Remember the good old days when nebulizers were highly profitable and HME providers could supply the inhalation drugs? Back then, respiratory providers marketed the heck out of nebulizers since they were not in the capped rental category and they would get the referral for the inhalation drugs to be administered through the nebulizer compressor.

This situation changed in 1996 when the government mandated that only pharmacies could provide the inhalation drugs. As a result, HME providers without their own closed-door respiratory pharmacies could no longer supply the drugs or bill the Durable Medical Equipment Regional Carriers (DMERCs) for them. Today, providers are only allowed to supply the nebulizer compressor and the supplies used with the nebulizer to administer the drug(s) to the patient.

I strongly believe that this change raised compliance issues with the beneficiaries. We have seen numerous mail-order pharmacies open for business, and we went through the “fee-for-service” era when providers were paid by pharmacies to supply their patients with the inhalation drugs, which resulted in so many government fines that some may still not be paid off.

After all the dust has settled, the question remains: Can providers still market and provide nebulizers to their patients and make a profit? I believe they can, but only if they employ the right strategy.

Qualification Criteria
Nebulizers and inhalation drugs have gone through many changes and obstacles, but one thing that has remained constant is the medical benefit that this form of treatment provides to qualified patients. For a Medicare patient to qualify for a nebulizer and the inhalation drug to be administered through the nebulizer, several criteria must be met prior to a provider delivering this equipment and/or supplies.

First, the provider must verify if the patient qualifies with the diagnosis code that the referral source provided at the time of intake. The diagnosis codes that qualify range from 496 to 505. Exceptions include patients with cystic fibrosis or thick tenacious secretions, and HIV patients can qualify when the nebulizer is used with pentamidine. If patients have a diagnosis of lung cancer or congestive heart failure, they do not qualify. But if you do your research, some patients may qualify under one of the other diagnoses in the physician’s progress notes. Therefore, it is very important to record all of a patient’s diagnoses at the time of intake.

An important qualifying issue many providers face in current DMERC audits is what happens when a patient is tried on a metered dose inhaler and it is ruled ineffective or inefficient. Physicians are expected to record this issue in their progress notes, and the DMERCs have searched for this information in recent and current audits.

You are not responsible for what physicians record in their progress notes. If you told one of your referral sources what the physician must write in the progress notes in case you are audited, you would be thrown out on your ear. Yes, we can educate our referral sources, but be cautious about how responsible you are.

Check Out Physician Orders
Your responsibility is obtaining a physician order for a nebulizer, supplies, and medication(s). The physician order is more than a prescription that states the patient needs a nebulizer or “drugs.” It must state the patient’s name, address, Health Insurance Commission (HIC) number/Medicare number, date of birth, and length of need. Furthermore, the physician order must itemize the type of nebulizer provided and all of the supplies that you are billing to the DMERC. This includes the name of each medication, the frequency, the dosage, the strength, and the quantities. The physician order also should indicate if a metered dose inhaler was tried and ruled out or found to be less effective than an independent treatment. Finally, it should include the medical necessity of the nebulizer compressor and all of the physician’s information.

Remember, if the nebulizer is covered, the medication is covered. If the medication is not a covered drug, the nebulizer is not going to be reimbursed. I strongly suggest you obtain the original signature on the physician order for auditing purposes. You may deliver with a verbal or faxed order and bill off of a faxed order, but do not forget the DMERC can ask for the original anytime they suspect fraud or have suspicions of problems with your account.

The most common type of nebulizer is known as a small-volume nebulizer. The most familiar Healthcare Common Procedure Coding System (HCPCS) code for this item is E0570. It is a capped rental item and reimburses at a very low rate per month. The coverage criteria are as stated above. Verify that you have the documentation you need to avoid overpayments in routine audits due to a lack of documentation. You do not want to receive an overpayment with a possible extrapolation with your nebulizers as little as they are reimbursed.

Medicare reimbursed for an ultrasonic nebulizer several years back, but due to the quantity of ultrasonic nebulizers that providers delivered soon after the coverage began, Medicare stopped reimbursement for them and will downcode them to the least costly alternative of a pneumatic compressor (E0570).

A large volume nebulizer and related accessories are covered by Medicare only when medical documentation exists to show that it is medically necessary to deliver humidity to a patient with thick, tenacious secretions, cystic fibrosis, bronchiectasis, or a tracheotomy. If a large volume nebulizer is used predominantly to provide room humidification, Medicare will deem it medically unnecessary.

Winning Nebulizer Strategies
There are three components of marketing and building your nebulizer business:

1. Converting nebulizer customers to respiratory medication customers.
2. Promoting nebulizers as a way to increase a respiratory medication customer base.
3. Engaging in the cash sales of nebulizers.

Providers must learn how to engage in marketing nebulizers to third-party insurers and patients other than Medicare. Not all patients who require a nebulizer are Medicare chronic obstructive pulmonary disease (COPD) patients. I have many clients who are selling more than 1,500 nebulizers a year to Medicaid programs, third-party insurers, and patients who are uninsured but pay cash.

One of my clients has even created a Web site to sell nebulizers, which accepts all major credit cards. The client’s company ships the device through the mail with simple instructions on how to properly use the nebulizer and offers a 24-hour toll-free number for the patient or caregiver to call for instructions on how to use the equipment or what to do if the nebulizer malfunctions. Profit margins for cash sales of nebulizers are relatively modest. The larger the volume, the more profit the provider will make.

An HME company can also make a profit in nebulizers by opening its own closed-door pharmacy to service its nebulizer customers. Alternatively, if the company does not wish to engage in the pharmacy business, then it can link its Web site to that of an existing mail-order respiratory pharmacy so nebulizer customers have access to mail-order medications. It simply must make sure it receives no financial remuneration from the mail-order pharmacy for the link since laws prohibit such arrangements.

Finally, an HME company can engage in a relationship with a reputable pharmacy through a Pharmacy Management Agreement (PMA), as long as the company verifies that the PMA has merit and is within all legal parameters.

Even though the sale of a nebulizer by itself might seem unattractive to an HME company, if the business opens its own closed-door pharmacy or forms a PMA with a reputable pharmacy—or uses nebulizers as a marketing tool for the sale of respiratory medications—marketing nebulizers can result in a profit center for the HME company. It is time for our industry to become more dependent on third-party insurers and cash sales and to become less dependent on Medicare reimbursement. What do you have to lose except cash?

Jane W. Bunch, RT, is CEO and founder of JB&CS Inc, Marietta, Ga. Contact JB&CS Inc at (678) 445-1221.