medicaid reimbursements.

Those products include uniforms and scrubs for doctors, nurses, home health aids and others. Cosker expects the new product lines to increase foot traffic in the store.

The company is also getting into some more complex lines of work aimed at preventing injuries, including remodeling bathrooms and stairways for handicapped clients.

"Ironically, Medicare does not pay for prevention. Maybe its time for them to start thinking proactively, as well," Cosker said.

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