Medicare bidding called 'Penny wise, pound foolish'

CLEVELAND, OH – Home medical equipment providers have long feared that a competitive bidding plan for Medicare Part B supplies will destroy the infrastructure of the homecare support system.

Now, as the initial phase of the bidding program from the Centers for Medicare & Medicaid Services progresses, they are waiting to see if their fears are justified.

HME providers in 10 metropolitan statistical areas recently submitted bids to CMS for product categories, including wheelchairs, hospital beds and oxygen, in a process that they see as bloated and overly complicated. Bidding results are expected between December and February 2008, and two of the participating companies say regardless of whether they win the bids, the beneficiaries will lose.

Officials at several key federal agencies, along with many legislators, see competitive bidding as the solution to Medicare fraud and abuse as well as an effective cost containment tool for the massive entitlement program. As a result, Congress mandated competitive bidding for durable medical equipment as part of the Medicare Modernization Act of 2004, specifying July 1, 2008, as the official start date.

Carol Gilligan, president of Health Aid of Ohio, and Georgie Blackburn, vice president at Tarentum, Pa.-based Blackburn’s, testified before the House of Representatives’ Small Business Subcommittee on Investigations and Oversight in late October about their frustrations with competitive bidding. While the bidding policy’s objective is to combat fraud and save money through lower prices, Gilligan and Blackburn told the panel that the actual result will be a dramatic erosion in service for possibly even higher costs.

“If the bid price ends up being unreasonably low, consumers will suffer,” said Gilligan, whose company specializes in sophisticated seating systems for rehabilitation patients. “Seat and back cushions are customized to the individual’s specific body to minimize the possibility of decubitus ulcers. If the bid price is unreasonably low, consumers will likely not have access to these more expensive customized cushions and end up being hospitalized. Healing a decubitus ulcer in the hospital can cost up to $70,000. That is (a) truly penny-wise and pound-foolish policy.”

Blackburn said 35 of the 40 HME providers in the greater Pittsburgh area are small independent operations, and that the competitive bidding deck is stacked in favor of national chains like Lake Forest, Calif.-based Apria Healthcare and Dunedin, Fla.-based Lincare.

“Whatever the Medicare allowables end up being, managed care organizations will no doubt follow suit,” she said. “Small providers will have next to no chance to compete. What does this do to patient access and quality of care? There are so many ramifications. This will have to backfire and hopefully it will.”