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Bi-Partisan Legislation Introduced Would Repeal Controversial Medicare 'Competitive Bidding' Requirements for Home Medical Equipment

HARRISBURG, Pa., March 18, 2011 /PRNewswire/ -- Pennsylvania Association of Medical Suppliers (PAMS) today applauded legislation introduced by Congressmen Glenn "GT" Thompson (R-Centre) and Jason Altmire, (D-Allegheny) that would repeal Medicare's controversial competitive bidding program for home medical equipment.  H.R. 1041, titled the "Fairness in Medicare Bidding Act," is already endorsed by numerous patient groups and consumer organizations, including the Three Rivers Council on Independent Living and United Cerebral Palsy of Pittsburgh.

"We are an industry that supports robust competition.  But the use of the term 'competitive' is hardly descriptive of what this program actually does," said John Shirvinsky, Executive Director for the Pennsylvania Association of Medical Suppliers (PAMS).  "At best, the term is perversely applied."

"From the very beginning, we believed CMS's bid program to be poor healthcare policy," said Georgie Blackburn of BLACKBURN'S Physicians Pharmacy Inc.

The bidding program was implemented on January 1, 2011, in nine metropolitan areas across the U.S. and will expand to an additional 91 areas later this year. Medicare beneficiaries who live in Charlotte, Cincinnati, Cleveland, Dallas-Fort Worth, Kansas City, Miami, Orlando, Pittsburgh, and Riverside, California are affected by this program now.  The bidding applies to medically required oxygen therapy, enteral nutrients (tube feeding), continuous positive air pressure (CPAP) and respiratory assistive devices, power wheelchairs, walkers, hospital beds and support surfaces, and mail-order diabetic supplies.  

Shirvinsky maintains that the Medicare bidding scheme is designed to eliminate the vast majority of competitors from the Medicare market.  "You cannot eliminate 80-90 percent of competitors and expect to arrive at a competitive outcome.  It's fundamental: Competition requires competitors.  Competition also requires free access to growing markets, which this program prohibits."

In the Pittsburgh market, which includes all of Altmire's district and part of Thompson's, 58 percent of contracts went to out of state firms with no base of operations in the market.  Shirvinsky noted that this outcome is "not a patient-friendly outcome."

Economists and auction experts have called the program's projected 32 percent savings "unrealistic."  Shirvinsky said, "there is a serious disconnect when an industry that earns a 5 percent return on average takes a 32 percent reduction in reimbursements.  This is simply unsustainable.  Companies need positive cash flow in order to sustain operations.

"In Pittsburgh, we are already seeing layoffs and salary reductions.  Winners and losers alike are living in a state of fear and uncertainty.  We are watching a slow-motion train wreck as revenues dwindle.  Our economy and our Medicare patients deserve better than this."  

"Two months into the program, OUR business is facing incalculable losses.  We don't want to reduce services, we don't want to lay off people and we don't want to close offices," added Blackburn.  

The American Association for Homecare has received hundreds of complaints about the bidding program from beneficiaries, physicians, case managers, and homecare providers.  These complaints are expected to increase exponentially as the program progresses because the payment rates established under this system are unsustainable over the long term.  These payment rates are leading to the provision of lower-quality medical equipment and reduced services associated with home medical equipment.

Blackburn also noted that her company and other compliant providers across the nine bid areas have been "replaced by various companies that do not have the same level of financial stability, purchasing capability or service capability."

A number of patient advocacy and consumer groups also support H.R. 1041 – the ALS Association, the Brain Injury Association of America, the Christopher and Dana Reeve Foundation, the International Ventilator Users Network, the Muscular Dystrophy Association, National Emphysema and COPD Association, the National Council on Independent Living, the National Spinal Cord Injury Association, and United Spinal Association, among others.

The bottom line is this: the "competitive bidding program will increase Medicare costs. It disrupts the continuum and coordination of care between doctors, discharge planners, patients, and homecare providers.  It will lead to longer, more expensive hospital stays and more physician office visits, nursing home admissions, and emergency room visits," said Shirvinsky.

Since the January 1 implementation of the bidding program in nine areas in the U.S., the following types of problems and complaints have been reported:

  • Difficulty finding a local equipment or service provider;
  • Delays in obtaining medically required equipment and services;
  • Longer than necessary hospital stays due to trouble discharging patients to home-based care;
  • Far fewer choices for patients when selecting equipment or providers;
  • Reduced quality; and
  • Confusing or incorrect information provided by Medicare.

In November, 2010, 167 leading economists, including two Nobel laureates and auction experts who have experience in the design and application of auctions around the world, warned Congress that Medicare's bidding design for home medical equipment will fail.  Those experts, who design market-based auction systems, found that this particular bidding program designed by Medicare has irreparable flaws that will prevent it from achieving its objectives of establishing accurate reimbursement rates while maintaining high quality equipment and related services.  Under this system, the bidding companies are not bound by their bids, which undermines the credibility of the process and encourages "low-ball" bids that create an unsustainable process and threaten the long-term viability of the program.

Last year, a bipartisan group of 260 members of the U.S. House of Representatives supported legislation similar to the Thompson-Altmire proposal to repeal the bidding program.

SOURCE Pennsylvania Association of Medical Suppliers
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