Bidding Will Cost Jobs

With jobs and the economy consistently ranking as the most important issue across the country, members of Congress are responding to the message that the so-called “competitive” bid program for home medical equipment will cost jobs across the country. This message is, of course, inextricably tied to the consumer access message; devastating the industry will cost jobs and deny consumers access.

Importantly, all consumers will lose access. With the closure of HME firms across the nation, not only will Medicare beneficiaries lose access to the range of providers in their community but all consumers will. Those who have private insurance, or who are state Medicaid recipients, or who choose to obtain DME items at retail, will no longer be able to choose from the variety of competitive firms that have historically served their community. The resulting loss of competition will disserve all consumers.

The Centers for Medicare and Medicaid Services’ durable medical equipment “competitive” bidding program is scheduled to be implemented Jan. 1, 2011, in nine of the nation’s largest metropolitan areas (Round 1). The program will be expanded to an additional 91 cities starting in January 2013 (Round 2).

Based upon a recent analysis performed by member services organization VGM, the bidding program will likely cost more than 80,000 American jobs in bid areas over the next three years. This is a strong message that we must make sure all members of Congress hear loud and clear.

Following are some key talking points to convey to your representatives and senators based on VGM’s jobs loss analysis.

• 93 percent of local providers will not be awarded competitive bidding contracts As a result of the original bidding process in 2008, on average only 7 percent of local providers were awarded contracts. In its own analysis of the bid program (CMS’ Interim Final Rule, CMS-1561-IFC, Jan. 16, 2009), CMS indicated that the Round 1 rebid results are likely to very closely resemble those in the 2008 bid process. CMS has told us that it would not be changing its supplier selection process and its methodology for reviewing the financial capability of supplier bidders. Therefore, it is highly unlikely that the results of this Round 1 will be substantially different (i.e., better) than that of the 2008 bid process.
• 42 percent of non-contract providers are likely to go out of business The average DME provider relies on Medicare for 42 percent of its revenue. If 42 percent of all revenue is taken from a sector of an industry, it is likely that the resulting consolidation will result in a reduction of an approximately equal percent of existing companies.
• 39 percent of all suppliers located in competitive bidding areas are likely to go out of business The 42 percent reduction in revenue for the 93 percent of providers who will not be awarded contracts will likely result in a 39 percent reduction in providers and associated jobs.
• 12,000 employees are set to lose their jobs through the first round of bidding The average DME provider employs 10 full-time employees. The reduction of nearly 1,200 provider locations will result in nearly 12,000 lost jobs in 2011 within the nine Round 1 competitive bidding areas.
• More than 80,000 employees will lose their jobs through the implementation of the first two rounds of competitive bidding Competitive bidding implementation in the nine Round 1 areas, plus an additional 91 Round 2 bid areas in 2013 will collectively result in more than 80,000 lost jobs within these 100 bid areas.

These are important figures for your members of Congress to understand — particularly those that will be impacted in the very near term, the nine metropolitan areas slated to go live in January. Further, the additional 91 metropolitan areas where the bid program is scheduled to be implemented in January 2013 will cover virtually the entire country.

For the complete VGM jobs loss analysis, go to www.vgm.com/headlines/article.asp?ID=1457.

Read more Washington Wit & Wisdom columns. View more competitive bidding stories.

A specialist in health care legislation, regulations and government relations, Cara C. Bachenheimer is vice president, government relations, for Invacare Corp., Elyria, Ohio. Bachenheimer previously worked at the law firm of Epstein, Becker & Green in Washington, D.C., and at the American Association for Homecare and the Health Industry Distributors Association. You can reach her at 440/329-6226 or [email protected].