AAHomecare Makes Case to the Media Against Round 1 Rebid
WASHINGTON—The American Association for Homecare took
arguments against the upcoming DMEPOS Round 1 rebid to the media on
Monday (Aug. 10), and the message was clear: Competitive bidding
will stifle rather than encourage competition, will decrease the
number of HME providers and will potentially disrupt the whole
health care community.
Fortifying the case in a conference call for press was a new
economic analysis of the original Round 1 bid in 2008 and reports
from three HME providers who participated in Round 1 bidding.
Economist Brian O’Roark, PhD, assistant professor at Robert Morris
University, stressed that an important factor in market competition
to keep prices down is easy entry into and exit out of a market. As
long as competitors can come and go, there will likely be plenty of
players, and prices will remain low. However, by awarding a limited
number of Medicare contracts to a few companies, CMS will be
“creating barriers of entry to the market and creating a
non-competitive market.”
O’Roark drew a parallel to cable TV, utility companies and
the airlines in the pre-regulatory days, all markets with high
prices because of a lack of competition.
Even the “winners” in competitive bidding will become
the “losers” if they find their business is
unsustainable at the prices they bid, said O’Roark, and those bids
are subject to a three-year price freeze that doesn’t allow
accommodation for a shifting business climate or changing costs,
such as the price of gasoline. “At some point, if you can’t
cover your costs, the winners will go out of business,” he
said.
Originally implemented in 10 MSAs, Congress suspended the bidding
program on July 15, 2008. Bidding is slated to begin again in
October, according to a CMS timeline.
O’Roark’s report,
“Analysis of the Economic Impact of
Competitive Bidding on the DME Market: A One Year
Update,” also concluded that CMS
misunderstands the structure of the market.
“What we’re looking at here is a plan that doesn’t seem to be
very well thought out,” O’Roark told reporters.
“Competition to achieve a monopoly doesn’t achieve the end
that anyone would really like to see.”
Even CMS loses out if patients cannot find the equipment they need
because of lack of access or declining quality of care. “If
patients are more likely to need to be institutionalized, it will
drive up costs for CMS,” O’Roark said.
His report noted nearly 40 percent of companies awarded Round 1
contracts in the Pittsburgh competitive bidding area were located
outside of Pennsylvania. Had the bidding program continued, he
said, all providers would have had to cut service, lengthen patient
response times and give up providing some equipment
altogether.
“We knew we were bidding at or below costs, and we needed to
bid at that level to stay in business,” recounted Joel Marx,
CEO, Medical Service Co., Cleveland, and a Round 1 bidder.
“We had to bid low, but what type of service levels could we
maintain in order to meet our costs? I have a sincere concern about
the service levels that will result when this is
implemented.”
Marx also questioned the practicality of bidding in 2009 for a
program that won’t begin until 2011 and will extend through
2013: “How do you do that? But if you don’t get the bid, you
are sitting on your hands for three years.”
“The bidding process is very flawed,” agreed Georgie
Blackburn, vice president of government affairs for Blackburn’s,
Tarentum, Pa. “We have no details on how many patients we
will need to serve, and we have a three-year window. Auctioning off
health care to the lowest bidder is illogical.” She noted
that the variables make the process a lot like Russian
roulette.
“Quality and access to care will most definitely suffer as
the sixty-five and over population skyrockets and the government
excludes 90 percent of qualified, accredited, community providers
from servicing their patients,” she said.
The entire health care industry was affected during Round 1
bidding, said Rob Brant, general manager of respiratory provider
City Medical Services, North Miami Beach, Fla. Inexperienced,
out-of-area companies were among the bid winners, and doctors and
case managers couldn’t find a bid winner to supply oxygen.
“Doctors could not discharge patients,” he said.
All three providers said patients ultimately would bear the burden
of the bidding program.
Added Marx, “We are intent as an industry in stopping the
program. It fundamentally misunderstands what the industry is all
about. We would like to see the program, frankly, abolished. At a
minimum, CMS needs to look at all the flaws in the
program.”
For a summary of O’Roark’s economic study, see the
AAHomecare Web site.
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