3 Myths of Orthotics & DME as Ancillary Revenue
Why Providers, Health Systems and Integrated Delivery Networks Shouldn’t Overlook this Profitable Service.
Executive Summary
Providers Offering Ancillary Services
Spend on DME in the US
$46B
According to the Centers for Disease Control and Prevention (CDC) National Center for Health Statistics, $46.4 billion was spent on DME in the U.S. during 2014.3
Reduce Group Overhead Up To
Average Net Profit Per Doctor
$46K
Orthotics & DME can generate an average net profit of $46K per doctor, per year, for a mid-sized practice.5
MYTH #1 – It is Not Compliant
Reality: The Exceptions & Safe Harbors
The federal Stark Law prohibits a physician from making a referral to a provider offering Stark designated health services (DHS) that would otherwise be covered by Medicare if the physician or an immediate family member has a financial relationship with the provider unless an exception applies. In addition, the Stark Law prohibits a provider from submitting a bill or claim for DHS referred by the physician, prohibits payment of such claims, and if payment is made, prohibits retention of such payments if the physician or an immediate family member has a financial relationship with the provider unless an exception applies.
Health care providers, including physician groups, hospitals and DMEPOS suppliers, are subject to the Stark Law if they furnish DHS. However, the Stark Law contains numerous exceptions, including the in-office ancillary services exception for physician groups, that may allow a provider to offer certain DME and/or O&P in compliance with the Stark Law.
MYTH #2 – It is Not Profitable
Reality: Ancillary services can significantly enhance revenue, decrease costs and improve outcomes
In fact, ancillary services can reduce group overhead between 10% and 30%,4 and orthotics & DME can generate an average net profit of $46K per doctor, per year, for a mid-sized practice.5 How much revenue a facility generates through an in-house orthotics & DME program will depend on the volume, type of braces dispensed and the reimbursement for each brace.
Some orthotics & DME products are not reimbursed at all, so the provider will need to determine patient pay amounts for these products as well.
MYTH #3 – It is Too Complicated
Reality: The right partners can help structure an ancillary service that is easy to set up and maintain, meets the needs of the provider and offers patient continuity of care.
Instituting a healthy ancillary service can seem daunting given complexities, potential disruption, and staffing and training needs. Such activities not directly associated with patient care can be difficult to focus on in a clinical setting. While challenges exist, it is possible to succeed by starting with an appropriate assessment of operational needs within the orthopedic environment, robust planning for implementation, and putting in place the right tracking, monitoring and feedback mechanisms.
Many facilities that have successfully implemented ancillary programs have found that the right partners and tools can significantly reduce complexity and smooth the transition to patient continuity of care by providing systems to help navigate implementation and provide ongoing program support.
Is a DMEPOS Division Right for You?
We conclude the three myths discussed on this web page are perpetuated by misinformation and a lack of understanding in the current market. Providers should not overlook a well-run orthotics & DME program that can be an important factor in generating revenue, reducing cost and enhancing the patient experience across the hurt-to-healthy orthopedic episode.
Download our complete DMEPOS whitepaper and receive:
- 3 Myths of Orthotics & DME as Ancillary Revenue
- DMEPOS Business Models
- Keys to Success
- Questions to Ask Any DMEPOS Workflow Provider
- Net Profit Averages
- “Blue Paper” Expanding on the “Complexity” Issues
- “Blue Paper” Expanding on “Ancillary Revenue”
- Specific DMEPOS Case Studies
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Acronym Soup
O&P, DME and DMEPOS
Durable Medical Equipment, Prosthetics, Orthotics and Supplies (DMEPOS) is an acronym established by the Centers for Medicare & Medicaid Services (CMS) to refer to a wide range of products meeting diverse health care needs. DMEPOS is categorized into two sections: “orthotics & prosthetics” (O&P) and “durable medical equipment” (DME).
Separating O&P from DME
O&P and DME are frequently lumped together and used interchangeably since both involve supplying devices; however, they are distinct categories of care, and laws may treat them differently.
Orthotics (leg, arm, back and neck braces) and prosthetics (artificial legs, arms and eyes) often require specialized education and clinical skills to fit the device to the patient. There is a labor services component associated with O&P in addition to the cost of the product itself. DME refers mainly to mobility devices like wheelchairs, walker, canes and crutches, and some home-use devices like oxygen therapy. Supplies are usually disposable and cannot withstand repeated use by more than one individual. Examples include diabetic supplies, bandages and test strips.
The confusion with DME is a major underlying problem for orthotics in legislation and reimbursement. Care should be taken to distinguish between the two. For the purposes of this whitepaper, we refer to “orthotics & DME” in order to keep the terms distinct.
1 “The Value of Ancillary Services,” Medscape, http://www.medscape.com/viewarticle/828246. Accessed June 13, 2016.↩
2 Bolesta, W.A., “The Physician-Owned Orthotic and Durable Medical Equipment Service,” Orthop Clin N Am 39 (2008) 71-79. ↩
3 “National Health Expenditures 2014 Highlights,” CMS.gov, https://www.cms.gov/research-statistics-data-and-systems/statistics-trends-and-reports/nationalhealthexpenddata/downloads/highlights.pdf. Accessed June 13, 2016. ↩
4 Bert, J.M., MD, “Ancillary Services Available to the Orthopedic Surgeon,” Sports Med Arthrosc Rev, Vol. 12, No. 4, December 2004.6 “History of Stark Law,” USLegal.com. http://starklaws.uslegal.com/history-of-stark-law/. Accessed June 13, 2016. ↩
5 Breg OrthoSelect aggregate client data as of June 2016. ↩