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 market, according to industry stakeholders who got their first look last week at Medicare's reimbursement rates for round one of the program.
Late Thursday, CMS revealed its new allowables for the items included in the first round, with average savings across the 10 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, which CMS defines as those with gross revenues of $3.5 million or less.
While stakeholders proclaimed some of the new rates “doable,” many nevertheless said serious questions remain about the impact on beneficiaries and providers in the round one MSAs.
“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.”
Peter Kelly, chairman of the Council for Quality Respiratory Care, said the changes were “even more dramatic than anticipated.” The breadth of those changes, he said, “should cause policymakers--and all of us who care for Medicare's sickest beneficiaries--to stop and assess carefully the effect these changes will have on the health and well-being of elderly patients. Deep reductions in Medicare funding will eliminate key jobs at a time when the demand for quality is increasing and the economy is experiencing a downturn.”
CMS alerted bidders via three types of overnight letters that most received on Friday. Winning bidders received contracts. Suppliers whose bids qualified but were not in the winning range received a notice that they could receive a contract from CMS if a winning supplier decided not to accept the contract offer. Suppliers were also notified if they were disqualified and, if so, why. Bid winners were given 10 days to accept or decline the contracts.
But even some providers that won 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. Those two categories comprised very small portions of the company's business, so losing those bids was not a great loss, Lopez said.
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.
He also fears there could be more fallout as companies that have won contracts discover they cannot provide the equipment for the new Medicare rate.
“They could decline at any point,” he said. “They have until April 3.”
Walt Gorski, AAHomecare's vice president of government relations, cautioned that beneficiaries might experience problems with service.
“We think that there is going to be significant disruption in care and continuity of care when beneficiaries will be forced to get their HME needs from multiple suppliers,” he said. “It's going to be interesting to see how all this shakes out when we hear the full disclosure in May of who actually accepted the contract.”
Earlier in the week, a group of 120 House members and 17 senators sent letters to CMS raising concerns about the effect of the program on access to medical equipment and quality of service. Spearheaded by Rep. Jason Altmire, R-Pa., and Sens. George Voinovich, R-Ohio, and Sherrod Brown, D-Ohio, the letters ask for economic data on the program's impact and suggest that reducing the number of small providers could actually increase rather than decrease Medicare costs. (See HomeCare Monday, March 17.)
Still, CMS was elated at the potential savings, which Acting Administrator Kerry Weems pegged at $1 billion a year once competitive bidding is fully implemented.
In a Thursday afternoon press briefing, Weems said the Medicare program will also experience short-term savings. For example, Medicare currently pays an average of $4,063.96 for a standard power wheelchair, Weems said. But on July 1 when the bid pricing takes effect, the program will outlay only an average $3,072.65 for a PWC.
”We were overpaying” for many of the items now included in competitive bidding, Weems told reporters.
“This program represents yet another way to use the competitive marketplace to bring the best possible and most efficient care and services to people with Medicare. Because new accreditation and quality standard initiatives are being implemented in conjunction with the phase-in of competitive bidding, this program will provide assurance to beneficiaries that they are receiving high-quality medical equipment for home use.”
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 related 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%
The projected Medicare savings in oxygen and related equipment concerned CQRC's Kelly. “The magnitude of current and pending Medicare cuts will make the oxygen benefit unsustainable and the impact on beneficiaries dangerously unpredictable,” he warned. “At a time when government is working to stimulate quality improvement and keep patients in their homes and out of expensive institutional settings, these budget-driven policies effectively eliminate all incentives for quality improvement and discourage preventive care.”
Todd Tyson, president of Norcross, Ga.-based HiTech Healthcare, however, thought the new oxygen concentrator allowable of around $140 was workable. Tyson's mid-sized company operates in the Atlanta MSA, included in round two of competitive bidding, and the company plans to bid, he said.
“I believe you can do oxygen for $140 and yes, I would take a contract for that amount,” he said. “If we could get CMS to relax the requirement for a CMN and require a written order, it would greatly reduce the administrative burden, and if we could reduce our marketing, [promotion] and advertising, you could definitely do it for that.”
But Tim Pederson, CEO of WestMed Rehab in Rapid City, S.D., was a bit more conservative as he reflected on the new rates for complex rehab.
“At the risk of sounding like I work for CMS, I really can't say with any certainty that providers can make it on the pricing reductions until I actually see the pricing reductions on paper,” he said. “My first reaction is that a 10-19 percent reduction in fees on complex rehab is somewhat unexpected and will be devastating to those providers. I thought the reductions on standard power wheelchairs were quite steep but not completely unexpected. It will be interesting to see what the landscape looks like once the contracts are returned.”
Stakeholders also were bothered by the disparity 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.”
Kelly said that “initial results prove that what works in one community cannot be assumed to work in another.”
Some stakeholders 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.”
CMS has said that after the program begins, bidders that did not become contract suppliers generally cannot receive Medicare payment for competitively bid items. However, they may choose to continue in the Medicare program as grandfathered suppliers for existing customers if they supply certain rented items or oxygen equipment to Medicare beneficiaries. Some may subcontract for bid winners.
However you look at it, though, the fact remains that with competitive bidding, the industry has changed, stakeholders said.
“This program will clearly reshape the entire HME marketplace, whether that was an intent of CMS or not,” Gorski said.
Read the CMS announcement about round one pricing.
Access single payment amount charts for the 10 product categories by CBA.
View the weighted average savings by CBA.
View a current timeline of CMS' competitive bidding program.