1. Boston Healthcare Associates, Inc. 75 Federal Street, 9 th Floor Boston, MA 02110 617.482.4005 Fax 617.482.4005 www.bostonhealthcare.com © 2006 Boston Healthcare Associates, Inc. | Create. Navigate. SM Home Healthcare Reimbursement: Getting Payment For New Living Room Technologies Presented to: 9 March 2006 Create. Navigate. SM Boston Healthcare.

2. © 2006 Boston Healthcare Associates, Inc. | Page 2 Create. Navigate. SM Discussion Topics  What is Reimbursement?  What is “home healthcare”?  What healthcare items and services are paid for in the home?  Who pays for home healthcare?  How is home healthcare reimbursed generally?  How are items and devices used in the home reimbursed?  How do you create a reimbursement strategy?

3. © 2006 Boston Healthcare Associates, Inc. | Page 3 Create. Navigate. SM  Coding is the language that characterizes services, procedures and products rendered to patients by physicians/institutions and the rationale for providing them  Payment represents the link between coverage and the value proposition for a product  Coverage is the first priority  Coverage defines the range and extent of services and products for which the insurer will pay COVERAGE The term “reimbursement” has become an umbrella term used to describe: CODING PAYMENT Defining Reimbursement: Coverage, Coding and Payment

4. © 2006 Boston Healthcare Associates, Inc. | Page 4 Create. Navigate. SM  Home health care services include: –high tech pharmacy services, –skilled professional and paraprofessional services, –custodial care, and –medical equipment provided in or delivered to the home  Providers of care delivered in the home –Home Healthcare Agencies –Durable Medical Equipment (DME) and Medical Supply Distributors Under the home healthcare reimbursement environment, new technologies face the challenge of being integrated into an existing system of consolidated payment, with little allowance for separately reimbursed items which may result in low payment for novel technologies A DME benefit may be more profitable for new technologies! Home Health Care Services and Providers Defined

5. © 2006 Boston Healthcare Associates, Inc. | Page 5 Create. Navigate. SM Medicare’s Definition of a Home Health Agency Private payers follow the Medicare definition of an HHA as far as State licensing, regulations, and the types of services the agency must provide A home health agency (HHA) is a public agency or private organization, or a subdivision of such an agency or organization, that must: 1.Be engaged in providing skilled nursing services and other therapeutic services; such as physical therapy, speech-language pathology services, or occupational therapy, medical social services, and home health aide services 2.Have policies established by a professional group associated with the agency or organization (including at least one physician and one registered nurse) to govern the services and provides for supervision of such services by a physician or a registered nurse 3.Maintain clinical records on all patients 4.Be licensed in accordance with State or local law or is approved by the State or local licensing agency as meeting the licensing standards, where applicable 5.Meet other conditions found by the Secretary of Health and Human Services to be necessary for health and safety

6. © 2006 Boston Healthcare Associates, Inc. | Page 6 Create. Navigate. SM A Prospective Payment System (PPS) Consolidated billing system with an episodic payment rate Services & Supplies Included  The six home health disciplines: skilled nursing services, home health aide services, physical therapy, speech-language pathology services, occupational therapy services, and medical social services  Medical supplies; both routine and non-routine medical supplies are included in the base rates for every Medicare home health patient regardless of whether or not the patient requires medical supplies during the episode, i.e., catheters, catheter supplies, ostomy bags and supplies related to ostomy care  Telehealth: the services are recorded in the plan of care along with the Medicare covered home health services  Services and supplies are paid on a reasonable cost basis using a consolidated billing system; HHA submits all Medicare claims for all home health services provided white the eligible beneficiary is under a plan of care Services & Supplies Excluded or Separately Payable  DME including supplies covered as DME,  Osteoporosis drugs The law governing the Medicare home health prospective payment system (PPS) requires that all payments be made to the home health agency for any services and medical supplies (as described in the Social Security Act (the Act except for durable medical equipment (DME)) that are furnished to an individual during the time the individual is under a home health plan of care

7. © 2006 Boston Healthcare Associates, Inc. | Page 7 Create. Navigate. SM  4 Medicare Home Care Eligibility Conditions –Part of physician care plan –Patient needs intermittent (not full time) skilled nursing care or physical, speech language, or occupational therapy –Patient is homebound –HHA must be Medicare approved  Original Medicare HH benefit covers: –Skilled nursing/therapy, –Some social services, –Certain medical supplies (BUT…NOT Rx Drugs) –Medical equipment (Covers 80% approved DME) Medicare HHA Eligibility and Benefit Reasonable and Necessary Services The law requires that payment may be made only if a physician certifies the need for services and establishes a plan of care. The Secretary is responsible for ensuring that the claimed services are covered by Medicare, including determining whether they are "reasonable and necessary"

8. © 2006 Boston Healthcare Associates, Inc. | Page 8 Create. Navigate. SM Duration of Covered Home Health Services Hospital insurance coverage then Part B coverage Hospital Insurance Coverage –Part A  Home health services are covered under the beneficiary’s hospital insurance, Part A, up to 100 home health visit  The first 100 visits must be paid under Part A if the beneficiary is entitled under Part A, and the remainder of the visits may be paid under Part B Part B Coverage  The unit of payment under home health PPS is a national 60 day episode rate for coverage of the same home health services that would have been paid by the Part A benefit  Coverage under Part B occurs after Part A coverage has expired The HHA may receive payment through the Part A or Part B benefit. The Part A benefit covers for up to 100 home health visits, and once these visits expire, the Part B benefit kicks in for a 60 day duration of care

9. © 2006 Boston Healthcare Associates, Inc. | Page 9 Create. Navigate. SM Key Reimbursement Issues to Consider in Home Healthcare Under the home healthcare reimbursement environment, new technologies face the challenge of being integrated into an existing system of consolidated payment, with little allowance for separately reimbursed items which may result in low payment for novel technologies A DME benefit may be more profitable for new technologies  Medical supplies and Durable Medical Equipment (DME) are reimbursed differently in home healthcare; DME is separately payable, and thus not covered under an HHA  The determining factor for coverage is the medical classification of the supply, not the diagnosis of the patient  The beneficiary is subject to a 20% co-insurance when using DME in the home  Telehealth services may not replace home health visits but may be furnished in the plan of care along with Medicare covered home health services: it is not separately payable  Home Healthcare Agencies are paid initially from the Part A (100 visits) Medicare benefit, then paid by the Part B (60 day episode) benefit  End Stage Renal Disease (ESRD) patients receive Medicare benefits as secondary to benefits payable under an employer group health plan (EGHP), during a period of up to 12 months

10. © 2006 Boston Healthcare Associates, Inc. | Page 10 Create. Navigate. SM 1.The equipment meets the definition of durable medical equipment: –(1) Can withstand repeated use, and –(2) Is primarily and customarily used to serve a medical purpose, and –(3) Generally is not useful to a person in the absence of illness or injury, and –(4) Is appropriate for use in the home 2.The equipment is necessary and reasonable for the treatment of the patient's illness or injury or to improve the functioning of his malformed body member: –These considerations will bar payment for equipment which cannot reasonably be expected to perform a therapeutic function in an individual case or will permit only partial payment when the type of equipment furnished substantially exceeds that required for the treatment of the illness or injury involved 3.The equipment is used in the patient's home The beneficiary is subject to a 20% co-pay with DME Rental and Purchase of DME in the Home A participating provider of service may be reimbursed under Part B on a reasonable cost basis for durable medical equipment which it rents or sells to a beneficiary for use in his home if the following three requirements are met: Payment may be made for repair, maintenance, and replacement of medically required durable medical equipment which the beneficiary owns or is purchasing Separately itemized charges for repair, maintenance, and replacement of rented equipment are not covered DME Coverage and Payment

11. © 2006 Boston Healthcare Associates, Inc. | Page 11 Create. Navigate. SM End-Stage Renal Disease Program: Home Dialysis Is a Unique Benefit  Medicare entitlement begins in the fourth month after the start of maintenance dialysis, except for patients who have undergone a kidney transplant or who receive training to perform dialysis at home  During the first three months, also known as the waiting period, the patient and other programs that the patient is eligible for (such as state Medicaid programs) are responsible for payment  If an employer group health plan (EGHP) covers a patient when ESRD is diagnosed, then the EGHP is the primary payer for the first 33 months of care  Medicare is the secondary payer during this period  EGHPs include health plans that patients were enrolled in through their own employment or through a spouse’s or parent’s employment, before becoming eligible for Medicare due to ESRD

12. © 2006 Boston Healthcare Associates, Inc. | Page 12 Create. Navigate. SM Reimbursement Strategy Summary  What reimbursement will mean to your product depends on a wide range of internal and external factors –First, understand the factors within your control (and put a plan in place to control them)  Characterize your product: type of service, site of service, expected payer mix, amount of competition, availability of clinical and economic data –Then, define your approach to those factors beyond your control  Assess the marketplace, policies and indicated patient audience(s)  After creating a great product, creating a strategy to get that product into the hands of the users is the most important step!

13. © 2006 Boston Healthcare Associates, Inc. | Page 13 Create. Navigate. SM Many limitations on coverage exists for Medicare beneficiaries under the Home Healthcare benefit. Understanding the reimbursement of medical supplies versus DME products early on may help to define the appropriate market for new technologies and help manufacturers reach their utilization goals Concluding Remarks  Some creative reimbursement strategies could include working legislatively to obtain coverage under a demonstration project  Try to obtain coverage through various payers – understanding that Medicare is the elephant in the corner

14. Boston Healthcare Associates, Inc. 75 Federal Street, 9 th Floor Boston, MA 02110 617.482.4005 Fax 617.482.4005 www.bostonhealthcare.com © 2006 Boston Healthcare Associates, Inc. | Create. Navigate. SM Thank You! Erica Bisguier (617) 912-5114 (ebisguier@bostonhealthcare.com)