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January 31, 2011 Volume 17, Number 3



Are You In or are You Out?

Medicare Competitive Bidding is underway in the first 9 MSAs with round two not far behind. Many companies in these first round MSAs didn’t do the necessary reengineering and have closed their doors while others are selling. Then there are the bid winners who are still in the process of determining if they can survive at the NCB rates. You owe it to yourself and your employees to learn what your company can do to survive round one or prepare for round two. Contact AnCor today at 954-757-3121 or visit our website at

Table of Contents
- HME Leaders Work to Devise Competitive Bidding Alternatives
- One Month In: Change Is HME’s New Mantra
- Brown Sticks by Study: Bidding Kills Jobs, Access in Rural Areas
- Bills Would Repeal Medical Device Tax
- Independent Medicare Payment Board Up for Grabs
- Obama Renominates Berwick as CMS Chief
- Reminders: CERT Call on Oxygen, CELA National Call-In Day; More News in Brief

For more industry news, features and highlights from our latest issue, please visit our Web site at

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Headline News
HME Leaders Work to Devise Competitive Bidding Alternatives
‘We’re not going to be spoon-fed this policy’

ATLANTA—As the industry daily sinks deeper into competitive bidding, implemented Jan. 1 in nine metropolitan areas across the country, a brain trust of HME thought-leaders assembled by the American Association for Homecare is working to determine a strategy for dealing with the CMS project.

Two work groups have been established, according to Michael Reinemer, vice president, communications and policy, for AAHomecare.

"One of our member work groups is looking at alternative payment systems for HME that don't involve competitive bidding in any shape or form," said Reinemer. "Another group is looking at ways that might be acceptable within a bidding framework, perhaps starting from scratch on a completely new approach. Both of these work groups are on a fast track, and we hope to be able to share some of their thoughts and conclusions by early March."

Georgie Blackburn, vice president of government relations for Blackburn's in Tarentum, Pa., and co-chair of the alternative ideas work group with Esta Willman of Medi-Source Equipment & Supply in Yucca Valley, Calif., said the intent is to "drive the best ideas forward."

“We are developing a mission statement and, over the next month, we will be finalizing the alternative, or alternatives, we have if we can’t get competitive bidding repealed,” Blackburn said. “March is the deadline for putting our ideas on the table.”

Blackburn said the groups are meeting weekly via conference calls.

“There is an undercurrent of activity,” she said. “Even though competitive bidding appears to be here to stay, there are problems that are being documented and there are those of us trying to get things done who believe we will have an opportunity. When you have a poor policy, something surfaces sometime, and it is our hope to be there with some possibilities.”

While it is still early in the game, AAHomecare reported Jan. 26 that it had recorded nearly 100 complaints tied to the CMS program, including difficulty finding an equipment provider, longer-than-necessary hospital stays due to confusion in discharging patients and confusing or incorrect information provided by Medicare.

But Wayne Stanfield, president and CEO of the National Association of Independent Medical Equipment Suppliers, called the problems being reported in the competitive bidding areas “a trickle, not the expected flood.” He added that among the reasons—other than people not knowing how or where to report problems—are bid winners “throwing full efforts behind making competitive bidding work.” Another reason for the slow reports, he said, “is the caring compassion of the suppliers without contracts who are helping patients by providing uncompensated services.”

Stanfield, a member of the alternative strategy task force, said “there are only two things that can come out at this point—it’s either going to fail or it’s not. If it fails, it will mandate that Congress do something.” He defined failure of the bid program as “enough chaos and catastrophes that it gets to Congress and they say, ‘Oh, my God, what have we done?’”

At that point, Stanfield said, the industry must have a solution. “It is my belief that a short-term plan needs to be ready if [competitive bidding] fails,” he said. “If it fails, whenever that is going to be, then someone is going to ask ‘What do we do now?’ and the industry is going to have to be ready … If this industry does not have a plan in its pocket when that occurs, we will have missed the only opportunity we have.”

That opportunity might come sooner than many think. Blackburn pointed to the House Republicans’ attempt to repeal the Obama health care law. If Congress chips away parts of the reform legislation, one of the possibilities could be a halt to its expansion of competitive bidding to 91 more areas in Round 2. Should something like that happen, the industry needs to be prepared, Blackburn said.

“We want to have alternatives that are saleable to Congress, to CMS, that [show] they will save money while we can preserve jobs and give the care we are accustomed to providing,” she said.

“This is our business, these are our patients,” Blackburn added. “We aren’t just going to be spoon-fed this policy.”

To report problems associated with competitive bidding, contact AAHomecare’s toll-free number at 888/990-0499 or go to

NAIMES is also collecting information at
Would you support a redesigned competitive bidding program? To vote in HomeCare's monthly Web poll, visit

One Month In: Change Is HME’s New Mantra
‘There’s no reset button on market share’

ATLANTA—After years of trying to fend off debilitating Medicare reimbursement cuts, HME providers have, as of Jan. 1, found themselves in a new reality. CMS’ dreaded competitive bidding project has kicked in and the first-month purchase option for power wheelchairs has been eliminated. It’s a new home medical equipment world—and that world is still emerging.

“The new reality is still evolving and probably will continue to do so for several years,” predicted Neil Caesar of the Health Law Center in Greenville, S.C. “But it clearly focuses on lower profit margins, higher volume bundling and requires a more aggressive approach to finding ways to hold down costs, which certainly may require holding back certain services.”

“You have to rethink your position in the market,” added Barry Johnson, president of Duncanville-based Texas Home Medical, which operates in the Dallas-Ft. Worth competitive bidding area. “We’ve had people reducing staff and laying off people. Some people have been giving away oxygen patients.”

The way it was before is not the way it is now, and those who are slow to respond may become casualties of change, stakeholders say.

“I think there has been a kind of cordiality among suppliers. It’s a gentleman’s game and at the end of the day, there was enough business to go around,” Caesar said. “But I don’t know if competitive bidding and the economic realities and the reshaping of regulatory attitudes will allow that.

“I think there are going to be a number of players, especially players who are big enough, who will attempt domination in certain markets. Smaller suppliers who don’t address it proactively may well find themselves without much in the way of referrals.”

Johnson said his area has already seen national providers buying up a spate of smaller counterparts. Also, he said, companies that won a majority of bids in the nine CBAs have been aggressively soliciting business from referral sources, effectively shutting out the singe-contract winners.

“It appears that the social workers and discharge planners are opting for the easy way out and are contacting just the bid winners that won multiple contracts,” Johnson said.

The intense competition doesn’t surprise Caesar. “I think the new reality will be far more competitive than the market has been,” he said. “Competitive bidding and other pressures will drive competitors to seek referral loyalty and customer loyalty more aggressively than before. Large companies will try to penetrate new markets and dominate existing markets.”

In fact, Caesar said, with the advent of competitive bidding, the industry has been focused almost entirely on “access problems, transition problems and problems with some of the contract winners perhaps not being able to do the job. But what people haven’t focused on is the reaction of savvy businesspeople to those problems. If you’re got the bucks and the presence, the reaction of those companies is going to be ‘We’ll fix it for you, come to us. We have four or five or six of the categories, so come to us.’ The industry has been so focused on looking to Washington and Baltimore, they haven’t looked over their shoulders at the competition.”

Such a business climate will require providers to be extremely savvy in running their companies. Some providers have said they are cutting back on services, limiting product choice and restructuring their businesses to accommodate the new reality.

“We may well be heading over the next several years toward a … model where full service is made available for additional reimbursement to those beneficiaries whose conditions warrant the extra service,” Caesar suggested. “This is perhaps not the model any caring supplier would wish would be in place, but it may well be the model that costs require be in place.”

It is incumbent upon providers to become sophisticated business owners, added
Louis Feuer, president of Florida-based Dynamic Seminars & Consulting. “[We must] understand every detail of our business, embrace the technology available to help us while ensuring we do not sacrifice our reputation,” he said. “Although not an easy task, it is imperative if we are to survive continued government scrutiny.”

There is one constant in the changing HME world: demographics. No matter what, baby boomers are coming on strong into their senior years—8,640 of them per day, according to AARP. That means there will always be a demand for HME and a need for someone to provide it.

“For those people who know how, or will learn how, to thrive in a market with more competition and lower profit margins, the demand for home care services will continue to grow exponentially,” Caesar said. “A company that can demonstrate to referral sources, collaborative partners, payers and customers that they offer superior value will earn loyalty and increased opportunities. The need for suppliers to recognize and then embrace the business reality of this market and the market that is revealing itself … is something they need to do now and act on now.

“Washington will do what Washington will do,” Caesar continued. “But meanwhile, market share is up for grabs and, when the dust settles, there’s not going to be a reset button on market share.”

For more thoughts on the industry’s future, see “Conjuring Up a New Future” in HomeCare’s January issue.

Brown Sticks by Study: Bidding Kills Jobs, Access in Rural Areas
It’s the ‘regulatory process run amok,’ says VGM’s Gallagher

WATERLOO, Iowa—According to VGM VP John Gallagher, a CMS official who pooh-poohed economist Ken Brown’s study of the impact of competitive bidding on rural areas may need to wipe some egg off his face. Only weeks into the project, Gallagher said, the negative effects are already being seen.

“People have gone out of business because of credit issues, we’ve lost probably six members in the competitive bidding areas and several outside,” said John Gallagher, vice president of government relations for the Waterloo, Iowa-based member services group.

“We are already seeing consolidation in the rural areas; the nationals have already pulled back,” he continued. “We are already seeing concerns in rural areas where Medicaid has said it is going to go to those [competitive bidding] rates, and we are hearing that third-party payers are going to those rates. When that happens, Dr. Brown’s theories will be played out.”

Brown, a Ph.D. in economics and professor at the University of Northern Iowa, conducted a study last year on the effects CMS’ project would have on care in rural areas. He concluded that as national companies closed branches because of resulting reimbursement cuts, the number of rural providers could decline by as much as 40 or even 50 percent in the states he studied.

But in a December meeting with Brown, Gallagher and Tom Powers, also of VGM, CMS’ Jonathan Blum suggested that the analysis was “flawed.” Small providers would, Blum said, surface to fill the void left by the nationals.

That prompted a follow-up from Brown.

“During our meeting, you essentially suggested that the logic of my analysis was flawed,” he wrote in a Jan. 4 letter to Blum, deputy administrator and director of CMS’ Center for Medicare Management. “In particular, you argued that when the large national firms fail and close their offices across the country, including in rural areas, that this would, in fact, be a good thing for small independent suppliers of DMEPOS. You pointed out that when the national firms fail, the geographic holes left behind by their closure will be easily, and profitably, filled by small independent suppliers.

“Your argument rests on the ability of small independent suppliers to quickly and easily set up shop. Unfortunately, a number of barriers to entry will likely prevent this from occurring in a timely fashion.”

Those barriers, Brown pointed out, include accreditation, which can take nine months; a $50,000 surety bond; the difficulties of finding financing for equipment acquisition; and the significant barriers new providers would need to overcome, such as getting a Medicare number, learning and implementing the Medicare billing process and being solid enough financially to withstand the lag time in getting reimbursed.

“Thus, while it is easy to argue that in theory a new firm can easily enter the market and provide high quality products and service to Medicare beneficiaries in rural America after the large firms fail, the reality is that the process of starting up in this industry is far more difficult than one might initially suspect,” Brown wrote.

On rural America Main Street, small providers are not waiting to take over the vacancies left by big nationals, Gallagher said. “It’s not practical having to take care of patients and not be paid,” he said, adding that there are a myriad of regulations that must be met. “The sheer weight of trying to get a provider number would preclude it, and if there is no margin there ….”

Brown’s findings of significant job losses in rural areas because of competitive bidding are on target, Gallagher said. “It really comes back to jobs, jobs, jobs,” he said, noting that in President Obama’s state-of-the-union address last week, he called for the creation of jobs and putting Americans back to work.

“Here is one [government project] that is a job-killer, and we have a bureaucrat who has no concept, no clue how competitive bidding will affect rural areas,” Gallagher added. “Here is a classic example of the regulatory process run amok.”

That’s the message the industry needs to hammer home to Congress and the Obama administration, he added.

“It’s about the jobs—that has got to be the mantra,” Gallagher said. “We support the president in his desires to create jobs and to make the country more competitive. At the same time, CMS and [the Department of Health and Human Services] are trying to eliminate competition and eliminate jobs. You have an agency of the government putting people out of work.”

Download a PDF of Brown’s study.

Read Brown’s letter in full.

Bills Would Repeal Medical Device Tax
WASHINGTON—On Tuesday, companion bills were introduced in the House and Senate to repeal the medical device tax included in the Patient Protection and Affordable Care Act.

Rep. Erik Paulsen, R-Minn., who proposed a similar measure last year, introduced the Protect Medical Innovation Act in the House, while Sen. Orrin Hatch, R-Utah, introduced the Senate bill. The legislation would repeal the 2.3 percent excise tax on medical device sales included in PPACA as a way to help pay for health reform.

Set to begin in 2013, the tax is estimated to raise $20 billion over 10 years. HME leaders have said the tax would send more of the industry’s manufacturing jobs offshore and curtail research and development.

According to a statement from Paulsen, who co-chairs the House Medical Technology Caucus, “Taxing the medical technology industry to the tune of $20 billion will only stifle growth, innovation, and access to the life-saving technologies U.S. device companies produce.” Hatch, ranking member of the Senate Finance Committee, echoed the sentiments in a statement, saying the tax would “cripple an important engine of opportunity, job growth and innovation, while hurting the advancement of technologies essential to improving patient care.”

The Medical Device Manufacturers Association applauded the legislation in a statement of its own.

“The United States is the global leader in medical technology and innovation, and the repeal of such an onerous tax will help us maintain our position,” said Mark Leahey, MDMA president and CEO. “It is crucial that we support entrepreneurs and engineers who continue to create quality jobs and physicians who focus on improving the quality of life for patients, especially in an increasingly competitive global marketplace.

“When our nation's job-creators face a future with additional taxes and an unpredictable regulatory environment, growth and innovation are stifled. Instead, we need policies that provide incentives for hiring employees and investments in research and innovation.”

The MDMA also said the tax would “disproportionately harm small businesses that develop the majority of innovative and cutting-edge technologies.”

Independent Medicare Payment Board Up for Grabs
WASHINGTON—Following the introduction last week of House and Senate bills that would repeal the medical device tax instituted under the Patient Protection and Affordable Care Act, lawmakers in the House introduced legislation to repeal a provision in the health reform law that created an Independent Payment Advisory Board for Medicare.

The proposed Medicare Decisions Accountability Act (H.R. 452) was introduced Jan. 26 by Rep. Phil Roe, R-Tenn., a physician, and cosponsored by 23 other Republicans.

To begin operation in 2014, the IPAB will be a 15-member independent panel—with members appointed by the president—that could set Medicare reimbursement that would become law unless Congress intervenes.

Industry lobbyist Cara Bachenheimer, senior vice president of government relations for Invacare, explained that the board is charged with enforcing an upper limit on annual Medicare spending growth. “Under the health reform law, Medicare spending is now officially capped,” she said.

“Beginning in 2015, Medicare spending is now supposed to be limited, on a per capita basis, to a fixed growth rate, initially set at a mix of general inflation in the economy and inflation in the health sector. Starting in 2018, the upper limit is set permanently at per capita gross domestic product growth plus one percentage point.”

The IPAB, then, will be responsible for making recommendations to Congress that would cut payment rates to keep Medicare spending within the prescribed limits. At that point, Bachenheimer said, “If Congress does not act—either vote for or against them—then the Department of Health and Human Services is required to implement IPAB's recommendations.”

Proponents of the independent Medicare board believe it will effectively curb spending growth in the massive program. The Congressional Budget Office has estimated the IPAB would save $15.5 billion between 2015 and 2019, the years in which its recommendations will be implemented.

But critics say creation of the board takes accountability for the operation of Medicare from lawmakers and gives it to unelected officials. Roe believes the move could curtail access and care for beneficiaries if physician payments are cut.

“Health care decisions should be made between a physician and the family. You don't need an administration-approved bureaucrat doing it,” Roe told reporters at a Jan. 26 press conference.

“Congress' traditional role of controlling payment rates will be eliminated by this IPAB, if indeed Congress chooses to not act on the IPAB recommendations,” said Bachenheimer, who last year called the board’s creation the “scariest” provision in the health reform law.

Does she still feel that way?

“Most definitely,” Bachenheimer said Friday. “It gives this commission essentially unfettered authority to reduce payments to Medicare providers across the board.”

Read more of Roe's thoughts on the independent board in his July 2010 op-ed piece in The Washington Times.

Obama Renominates Berwick as CMS Chief
WASHINGTON—Late Wednesday, President Obama renominated Donald Berwick as administrator of the Centers for Medicare and Medicaid Services.

The president had originally nominated the Harvard professor and pediatrician for the job in April 2010. But after Republicans attacked Berwick's views on Medicare cost control, which some felt would lead to care rationing, the president bypassed Senate confirmation and used a recess appointment to put Berwick in place as acting CMS administrator in July.

But recess appointments are temporary, and Berwick can remain as acting administrator only through the end of 2011. This time around, he must be confirmed by the Senate to win the job as the giant agency's permanent head.

Although most of CMS' official comments on competitive bidding have been left to Jonathan Blum, deputy administrator and director of the Center for Medicare Management, Berwick did single out the program as an example of how Medicare can save money at a Senate Finance Committee hearing in November.

Responding to questions about savings under health reform, Berwick pointed to the 32 percent drop in Medicare payments for DME in Round 1 of competitive bidding, which he said would return "something like $150 million I think back to beneficiaries in those nine trial areas."

CMS has been without a permanent administrator since Mark McClellan left the post in October 2006.

In Brief
Reminders: CERT Call on Oxygen, CELA National Call-In Day; More News in Brief
BALTIMORE—On Thursday (Feb. 3) from 2-3:30 p.m. ET, the DME MAC CERT Education Task Force will hold a national teleconference on oxygen policies. To register for the call, go to

CELA Call-In Day Feb. 16
WASHINGTON—Held in conjunction with the Continuing Education and Legislative Advocacy Conference, advocates will hold a national call-in day Feb. 16 to ask members of Congress for support of a separate Medicare benefit for complex rehab. Register and receive an informational packet at CELA attendees will also lobby for creation of the benefit in visits to Capitol Hill Feb. 17. For information on CELA 2011, visit

Special Pricing for Medtrade Spring
LAS VEGAS—Register before Feb. 4 and attend the Medtrade Spring Conference and Expo for only $79! To be held April 12-14 at the Sands Expo and Convention Center in Las Vegas, the show features 80 educational sessions—including three new tracks on audits, competitive bidding and retail sales—and close to 300 product and service exhibitors. To register, go to

Record Results for ResMed
SAN DIEGO—Last week ResMed reported record revenue for the company’s second quarter and six months, ended Dec. 31. Revenue for the quarter was $306 million, an 11 percent increase over the same quarter in 2009, while revenue grew 13 percent to $588 million for the six months. "We expect the growth of all of our products to continue to benefit from the vastly under-penetrated and growing sleep-disordered breathing market,” Kieran T. Gallahue, president and CEO, said in a release. He added that evidence coming to light shows early intervention in the treatment of SDB may slow or prevent the progression of co-morbidities such as obesity, hypertension, heart disease or drug-resistant hypertension. “The increase in awareness of the role that SDB plays in these costly and debilitating co-morbidities and in the reduction in workplace safety and productivity should continue to be a major driver of market expansion," Gallahue said.

MLN on End of Purchase Option
BALTIMORE—CMS has issued MLN Matters MM7116 on elimination of the first-month purchase option for standard power wheelchairs, available at

Feds’ Fraud and Abuse Efforts Recoup $4 Billion
WASHINGTON—A new report shows that the government’s health care fraud prevention and enforcement efforts recovered more than $4 billion in fiscal year 2010. That’s the highest annual amount ever recovered from people who attempted to defraud seniors and taxpayers, according to a release from the Department of Health and Human Services. Read the news release at, and view the entire “Health Care Fraud and Abuse Control Program Report” at

Brightree, NAIMES Align
ATLANTA, Ga.—Brightree has formed a strategic alliance with the National Association of Independent Medical Equipment Suppliers “to help providers stay informed about industry legislation and help promote advocacy efforts to better the DME community,” according to a release from the HME software provider. Under the partnership, Brightree and NAIMES will work together to develop a series of informational programs about various topics, such as competitive bidding, that have a significant impact on the industry. “At Brightree, we believe with information comes power,” said Chris Watson, chief marketing officer.

Amerita Acquires Advantage Infusion
IRVINE, Calif.—Amerita has acquired San Antonio-based Advantage Infusion Services as part of its plan “to become the premier specialty infusion services provider in the United States,” according to a release. With an existing location in the area, the acquisition offers the company an opportunity to consolidate operations, improve costs and become a dominant share provider in the San Antonio market. Advantage CEO Ed Lee will remain as branch manager of the combined businesses. “Advantage Infusion Services and Ed Lee have a great reputation in the pediatric market. This is a new specialty area for Amerita in San Antonio and complements our strength in the adult nutrition market,” said Jim Glynn, Amerita president and CEO. The company has 13 locations in six states.

Find Coverage Info Faster
BALTIMORE—CMS has redesigned the Medicare Coverage Database to make it easier to find more information in one place about a specific national or local coverage determination. The new URL is

To revisit this news anytime during the week, check We welcome your comments. Drop a line to HomeCare Editor-in-Chief Gail Walker at


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