2010 Forecast Survey

Along with the plummeting temperatures that ushered in the New Year across much of the nation, home medical equipment providers told HomeCare they're worried about a deep freeze of their own in 2010.

Most taking part in the magazine's annual Forecast Survey said they had jumped through the latest regulatory hoops, with more than 90 percent becoming accredited and obtaining surety bonds. And despite the regulatory headaches, a still-dull economy and HME's toughening market, providers' product intentions remain strong for the year.

But unrelenting reimbursement woes, the forward march of competitive bidding and potential threats under health reform could worsen business conditions dramatically, some said.

The python-like squeeze has already taken a toll on some HME companies. Seventy percent of survey participants said rival businesses in their local markets had closed within the past year. The bright side for those remaining is that they picked up market share. "Our goal is to be among the survivors," one provider said. "As weaker businesses fail, we will do our best to capture their market share."

Seventy-two percent are confident they could handle the influx of patients even if half or more of their competitors go under, as CMS has estimated could happen with competitive bidding.

To keep their companies in the right half of that scenario, the vast majority (84 percent) said they had adopted new technologies and/or business practices: Half said they now use DME-specific software of some kind, 41 percent use document imaging and 30 percent use GPS/routing software. To deal with the 36-month oxygen cap and the 9.5 percent DME cut, providers said they had increased efficiency (57 percent), changed their oxygen delivery model (35 percent) and/or changed their product mix (30 percent).

As for the cap, respondents said it has had some dire effects — not the least of them on patients — but the majority (59 percent) said they are coping. Another quarter (24 percent), however, said they don't know how much longer they can continue in the Medicare oxygen business. A whopping 89 percent consider CMS' recently announced payments for oxygen maintenance and service to be inadequate.

"CMS does not fully understand the service and delivery needed to adequately provide the care needed for these fragile patients," one provider commented. Added another, "CMS should read the standards manuals of the accrediting bodies. If CMS wants this level of patient care, they should pay for it."

Then there are the day-to-day speed bumps. Providers complained CMS' recent PECOS requirement, for example, is "another damaging move by CMS … another hurdle to make things more difficult to provide much needed services … another poorly planned implementation … another waste of taxpayers' time … another way for Medicare to get rid of us."

In aggregate, providers estimated only a third of their referring physicians were registered in the system by mid-December. "Again, the DME industry is carrying the burden of holding physicians' hands and making sure they do what Medicare wants," a frustrated respondent wrote. "Another rule, another barrier to overcome."

But overcoming competitive bidding is another matter, and providers said it remains their biggest concern. In fact, 75 percent of those taking part in the survey said they had contacted their federal legislators about H.R. 3790, Florida Rep. Kendrick Meek's bill to stop the program juggernaut. That's the largest percentage of HME providers ever reporting political involvement in HomeCare's history of surveying on legislative issues.

Will it be enough? Providers said they're not sure, with many noting they will continue to fight the program because they are just plain scared about their prospects if bidding is implemented. "Reduced reimbursement can usually be dealt with; exclusion from any participation is fatal," stated one. "If I don't have patients, I don't have a business," said another.

As for the Round 1 rebid of the current program, scheduled to be implemented in January 2011, 19 percent of the providers in the survey said they were bidding. Of those, respondents bid in an average six categories, 42 percent bid in non-local areas and 20 percent bid in categories they don't currently provide. On average, these providers said they bid 9 percent below current allowables.

These Round 1 bidders also had some advice for others considering a bid in Round 2: "Be careful," warned one. "Three years is a long time." Cautioned a second, "Don't lowball your bid. Know your limits since no amount of volume can make up for zero profit margins." And yet a third, "Pray for H.R. 3790."

Simply "staying in business" was another top concern registered by providers, whose thoughts about the future ranged from positive to positively grim:

• "I believe that our company is diverse enough to survive."

• "We are very innovative and flexible as a company. If there is an industry when the dust settles, we will be there."

• "I'm gonna keep on doing what we do best, and that's giving our patients the best service possible. I believe once the competitive bidding repeal happens, we all will be OK."

• "My patients don't seem to understand the dire circumstance that [both of us] face. I no longer have the cash flow to provide the service that has always put the patient first."

• "The combination of health reform and competitive bidding will deeply impact this industry and my business negatively. Ultimately, patients will receive [fewer] benefits, less quality of care, poor quality of products. In turn they will have less independence to stay in the home environment, end up in hospitals and state-run home facilities and ultimately cost the country more than the current system."

• "While remaining optimistic that we are in charge of our own destiny and our business, the reality is CMS is leading the charge and all other payers will follow. So much is still up in the air, including competitive bidding. That one program and the intention to go national by 2016 will seriously affect our industry, our company and our patient base."

• "Once competitive bidding hits my area, I will go out of business."

• "I don't know that any company in this industry has a future."

On a more hopeful subject, we asked providers how they would spend the money if they could invest any amount in their HME business. We got a range of answers on this one, too, everything from adding inventory and new locations to hiring on expert staff to utilizing more technology and more advertising. However, some said, with the industry's mounting uncertainties, they would invest "not another penny."

And one funny guy? Well, he said, "I'd relocate to Costa Rica."

2010 Forecast Survey Results

• Market Conditions
• Accreditation/Surety Bonds
• Competitive Bidding
• Company Revenue
• Oxygen/Mobility
• Technology/Innovation
• 2010 Product Shopping List
• The Future
• About This Survey