Complex Rehab Stakeholders: ‘It’s Bad’

ATLANTA–The industry is reeling from the across-the-board cuts
set in round one of competitive bidding, but nowhere is this more
true than in the complex rehab sector.

Averaging 15 percent of current reimbursements, the reductions,
coupled with the scant number of contracts offered in the product
category, were shocking to members of the rehab community, which
has been fighting–thus far unsuccessfully–to have complex rehab
equipment excluded from the bidding program.

“I don’t like the reimbursement numbers I am
seeing,” said Gary Gilberti, vice president of the National
Coalition for Assistive and Rehab Technology. “It’s tight
already; we have companies that are barely making it on current
allowables. I think a lot of people bid out of fear. I think they
bid low to try to keep their share of the market.”

Gilberti, president and CEO of Chesapeake Rehab Equipment,
Baltimore, said his company won its bid in Charlotte, N.C., but
lost in the Pittsburgh CBA.

“And I am glad I didn’t bid in some of the other markets,
considering how low those numbers are,” he said.

Tim Pederson, CEO of WestMed Rehab in Rapid City, S.D., agreed
that the numbers are surprisingly low, especially since, he said,
“it’s completely inappropriate to competitively bid complex
rehab at all.”

“It’s bad,” said Pederson, who also serves as chair
of the American Association for Homecare’s Rehab and Assistive
Technology Council. “Anytime you have reimbursement
reductions of that magnitude, it’s bad, because our profit margins
are already so thin.”

Competitive bidding for complex rehab, Pederson argues, could
ultimately result in tragedy.

“I think, just as I have thought for the past couple of
years, that we probably won’t have any real change in the
[competitive bidding] program until we have a catastrophe. [CMS is]
trying to see how low they can set the bar before they have a
tragedy,” he said.

In addition to the round one reimbursement rates, many are also
concerned that only five or six companies were selected as bid
winners in five of the 10 bid areas. This means that, come July 1,
some bid winners will be responsible for providing equipment and
services for up to 20 percent of those MSAs.

Sharon Hildebrandt, NCART executive director, called the bid
program “a disaster.”

“I see this as a disaster for consumers of complex rehab
because in many of the markets, many inexperienced suppliers are
being offered a contract,” she said. “They do not know
the different types of technology needed for complex rehab clients,
nor do they know or understand the disease progression in the
disabilities.

“They were awarded the contracts because they bid low.
They bid low because they don’t know what their costs are. They
just wanted the business,” she said.

Hildebrandt also voiced concerns over how repairs will be
handled. CMS is not requiring those who win contracts to provide
repairs, she said, “so repairs are going to be done by
providers who did not win bids, and those providers are not going
to be willing to provide repairs at less than cost … The
consumers are going to be the ones who are going to be the big
losers.”

In analyzing the problems concerning competitive bidding and
complex rehab, Rita Hostak, NCART president and vice president of
government relations for Sunrise Medical, Longmont, Colo., offered
the following list of complaints:

–There are many reports of experienced rehab suppliers being
disqualified due to bid amounts that someone judged to be too low.
The irony is that many single payment amounts for items in category
3 are below supplier acquisition cost, so, these decisions appear
to be arbitrary. The lack of judicial recourse is causing
tremendous concern for these suppliers and the Medicare
beneficiaries they serve.

–The fact that capacity was a key determining factor in the
number of suppliers whose bids would be included in the development
of the single payment amount is a significant concern. The
suppliers are not in any way committed to their claimed capacity
and yet, it eliminated other suppliers from the program that bid
within pennies of the winning suppliers. This certainly gave
competitors an opportunity to block out their competition.

–[There are] reports of a high number of winning suppliers in
the complex rehab category that have little or no experience with
these products or the individuals that require them. The fact that
these suppliers would not intuitively understand the product or
service costs related to this category would cause them to naively
bid lower, therefore, blocking out more experienced and
knowledgeable suppliers. The ultimate result will be that these
knowledgeable suppliers could be forced to close their doors or
sell their business to winning suppliers. Suppliers that are solely
dedicated to providing complex rehab technology cannot survive a 30
percent or higher loss of revenue and sustain their business.

–The differences from CBA to CBA in the single payment amount
cannot be accounted for in service cost differences. It appears
that the experience of the supplier in terms of providing truly
complex equipment may be the single most variance to cause this
pricing difference. If a supplier does not recognize the broad
range of technology that fits a single HCPCS code and the fact that
consumers with severe physical disabilities often require a
specific product within a code–meaning products within HCPCS codes
are not interchangeable–the supplier could naively bid based a
single low cost product within a code assuming that they can
provide that product to anyone needing a product within that code.
The problem that results is either the supplier begins to see that
he cannot afford to provide the appropriate products at the single
payment amount and drops out of the program (this is the unlikely
scenario–after all, it is the supplier’s livelihood) or the
consumer no longer receives the appropriate device.

–Innovation in technology to improve people’s lives will no
longer be a viable option for manufacturers of products in the bid
categories; the new goal will only be to reduce costs. Products
will be de-featured, and manufacturing jobs will move overseas at a
faster pace.

–Suppliers obviously analyzed utilization data, their own as
well as CMS’, and the weighting assigned to each HCPCS code in the
bid request to help them determine their bid prices and to raise
their chances of being a contracted supplier. The result is that
repairs for beneficiary-owned equipment will be more difficult than
ever to obtain. In several CBAs, the new single payment amounts on
power wheelchair parts are actually below supplier acquisition
cost. Whether suppliers did this purely on the basis of utilization
and believing that the level of pricing would result in a composite
bid that would place them in the winning array, or whether they
also remembered that the Final Rule indicates that contracted
suppliers are not required to repair beneficiary-owned equipment,
is unknown. Regardless of what motivated the low bid prices, the
result is that Medicare beneficiaries will most likely end up
paying for repairs out-of-pocket.

–The fact that CMS did not require a bidding supplier to have a
physical location in the CBA will cause problems for beneficiaries
requiring complex rehab. To provide complex rehab, the [Assistive
Technology Supplier] needs local support. They require demo
equipment, simulation equipment. Meeting the medical and functional
needs of an individual with severe disabilities is not accomplished
with out-of-the-box technologies. [Often], a mobility system will
require multiple fittings and may have to be delivered twice, once
to the hospital so the evaluating therapist can assess whether the
product ultimately meets the individual’s needs, and again to the
individual’s home. This level of service is difficult to provide in
a timely manner if the office is hundreds of miles away.

Seth Johnson, vice president of government affairs for Pride
Mobility Products, Exeter, Pa., echoed concerns over winning
bidders that may have no experience in the complex rehab market. He
also raised questions as to the numbers behind CMS’ selections in
certain MSAs.

“The program should not go forward until these significant
issues are resolved and more transparency is provided on the
detailed calculations behind the establishment of the payment
rates. Within the complex rehab category, for example, it is highly
improbable that Cincinnati would have a straight 20 percent cut
across all base codes,” Johnson said.

“The reductions in the Dallas, Miami and Riverside
competitive bid areas are also questionable for the same reason,
which raises issues with CMS’ application of the required
methodology to develop the payment amounts in the CBAs. When you
look at the formula that CMS/CBIC were to follow, which is outlined
in the Final Rule, such outcomes seem highly improbable.”

So what can complex rehab providers do?

For those preparing to bid in round two, Gilberti advised,
“Know your costs … because right now we are doing
nothing but damaging the market with these lowball
prices.”

Access CMS’ single payment amount charts for
complex rehab and all product categories in round one.