Round 1 study triggers alarm, call for Congressional intervention

An analysis of data from Round 1 of competitive bidding is so alarming that Congress must stop expansion of the program to learn exactly why HME claims have plummeted, and enact necessary changes to protect Medicare beneficiaries from rising risks of hospitalization and death, HME industry leaders said last week.

“Congress needs to look at this,’’ said Georgie Blackburn, vice president for government relations at Blackburns’ Physician Pharmacy Inc., which operates in the Pittsburgh competitive bidding area of Round 1. “We’d better unravel this now before we allow competitive bidding to expand.’’

Blackburn’s comments came after the Jan. 20 release of a study by Peter Cramton, an economics professor at the University of Maryland. Cramton looked at the nine locations where Round 1 was implemented about a year ago, and found declines in claims ranging from 61.7 percent to 81.5 percent in all HME product categories. The study concluded that Medicare beneficiaries are not getting medical equipment needed for their homecare, and are at increased risk for hospitalization and death.

Blackburn said the data is even more alarming considering that a rising number of elderly Americans should be driving an increase in HME claims.

“It’s too dramatic to make sense,” she said. “It’s not logical that you would have an increase in the demographic and a decrease in the utilization.”

Medicare officials had theorized that competitive bidding would weed out inefficient providers and leave more efficient providers to handle increased volume at lower prices, Blackburn said. But the program was so flawed that it shattered the supply network that connected HME providers with patients, she said.

For example, she said, competitive bidding forced hospital discharge planners into new and very complicated terrain with regards to locating products and services needed by patients being discharged to homecare.

In just one product category, oxygen, the 150 Medicare-approved providers in the Pittsburgh area before competitive bidding diminished to about 20 after competitive bidding.

Amid this purge of veteran providers, the competitive bidding program attracted new, out-of-state providers, some of whom had neither the experience nor resources to properly serve Medicare beneficiaries in the Pittsburgh area, Blackburn said.

Meanwhile, providers who had offered a full-range of HME products and services ended up without contracts or with contracts for just a few product categories. This forced discharge planners to either hunt and peck for products or overwhelm a few providers holding a full range of contracts.

And to further complicate matters, prices were set so low in some product categories that providers could not make enough money to make sales worthwhile.

Rob Brant of the Accredited Medical Equipment Providers of America pointed out that Cramton’s study showed that up to 48 percent of providers receiving contracts in some Round 1 competitive bidding areas have not processed a single claim.

“For example, of the 25 enteral feed contracted suppliers in the Orlando Bidding Area, only 13 have actually provided enteral pumps and supplies,’’ Brant wrote last week in the AMEPA Newsletter. “Similar results are apparent as 11 of 23 contracted enteral suppliers in Cincinnati and 13 of 29 in Pittsburgh have also not provided enteral supplies or pumps in those bidding areas.”

Brant said providers of enteral supplies in Round 1 areas told him they had to give up the Medicare business because they were operating at tremendous losses. He said some providers who moved into unfamiliar areas and took on new product categories in Round 1 didn’t understand costs, or they low-balled bids. This drove reimbursements down for everybody.

Cara Bachenheimer, vice president of government relations for Invacare Corp., said the new study is important because it shows with Medicare’s own data that competitive bidding is trading homecare—a relatively inexpensive method of health care—for institutionalized care—a very expensive method of health care.

“CMS data shows that when there is a higher incidence of DME utilization by beneficiaries with specific diagnoses, such as COPD and congestive heart failure, then Medicare saves health care dollars because the health risks significantly decrease,’’ she said. “Therefore, with such a utilization decline, Medicare should expect to pay higher costs associated with increased emergency room visits, longer hospital stays and higher hospitalization rates.”

Attempts to reach a Medicare official for comment were unsuccessful.

— Dave Parks is editor of HomeCare