Watch It in Rural Areas, Too, Economist Says

WATERLOO, Iowa — While HME providers in rural areas might
think they’re off the hook for the time being when it comes to
competitive bidding,
economist Ken Brown says they better think again.

According to new research conducted by Brown, a Ph.D. who has
completed several studies on the
effects of competitive bidding, rural areas will also take a
hit from the bidding program even though they’re not in Rounds 1 or
2.

In his most recent research, commissioned by VGM Group, Brown
looked at the marketplace in five rural states: Iowa, Montana,
North Dakota, Wyoming and West Virginia. His findings indicate a 40
to 50 percent decline in HME providers in Iowa, Montana and West
Virginia; a 15 to 25 percent decline in North Dakota and a 35 to 45
percent decline in Wyoming.

As national companies close branches across the country because
of financial instability and an average 32 percent cut in Medicare
reimbursement resulting from Round 1 of the bid, Brown said rural
areas will not be exempt from the loss of jobs — and the
resulting loss of access and service for Medicare
beneficiaries.

Brown, the Lawrence M. Jepson Professor of International
Economics at the University of Northern Iowa-Cedar Falls,
documented the financial struggles of several large, national HME
companies.

“If these firms are having trouble surviving in this business
climate, then it is quite likely that the small, independently
owned suppliers that cannot take advantage of the economics of
scale that go along with a national presence are having financial
difficulties as well. A significant number of suppliers will fail,”
Brown wrote in his study.

He estimates that approximately one-third of independent HME
providers are already operating at a loss.

Brown found that when patients aren’t located close to
providers, there are negative consequences, including:

• A reduction in the number of rural providers reduces the
  proximity of patients to their supplier.
• Oxygen and other respiratory patients will be at much greater
  risk during power outages, which are often more common and of
  longer duration in rural areas.
• Respiratory patients will have diminished access to portable
  tanks, which will lead to reduced ambulation and lower quality of
  life.
• Increased dependence on more costly institutional care.
• It will take longer to get equipment repaired. For a complex
  rehab patient, that could mean confinement to bed for extended
  periods of time, which increases the chance of developing pressure
  sores or contracting pneumonia.

A loss of providers in rural areas could have a “significant
impact,” Brown cautioned.

“This will have a number of negative, unintended consequences
that must be considered when deciding whether or not to move
forward with competitive bidding,” he said.

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