Study Describes Faults in Bidding Program
The American Association for Homecare (AAHomecare), Arlington, Virginia, hosted a media conference on August 10 to unveil an economic study that it claims exposes severe flaws in the Medicare competitive-bidding program for durable medical equipment, prosthetics, orthotics, and supplies (DMEPOS). Round one of the bidding program is due to re-start this October. The unpublished study by Brian O’Roark, PhD, assistant professor of economics at Robert Morris University, Pittsburgh, Pennsylvania, suggested that the Centers for Medicare & Medicaid Services (CMS) “drastically misread the marketplace and that the current competitive bidding program reduces overall competition and hurts the quality of patient care,” according to AAHomecare.
The full report and a summary of findings are available at www.aahomecare.org. The study is titled, “Analysis of the Economic Impact of Competitive Bidding on the DME Market: A One Year Update.” The sponsorship of the study is not listed.
“This study joins an extensive body of evidence showing that this bidding program will produce fewer competitors, fewer homecare services, and lowest-common-denominator healthcare for older Americans and people with disabilities who require medical care at home,” said Tyler J. Wilson, AAHomecare president.
The study analyzed the results for round one of the bidding program, which took place in ten areas nationwide beginning on July 1, 2008. The program was delayed by Congress on July 15, 2008, to settle legislative questions about the program’s logistics. According to AAHomecare, O’Roark’s study revealed several flaws in the competitive bidding program:
- During the bidding implementation, nearly 40 percent of companies awarded durable medical equipment (DME) contracts for Pittsburgh patients were located outside of Pennsylvania.
- Had the competitive bidding program continued, homecare providers would have had to cut service, lengthen patient-response times and forgo providing some equipment altogether. Some contracts were also awarded to unlicensed providers, which would have violated state regulations.
- Reduced access and declining quality of care under competitive bidding might force patients into institutionalized care. This could lead to higher long-term costs for Medicare.
- One group that would benefit from competitive bidding is private insurance firms. AAHomecare said, “Medicare reimbursement rates are the gold standard and the basis for reimbursement by all other forms of health insurance. An artificial lowering of Medicare rates is immediately followed by a lowering of all others. As price schedules fall, insurance firms costs fall with them.”
The competitive bidding program is scheduled to begin again at the end of October.
“The bidding program forces an unsustainable business model on the DME industry,” O’Roark said. Ninety percent of providers were excluded from participating because they could not meet the bid. Those who qualify are forced to sustain prices for three years-an untenable position for any business.”
AAHomecare called the bidding program “misguided” and stated that it “would allow the government to selectively contract with only a small group of homecare providers based on lowest cost, forcing out providers who use high-quality equipment or provide critical patient services. The bidding program ignores the providers’ ability to serve a geographic market, meaning fewer home visits to patients in rural areas. By ignoring the role of service, bidding will result in fewer resources for setting up and adjusting wheelchairs, walkers, and hospital beds.
“Despite its misleading title, this bidding program is anti-competitive. During its initial implementation in 2008, the vast majority of providers were shut out of the program. Of the more than 4,000 providers in the initial bidding areas, only 376 were deemed to have met the bidding-program requirements, which were not clearly defined. This competitive bidding program, in fact, depresses competition and limits patient access and choice.”
Joel Marx, CEO of Medical Service Company, Cleveland, Ohio (a round-one bidding area), said, “If we are fortunate (or unfortunate) to be a winning bidder in this ill-conceived program, we will have a fixed price through 2013, minimal competition, and very few incentives to provide exceptional service. Patients will ultimately bear the burden.”
Rob Brant, general manager of City Medical Services, North Miami Beach, Florida (also a round-one bidding area), commented, “Competitive bidding may work for staplers and hammers, but not in a healthcare sector like home medical equipment, which is called upon to work with doctors, hospitals, and nursing agencies to properly and safely train and to provide products and services so patients can live independently in their homes-and not in facilities like nursing homes.”
Georgetta Blackburn, vice president of Blackburns, a home medical provider in Tarentum, Pennsylvania, said, “Healthcare services for the elderly and disabled cannot and should not be auctioned off to the lowest bidder. Quality and access to care will most definitely suffer as the sixty-five-and-over population skyrockets and the government excludes 90 percent of qualified, accredited, community providers from servicing their patients.”