Round 1 knocks walkers out from under Medicare beneficiaries

The U-Step walker is a niche HME product with an exceptionally good reputation among neurologists and their patients. It is kind of a super rollator, and undeniably provides the stability, control and mobility needed by many people with severe neurological conditions like advanced Parkinson’s disease.

Unfortunately, Round 1 of competitive bidding has already blocked access to the U-Step walker for many Medicare beneficiaries, and Round 2 of the program threatens to pretty much block access completely.

What happened to the U-Step walker provides a painful lesson in how the Competitive Bidding Program can destroy the distribution network for a good HME product and actually increase medical risks and costs for Medicare and beneficiaries. And the U-Step experience helps explain why claims for many HME products dropped so dramatically in Round 1 areas, as recently reported by Peter Cramton, a University of Maryland economist.

In response to this story, the Centers for Medicare & Medicaid Services stated that it doesn’t see a problem with beneficiaries getting this walker or any other item in a Round 1 area.

A product of caring

Jonathan Miller designed the first U-Step for his mother, who suffered from a serious neurological condition. It worked so well, he created a company, In-Step Mobility Products Inc. of Skokie, Ill., about 10 years ago to produce and sell the walker.

Among the U-Step’s many safety and stability attributes are brakes that work when hand levers are released, as opposed to working when hand levers are squeezed. Effective in preventing falls, the variable-resistance, heavy-duty walker is sold through distributorships or directly through Miller’s company, which has developed referral source relationships with many neurological clinics.

The U-Step is unique in that it is essentially the only walker that meets standards of HCPCS E0147, Miller said. Three or four companies used to market walkers under the E0147 standard, but the manufacturers discontinued them, went out of business or re-coded the walkers, he said. Miller’s company remains, and sells about 3,000 U-Step walkers a year.

Included in Round 1

Problems started for the U-Step when its HCPCS code was included in competitive bidding for nine metropolitan areas in Round 1 of the program. In those areas, some HME providers who knew little or nothing about the U-Step submitted bids below the product’s wholesale cost, depressing its “clearing price.” As a result, the Competitive Bidding Program set the price of the HCPCS E0147 near the wholesale level.

The Competitive Bidding Program accepts very low but non-binding bids from providers, and uses them to calculate the clearing price Medicare pays. This allows Medicare to arbitrarily drop prices below costs, a practice a Wall Street Journal editorial last week described as a “scheme” and part of an auction process that “defies all common sense.”

For example, Medicare set the price for the E0147 in the Cleveland Competitive Bidding Area at $326.71. The wholesale price of the U-Step is $325—if an HME provider purchases at least two. Add shipping and delivery, and every sale accrues losses.

As a result of competitive bidding in Round 1 areas, clinics lost their referral connections to U-Step distributors and Miller’s company because only contract holders were allowed to sell it those areas—at the new, lower price. And contract holders weren’t interested in selling the product since it was a money-loser.

Miller talked with neurological clinics and contract holders in an attempt to create a new network and resuscitate U-Step sales. “We tried very hard,’’ he said.

He got a few contract holders to offer the U-Step, but they quickly stopped. “They said, ‘It’s nothing personal; we’re losing money,’” Miller said.

Meanwhile, neurological clinics got frustrated calling around trying to find a contract holder with a U-Step for a patient. “They just said, ‘Forget it. This is just too complicated.’’’

CMS sees no problem

When told about the situation, CMS expressed disbelief that it was occurring. “We are not seeing any evidence of access problems for any competitively bid items, including this type of walker,’’ a statement from the agency said.

CMS said contract holders must supply items, including E0147 walkers and even the U-Step brand if it is specified as medically necessary by a physician. Miller said he has contacted CMS about the problem and has been unable to get a response.

Data from a recent report by Peter Cramton—a University of Maryland economist—strongly suggest that the problem reaches far beyond the U-Step. During 2010, the year before Round 1, claims for all walkers in the nine Round 1 areas hit 231,007, according to Medicare data analyzed by Cramton. In 2011, the year Round 1 of competitive bidding was implemented, claims for walkers plunged to 65,893, according to the Cramton report. That is a 71 percent decline, or 165,114 fewer walkers provided to Medicare beneficiaries in 2011 than in 2010.

Similar declines occurred in other product categories.

It’s not surprising to Miller. He’s been talking to HME providers who won contracts in Round 1 and are now trying to make a living by selling products at near-wholesale prices.

“I’ve spoken to some dealers about my product and others, and I ask them, ‘How can you afford to stay in business and sell medical equipment at that price? So you make $20 on a walker. Guess what? That doesn’t pay for a delivery guy.’

“Really, these prices are too low,” Miller said. “They took the Medicare allowable and dropped it precipitously. Our margins weren’t that high.”

And he is insulted by Medicare’s explanation that the huge drop in claims was caused by eliminating fraud and waste. “We’re not scamming,” he said. “We’re not doing anything but making a product to stop falls.”

Medicare’s logic is faulty, he said. Instead of paying for a good walker for a few hundred dollars, beneficiaries are going to end up with more falls, painful injuries and expensive hospitalizations.
And if competitive bidding spreads in its present form, his company and the U-Step walker may be finished.

“If Medicare pulls this, it completely kills us,’’ he said. “Why would you kill a company like us?”

– Dave Parks is editor of HomeCare