Providers Take Sobering Job-Loss Projections to Lawmakers

WATERLOO, Iowa — If legislators on Capitol Hill thought
the jobs outlook was already grim, wait until Wednesday.

That’s when scores of home medical equipment stakeholders meet
with their congressional leaders as part of this week’s Legislative
Conference hosted by the American Association for Homecare —
and when they’ll share the results of a new report projecting HME
job losses of more than 100,000 if competitive bidding is
implemented as planned.

In addition, according to the study by the Waterloo, Iowa-based
VGM Group, some 39 percent of providers in competitive bidding
areas are likely to go out of business should the Centers for
Medicare and Medicaid Services’ plan for DMEPOS competitive bidding
be instituted.

The controversial project, which was initially implemented in
July 2008 and subsequently delayed by Congress due to a myriad of
problems, is on target to begin again on Jan. 1, 2011, in nine of
the country’s largest metropolitan areas. Round 2 of the program
will involve 79 areas as it currently stands; a provision in the
Senate’s health care reform bill would add another 21 cities for a
total of 100.

“Competitive bidding is set to cost more than 80,000 American
jobs in bid areas over the next three years,” said VGM’s Alan
Morris and Mark Higley, who utilized Round 1 contract award data in
conjunction with provider and demographic statistics provided by
Melbourne, Fla.-based The Weeks Group to reach their conclusions.
According to VGM, “the ‘domino effect’ of destroying the
infrastructure of the home medical equipment delivery model will
bring job loss totals well over 100,000.”

The two analysts noted yet another sobering statistic: An
estimated 93 percent of local providers will not be awarded
competitive bidding contracts.

“As a result of the original bidding process, only 7 percent of
local providers were awarded contracts … CMS expressed the
likelihood that rebid results are likely to very closely resemble
those stemming from the original bidding process,” the analysts
said.

Since CMS is not allowing any provider who does not win a
contract to accept the new Medicare reimbursement and remain a
Medicare provider, those who do not win contracts will face some
serious consequences, according to the report, among them:

• 12,000 HME employees would probably lose their jobs in Round 1,
  with the most — an estimated 3,739 — in the Miami
  area.

• 42 percent of non-contract providers are likely to go out of
  business, a figure that corresponds to reports that the average HME
  provider gets 42 percent of its revenue from Medicare. “If 42
  percent of all revenue is taken from a sector of an industry, it’s
  likely the resulting consolidation will result in a reduction of an
  approximately equal percent of existing companies,” the analysts
  said.

• Medicaid and private insurers will reduce payment rates due to
  the program. “Generally, Medicaid and private insurers follow
  Medicare’s lead when setting reimbursement rates for DME,” Higley
  and Morris noted. “Bid rates will undoubtedly result in significant
  reduction in payment from all payers, only reinforcing the fact
  that more than 100,000 jobs will be lost as a result of direct and
  indirect effects of the program.”

• Contract suppliers will lose on average 33 percent of their
  Medicare business and 14 percent of their overall patient base. The
  new Medicare reimbursement in nine categories is expected to drop
  by double digits, but in addition, the report says, “the average
  DME will only receive four of six bid category contracts, based on
  original Round 1 results.”

• Finances will not allow for significant shifts in jobs from
  non-Medicare suppliers to Medicare-contracted suppliers. “The
  anticipated reductions in Medicare reimbursement will be such that
  suppliers awarded contracts will not have the financial wherewithal
  to take on additional staff,” the analysts said.

All of this is not good news for a Congress that is now focused
on jobs legislation.

Stakeholders are hoping that the information will compel
lawmakers to sign on to H.R. 3790, the bill that would eliminate
competitive bidding.

Bill Cheek of Carmichael’s Home Medical Equipment in Monroe,
Ga., has never been to a legislative conference before, but despite
the tough economic times, he decided to pony up the funds and go
this year.

“[It’s] a small price for me to pay to go to Washington to take
care of my employees and my patients and save their livelihood and
mine,” said the 18-year veteran of the HME business.