Rep. Heath Shuler’s opening statement

STATEMENT
of the
Honorable Heath Shuler, Chair
Subcommittee on Rural & Urban Entrepreneurship of the
House Committee on Small Business
Hearing on the
“The Impact of Competitive Bidding on Small Businesses in the
Durable Medical Equipment Community”
Wednesday, February 11, 2009

Good policy is defined by the same basic philosophy that governs
good medicine — First, do no harm. That principle seems
simple enough.  And yet there are instances in which
well-meaning legislation has unintended, and sometimes disastrous,
consequences.

This was the case in 2007, when CMS established competitive bidding for Durable
Medical Equipment. When it was first launched, competitive
bidding was expected to save up to one billion dollars in taxpayer
money.  The idea was that it would drive down prices by
increasing competition and creating more choices. But this was not
the case.

Instead, it devastated small suppliers of rural communities.
Although Congress intervened to stop competitive bidding, CMS used
the last days of the Bush Administration to push it through.
Fortunately, the new Administration has put a hold on that
eleventh-hour rule. In the next two months, the Administration will
review — and hopefully eliminate — the competitive
bidding program altogether.

This morning, we will explore the effects of competitive bidding
on small healthcare providers, and discuss the importance of ending
the program entirely. The vast majority of Durable Medical
Equipment providers are small businesses. Most of them deliver
highly specialized products, which requires a depth of industry
knowledge. But competitive bidding allowed many of the small
suppliers to be outbid by larger, less knowledgeable firms. By
nature, this process gives the upper hand to larger suppliers, who
can churn out several medical devices and span an entire bidding
area.

In the last year, this committee has held hearings to review the
effects of competitive bidding on entrepreneurs. Time and again,
our witnesses have said the exact same thing — the program
hurts small businesses, and cripples rural communities. Because
Medicare payments total a large percentage of revenue for many
small suppliers, the effects of the program were devastating for
those that failed to win contracts.

This was particularly true for Durable Medical Equipment
suppliers in rural areas. If those firms are forced to shut their
doors, entire communities will suffer both economically and in
terms of access to care.  Although the name would suggest
otherwise, competitive bidding did nothing to encourage
competition.  If anything, it worked to suppress it.

In the long run, the program would have caused choices to
dwindle, and prices to go up. We need to continue to work to ensure
that small businesses are able to compete in this market.  I
look forward to today’s testimony and thank the witnesses for their
participation.