Industry: Round One Rates Add Up to Trouble

ATLANTA

The fees are in, but the jury’s still out when it comes to the impact competitive bidding will have on the home medical equipment industry, according to stakeholders who got their first look last month at Medicare’s reimbursement rates for round one of the program.

On March 20, CMS revealed its new allowables, with average reductions across the 10 first-round product categories at 26 percent. The agency also said 64 percent of the winning bidders fell into the small business category, surpassing its original 30 percent contract target for small suppliers.

According to CMS, the average savings from Medicare’s current fee schedule in each category is:

• Oxygen and oxygen equipment: 27%
• Standard power wheelchairs, scooters and related accessories: 21%
• Complex rehabilitative power wheelchairs and related accessories: 15%
• Mail-order diabetic supplies: 43%
• Enteral nutrients, supplies and equipment: 26%
• Continuous Positive Airway Pressure devices, respiratory assist devices and related supplies and accessories: 29%
• Hospital beds and accessories: 29%
• Negative pressure wound therapy pumps and related supplies and accessories: 14%
• Walkers and related accessories: 27%
• Support surfaces, such as specialized mattresses to help people with pressure ulcers: 36%

“We were overpaying” for many of the items now included in competitive bidding, CMS’ Acting Administrator Kerry Weems told reporters at a press briefing announcing the rates.

While Weems pegged potential savings at $1 billion a year once the program is in full swing, others raised serious questions about its impact on beneficiaries and providers.

“The American Association for Homecare thinks the jury is still very much out on the question of competitive bidding and its impact both on beneficiary access to care and the quality of that care,” said Tyler Wilson, president.

“The CMS perspective seems to be limited to focusing on payment cuts. After July 1 when the program is implemented, we will begin to get a sense of the services that contract providers may have had to eliminate in order to meet CMS’ singular concern about home medical equipment pricing.”

Even some providers that won their bids had reservations about what the program could mean to the industry.

Raul Lopez’s company, Bayshore Dura Medical in Miami Lakes, Fla., won eight of the 10 categories it bid on, losing only in mail-order diabetic supplies and standard power wheelchairs. But the president of the Florida Association of Medical Equipment Services still wasn’t celebrating.

“I know too many suppliers who do a good job who can’t do Medicare business anymore,” Lopez said.

Stakeholders also were bothered by the wide range in rates from area to area.

“The disparity between MSAs is quite shocking,” said Miriam Lieber of Sherman Oaks, Calif.-based Lieber Consulting.

“I think the lesson learned is you don’t have to lowball. In Miami where the prices are much lower than in Riverside [Calif.], for instance, it’s almost like providers played a game of chicken, and look what it got them. They didn’t need to bid so low, because you see in the other areas that the prices are not nearly as low.”

She also questioned whether CMS’ assertion that 64 percent of the contracts were awarded to small businesses was really good news.

“CMS is touting that 64 percent of small suppliers won bids, but the fact is that those who did not win are simply out of business,” said Lieber. “I would get back to the fact that, really, CMS’ objective with competitive bidding was to limit the number of providers and to get their prices lower.”

And those are not the only problems.

When CMS sent out the round one contract offers to arrive March 21, some 160 complaints from providers claiming their bids were disqualified due to CMS’ error were reported within a matter of days.

The deluge spawned action from AAHomecare, The VGM Group, the National Association of Independent Medical Equipment Suppliers and others who began contacting members of Congress as well as Washington legal teams including Sidley Austin and Akin & Gump.

At press time, the organizations were reviewing grounds for potential lawsuits contesting the DMEPOS bid program.

Others in the industry want to see CMS’ math.

In some product categories, identical prices were calculated for multiple bid areas, said Cara Bachenheimer, senior vice president of government relations for Elyria, Ohio-based Invacare.

As an example, Bachenheimer noted in the high-end rehab category, 105 HCPCS codes had identical prices in two markets, 24 codes had identical prices in three markets and 14 codes had prices that were identical in four markets.

In the standard wheelchair product category, she said, 76 codes had identical prices in two markets and 18 codes had prices that were identical in three markets.

“This is highly improbable mathematically” and suggests a flawed bid calculation process, Bachenheimer said.

As the industry waits for CMS’ announcement of bid winners, VGM’s John Gallagher, vice president of government relations, said there could be a bright side to the problems in round one.

“Actually, this is almost too good to be true. It highlights the total incompetence of CMS,” he said. “CMS is totally incapable of moving [competitive bidding] forward … It’s almost like the Keystone Cops have taken over and rolled this thing out. They have no idea what they are doing.”