Making MMA Work

Now that the initial shock has worn off, home care companies are coming to terms with the government’s overhaul of the Medicare payment system for DME. Providers will be heading to Medtrade 2005 — the industry’s venerable trade show and expo, in Atlanta this year — if not exactly with a newfound confidence, at least with a spirited resolve they can make the new Medicare environment work.

They’ll be looking to Medtrade for some hard answers, they say, and hope to find a brain trust there that will help them wade through the tough first years of the Medicare Modernization Act as its provisions continue to roll out. Their chief concerns now center on exactly how competitive bidding contracts will be implemented, how accreditation will be administered — and by whom.

INFORMATION, PLEASE

“I’ll definitely be shopping for information,” says Wendi Phillips, president of Breeze Medical, Chicago, Ill. Last year, as director of accounts and marketing for Hart Pharmacy & HME in Wichita, Kan., Phillips was most concerned about mandatory accreditation, and “it’s still [my] biggest concern,” she says. Phillips left Hart in August to help launch Breeze, a start-up of 10 planned Midwest stores, some to be located inside Wal-Marts.

But she may not get all the answers. The full impact of MMA has yet to be felt. The soonest that may happen is 2007, when CMS is required by the law to have its DME competitive acquisition program (the government’s term for competitive bidding) running in 10 of the country’s largest metropolitan statistical areas.

Cynthia Jarman, director of operations at Alliance Medical, Albemarle, N.C., says she’s bracing for competitive bidding but is certain the company can adapt. With 60 percent of patients and revenue associated with Medicare, Alliance has no plans to walk away from that business, Jarman says.

Instead, the provider is looking for additional revenue sources. This year, it contracted for services with a physical therapist, increased its line of off-the-shelf orthotic items and pushed aggressively into securing new referral sources including managed care companies and home health agencies. And Jarman is hopeful that Alliance will escape the first round of bidding. Charlotte, the closest big city, ranks 37th on the MSA list, she notes.

Primary Medical Supply in Midland, Texas, also has invested heavily in diversification as a defensive strategy. The provider is busy building a new $1.2-million, 10,000-square-foot facility that will house its DME and pharmacy businesses but will also provide clinic space for physicians and physical therapists.

The company has moved out of oxygen and shifted to orthopedics, power mobility, custom seating and equipment repairs, though the bulk of its revenue now comes from wound care and enteral nutrition, according to General Manager Justin Rogers.

Rogers believes his company, too, will escape competitive bidding — at least for awhile. “We’re pretty low on the MSA list with only 250,000 residents, so we’ll probably get an exemption,” he says.

But experts caution against over-optimism. “Everyone has reason to worry about competitive bidding,” says Michael Barish, president of Ancor Healthcare Consulting, Coral Springs, Fla. Managed care companies and other payers will use the Medicare schedule to set their own fees, “so in that sense no one is exempt,” he points out.

Operationally, providers are grappling with how to make Medicare work in the long run, what the actual reimbursements will look like and how they will ultimately offset any lost revenues. “Those remain the big questions,” says Barish. “Will the reimbursements ultimately make the effort worthwhile?”

TOO MANY UNKNOWNS

What many providers say they find most frustrating, however, aren’t the provisions in the MMA — though it’s hard to find many who like them — but the lack of sufficient information about their implementation.

For Gary Salazar, president of Mobility Givers in Huntington Beach, Calif., the absence of absolutes regarding competitive bidding — plus questions about CMS’ new power mobility codes and allowables — has stifled his decision-making ability. “There are so many unknowns,” a frustrated Salazar says.

As part of Medicare’s power mobility update, CMS has expanded the number of billing codes for power wheelchairs and scooters from five to 49. To qualify under the new rules, beneficiaries will have to undergo an in-person exam. And while CMS has dropped the power mobility CMN, providers will be required to keep physicians’ patient information on hand to prove medical necessity for the equipment. Debate over exactly what documentation will be required continued at press time.

But what worries Salazar most is that product quality may suffer under MMA. “Under competitive bidding, pricing and payments will ultimately drive what you offer patients. Now you’re doing things based on economics, not patient need,” Salazar points out.

In turn, he says, manufacturers may end up following suit. “They’ll try to come out with cost-effective products to meet Medicare criteria,” Salazar believes. The market will see an influx of cheaper imports, and eventually, the entire industry will be at the mercy of the Medicare rates, he adds. Salazar says he is curious about the impact MMA has already had on equipment quality and pricing, and he will be checking at Medtrade.

One provider says she has had enough and is getting out of Medicare. Mary Sitcoske, president of American Surgical Supply, Pottsville, Pa., is selling or “giving away” her rental inventory to concentrate on the retail side. Though the company isn’t abandoning its current Medicare patients (federal law prohibits doing so), it’s not accepting any new Medicare business.

In January, Sitcoske, whose family has been in the HME business since 1951, moved her stock into a new 1,800-square-foot showroom that will focus exclusively on non-rehab cash-and-carry items. At Medtrade, Sitcoske says she’ll be shopping for products that will add value to her already growing retail mix.

HUNTING FOR HELP

Also searching for the right new products are David and Connie Hosemann, owners of Hometown Medical, Vicksburg, Miss. Three years into their new business, the Hosemanns feel beset by additional problems brought on by the MMA.

“It complicates things a lot,” David Hosemann says.

Aside from gauging the market’s needs, satisfying referral sources and carrying the right inventory — all especially vital to a new company — the necessity of working under the new Medicare rules and facing the risk of losing a bid looms large in their future. “Is it a lot of pressure? Yes,” Connie Hosemann states.

The Hosemanns are going after deals from buying groups and applying pressure with legislators to soften MMA’s blow. “We really hope the government will come to its senses,” David Hosemann says.

Lawmakers may be listening. Introduced in July, H.R. 3359, sponsored by Reps. David Hobson, R-Ohio, and John Tanner, D-Tenn., would allow small business owners like the Hosemanns to continue providing DME without winning a competitive bid contract but at the winning bid rate (and only if they had earlier submitted a reasonable bid). The bill would also exempt areas with fewer than 500,000 people from the bidding program.

This year, the Hosemanns plan to make Medtrade an educational trip. “We’ll do some shopping, choose four or five products to thoroughly research and spend the rest of the time learning about the state of the industry [under MMA],” David Hosemann says.

Almost all of the small providers interviewed for this article say they’ll be taking a special interest in the reception they get from Medtrade’s exhibitors this year. Most will be looking for the traditional price values and technical innovations. But with reimbursement cuts, regulatory changes, accreditation and competitive bidding in play, they say now more than ever, they will be looking to the industry’s manufacturers for help.

The “large, national providers will survive the juggernaut. They’ll come out of it bruised, of course, but largely intact,” says Salazar. “It’s the small independents and regionals who will feel the brunt of MMA. It’ll be interesting to see how responsive the equipment-makers will be to us.”

“If we’re going to be receiving less [from Medicare], somehow the manufacturers are going to have to share in that loss,” adds Jerry Woolam, co-president of Star Medical, Lubbock, Texas.

Many small companies say they are already feeling squeezed. Another big sore spot is oxygen, since the MMA’s required cuts have reduced rates this year by an average of 8.6 percent for stationary oxygen and 8.1 percent for portable units.

ANXIOUS OVER ACCREDITATION

Even so, providers say they are upbeat. “This is still a good business,” states Woolam, adding that he thinks Medicare’s reforms can only improve the industry. What’s frustrating, he says, is the government’s slow pace. “I’d feel a lot better if we knew who the final accrediting bodies will be, and the full impact of competitive bidding.”

Mandatory accreditation, second only to competitive bidding on providers’ fret index, has gotten mixed reviews. While most see it as a plus for quality, others bristle at the expected cost. Still others, like Woolam, are eager to see the final published standards.

A lot is at stake. The MMA requires CMS to implement “quality standards” (mandatory accreditation). At press time the standards had not been issued, though their discussion was slated at the next meeting of the Program Advisory and Oversight Committee — which is advising CMS on the implementation of competitive bidding — in late September.

In any case, accrediting the industry’s providers could be a long, drawn-out process. By most estimates, from 60 to 70 percent of current Part B providers remain unaccredited, and the majority of them have not yet begun the process. But neither has CMS designated its chosen accrediting bodies. The agency says that decision should be made by year’s end.

Since the MMA’s enactment in late 2003, providers say they’ve progressed from worry over this year’s reimbursement cuts to a healthy resolve to meet additional provisions of the law head on. And that means a lot to think about at Medtrade.

On a scale of 1-10 (with 10 the highest rating), how optimistic are you that the industry will adapt fairly quickly to the demands of the Medicare Modernization Act?

8
Wendi Phillips
President, Breeze Medical, Chicago, Ill.

“I give it an eight with qualifications. The industry has to understand that all this won’t happen overnight. There will be some people hurt, and a great deal of settling has to happen before we’re through. But in the end things will be all right.”

5
David Hosemann
Co-Owner, Hometown Medical, Vicksburg, Miss.

“Some people are going to be slow to react to MMA and some people will do what’s necessary when the time comes. I really don’t think Medicare knows what it’s doing, so that may be a plus.”

3
Gary Salazar
President/CEO, Mobility Giver, Huntington Beach, Calif.

“With competitive bidding, I’m concerned that things will get so difficult there won’t be many people left in this industry after awhile. I also worry that manufacturers will respond adversely to the mandate for lower rates, and the industry will get flooded by equipment that is essentially junk.”

7
Jerry Woolam
Co-President, Star Medical Equipment, Lubbock, Texas

“Most people will adapt fairly well, but some will definitely be left behind. They’re the ones who aren’t paying attention and are slow to react. But overall, 75 percent of us will come through okay. After all, we’ve all been through this before in one way or another.”

7
Justin Rogers
General Manager, Primary Medical Supply, Midland, Texas

“As an industry, we’ve survived Medicare cuts before, and everybody’s just had to adapt. I don’t think everyone will be saved this time around, but the survivors will be the ones who can adapt and change very quickly.”

5
Mary Sitcoske
President, American Surgical Supply, Pottsville, Pa.

“Every year that I’ve gone to Medtrade, it’s been something else. A lot of it has never materialized, and we’ve always seemed to make it through. This time with MMA things are going to be different. But I think as an industry, we’ll survive. Let’s face it, this is a survivor’s industry. People need us, and we need them.”

4
Cynthia Jarman
Director of Operations, Alliance Medical, Albemarle, N.C.

“I’m concerned, and maybe I’m too worried about competitive bidding. But I see myself as an optimist. As an industry we’ve always adapted. Most of us will survive. We’ll just have to figure things out.”