WASHINGTON — In a spectacularly timed twist of luck, the
home medical equipment industry got a tremendous boost in its
battle against competitive
last week when a new study surfaced that takes deadly
aim at the process.

The industry spent the week marshalling forces against the
scheduled July 1 implementation of round one, sending letters,
signing an online petition and calling legislators to appeal for
its suspension. (See related stories in this issue.)

Then on Friday, just as stakeholders prepared to set off for the
American Association for Homecare's Washington Legislative
Conference, which begins tomorrow at the L'Enfant Plaza Hotel, they
acquired new ammunition when the study--titled "Will Competitive
Bidding Decrease Medicare Prices?"--came to light.

Authored by Brett Katzman, PhD, associate professor of economics
at Kennesaw State University near Atlanta, and Kerry Anne McGeary,
PhD, associate professor of economics at Drexel University in
Philadelphia, the peer-reviewed study takes an in-depth look at the
1999 competitive bidding demonstration projects in Polk County,
Fla., and San Antonio. It concludes that CMS' format for
competitive bidding is fatally flawed and, in many instances,
results in higher prices and poorer quality of service.

"The problem with the CMS process is that the bid scoring and
price formulation procedures are inconsistent with the bidding
behavior CMS wishes to induce," the authors conclude. "That is,
overly complex rules for choosing winners and setting prices
distort the incentives that bidders face and may actually result in
increased prices for some consumers."

The study notes that, while no data on service quality was
available, "there is anecdotal evidence of diminished quality that
comes from CMS itself." CMS felt compelled to initiate quality
check site visits for all winners and hired an independent
contractor to conduct quality assurance surveys, according to the

"Further problems with the process are evidenced by the fact
that some winning firms have attempted to withdraw from the
program," the study says.

Jubilant stakeholders said the new study provides significant
data for them as they gear up to meet with legislators and ask for
delay or suspension of DMEPOS bidding pending an analysis of both
the process and its results.

"I think it gives us a lot of really great ammunition. We are
going to use it on the Hill, no question," said Cara Bachenheimer,
senior vice president, government relations, for Elyria, Ohio-based

News of the study, which appeared in January's issue of the
Southern Economic Journal, spread like wildfire through
the industry, which just a week earlier was buoyed by the
announcement of a study by two economics professors at Robert
Morris University in Moon Township, Pa. That study, commissioned by
the Pennsylvania Association of Medical Equipment Suppliers,
blasted competitive bidding, saying it would result in substantial
market failure, the loss of 21,000 jobs and increased prices. (See

HomeCare Monday, Feb. 25

"This dovetails exactly with the PAMS study," said John
Shirvinsky, executive director of the state association.
"Obviously, there is no relation between the two. This is an
analysis of the demonstration projects in Polk County and San
Antonio. It was four years in the making, and it is in a
peer-reviewed journal. It took a year to get published. But it
unveils some serious flaws in the Medicare HME competitive bidding
program that have been pretty much glossed over by CMS."

The Robert Morris study, said Shirvinsky, "did a great job on
what problems are going to result from competitive bidding. And lo
and behold, here comes this study that no one knows about and it
substantiates virtually every point that the Robert Morris study

"I'm hoping we get enough people fired up about what's going on
here," he continued. "This new study is earth-shattering for our
industry. It lends credence to every gut-checking reaction we have
had on what this program will do and what it won't do. [Competitive
bidding] is a sham. And it is a disgrace that [CMS is] trying to
force this on the Medicare beneficiaries."

Seth Johnson, vice president of government affairs for Exeter,
Pa.-based Pride Mobility, said the two studies might turn the tide
for HME.

"I do think these two studies could result in a delay in round
one, which would be very good. If they are closely evaluated, it
could end up stopping the program altogether," he said.

"This certainly helps the cause," said Don Clayback, vice
president, government relations for Lubbock, Texas-based The MED
Group, adding it is particularly notable that the two studies are
by "outside sources that have looked at this from a
business-economic standpoint. At a minimum, you would hope that it
would create some doubt in Congress' mind so that some in Congress
... will take a look."

Tom Ryan, former chairman of AAHomecare and president and CEO of
Home Care Concepts, Farmingdale, N.Y., said he hoped the studies
would push Congress "to slow the train wreck down."

The points made by the two studies, he said, should prompt
Congress to put the brakes on "because they might not get the
results they intend," he said.

The association will urge conference attendees to talk to their
legislators about the issues that are most important to them, such
as a reduction of the oxygen cap or elimination of the first-month
purchase option for power mobility, said Michael Reinemer, vice
president, communications and policy, for AAHomecare. But the
overarching message of the lobbying event this week will be that
competitive bidding should--at the least--be delayed.

"We are recommending ... that Congress urge CMS to suspend round
one. That will be particularly important for providers in the 10
round one metropolitan statistical areas," Reinemer said.

"The message right now is to delay round one," echoed Clayback.
"The second message is: Don't move on to round two before you've
digested what's happening in round one. The whole program needs to
have more parameters, more analysis, more due process for

A delay of the program could work in the industry's favor,
Bachenheimer said. "Some people have been pretty negative about
this delay tactic," she said, "but delay buys us time; time is

The conference is expected to draw at least 350 providers and
other HME advocates. In addition to meeting with their legislators,
attendees will have opportunities to learn more about the
legislative and regulatory sides of HME. Guest speakers include
Laurence Wilson, director of CMS'chronic care policy group; keynote
speaker Sen. Pat Roberts, R-Kan.; Rep. Jason Altmire, D-Pa.; Jim
Nussle, director, Office of Management and Budget; Sen. Ken
Salazar, D-Colo.; and Kristen McCosh, Ms. Wheelchair America.

In addition, Brian O'Roark, PhD, and Stephen Foreman, PhD, JD,
MPA, authors of the Robert Morris University study, and PAMS'
Shirvinsky will speak.

For further information on the conference, visit www.aahomecare.org.