Commentary: Provider Reduction Up to 88 Percent in First Round 1

On Dec. 7, the Government Accountability Office released a study
on the variety of problems with the original Round 1 DMEPOS
competitive bidding program. The program ran for two weeks, but was
stopped by Congress on July 15, 2008, because of concerns about
unqualified bid winners and patient access issues.

For the first time, details that Medicare refused to confirm
have been made public. Medicare has also acknowledged problems that
industry associations have been warning legislators about including
unlicensed bid winners, inexperienced bid winners and a reduction
in the majority of existing providers in each of the competitive
bidding areas. Ironically, the report was released as companies in
nine metropolitan areas are preparing to rebid under an almost
identical set of rules in the first round of the program. Once the
program is re-implemented, only bid winners can provide the
majority of durable medical equipment items for those local
Medicare beneficiaries.

In one category, the report revealed an average 88 percent
reduction in providers nationwide, which has caused great concern
for providers, beneficiaries and health care professionals. Miami
had the largest reduction of providers nationally: 91 percent of
oxygen providers, 91 percent of support surface providers, 94
percent of complex wheelchair providers and 94 percent of
mail-order diabetic providers.

Appendix 2 of the report is a detailed “Change in Number of
Suppliers by CBP Product Category and CBA: 2006 — 2008.”
After calculating the difference between the 2006 existing
companies and bid winners, 4,012 companies would have been unable
to bill Medicare for any of the competitive bid items. It is
important to note that the competitive bid items make up over 90
percent of what is typically billed by DME providers, and the
Negative Pressure Wound category was not included in our analysis
since that category was removed from the Round 1 rebid.

Zachary Schiffman, president of US Medical Supply in Miami, was
one of the 276 companies that did not win a bid in the mail-order
diabetic category in the Miami MSA. “We have 250 employees and if
we do not win the bid again, we will all most likely be
unemployed,” he said.

Schiffman added, “Despite the fact that so many diabetic
providers were excluded from the program, I am concerned about the
effects the program will have on patients who rely on quality
diabetic testing supplies. Although Medicare boasts a reimbursement
savings, there is no requirement for suppliers to provide
brand-name equipment. Patients will be stuck with the cheapest
generic meters and testing supplies, which are more difficult for
patients to use, require more blood to test and historically
frustrate patients with inconsistent errors.”

Jeff Rittenberg, CEO of Surfmed in Miami, was one of the few bid
winners who won the bid in multiple categories, but he was also
concerned about his company’s ability to survive it since he only
won in four of the categories in the Miami MSA: “Our company won
the bid in enteral supplies, hospital beds, walkers and support
surfaces, but during the two weeks that the program was operating
our company did not receive a single order from any of the local
hospitals in the Miami CBA and we have a location in the Mount
Sinai Medical Center.”

Rittenberg explained, “If a case manager is discharging a
patient from a hospital and the patient requires a hospital bed,
oxygen and a respiratory assist device, they are going to have to
call and coordinate three separate bid winners to service that
patient. The likely scenario is that the case manager will call the
one company in the area that won the bid in all of those product
categories.

“Since I did not win the oxygen category and cannot service all
of the categories, I might as well have been with the other 90
percent of the companies that did not win any part of the bid.”

The calculations for the Miami and Orlando CBAs result in 2,034
companies excluded from the Medicare program. Industry experts
believe that could translate to 15,000 to 20,000 workers unemployed
in Florida alone.

Rob Brant, president of City Medical Services in North Miami
Beach and AMEPA president, said that win or lose, the program would
put his company and several ancillary businesses that he relies on
“out of business.”

“I have seven employees, and 80 percent of my business is
through Medicare. When I close, it will affect the 30-plus
employees that work for the local billing company that I use, the
local accreditation consultant and the local company that repairs
our oxygen equipment.”

Roger Ribas, president of the Florida Alliance of Home Care
Services, is concerned about the long-term effects of the DMEPOS
bidding program on affected Florida companies. “The closure of
2,000 companies in Florida is just scratching the surface,” Ribas
explained. “When the program expands into the second round, you can
expect to see 10,000 companies close and 50,000 to 75,000
additionally unemployed in Florida. The next round jumps from nine
areas to 70 and includes the Florida areas of Jacksonville, Tampa,
Lakeland, Fort Myers, Ocala, Melbourne and Daytona Beach.”

Sean Schwinghammer is an advisor to Accredited Medical
Equipment Providers of America, www.amepa.us.

For more from HomeCare on the GAO study, including a
link to the entire report, see It’s
Official: Round 1 Had Lots of Problems, Dec. 10.