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North Carolina Business Owners At Risk Because Of Defective Medicare Bidding Program

GASTONIA, N.C. and HENDERSONVILLE, N.C., May 21, 2013 /PRNewswire-USNewswire/ -- The controversial Medicare bidding procurement program for home medical equipment is forcing many small and large providers in North Carolina to lay off employees or close their businesses, developments that will likely disrupt the quality of service and products received by Medicare beneficiaries, says the American Association for Homecare.

Under the defective and dangerous program, the Centers for Medicare & Medicaid Services (CMS) is reducing reimbursements to providers by 45% when the bidding program expands to 91 new locations in July. Due to these arbitrary cuts, many providers say they can no longer supply Medicare patients with durable medical equipment (DME); these include critical items such as power wheelchairs, hospital beds, oxygen, and diabetic supplies.

"Medicare is creating havoc for providers in North Carolina and across the country and, ultimately, jeopardizing people's health," said Tyler Wilson , president of AAHomecare. "It is time Congress and the Administration end this failed experiment and create a program that guarantees high-quality service to patients, while offering businesses fair, market-based reimbursement rates."

Wilson said there has been "complete mismanagement of the design and implementation of the bidding program." CMS basically imposes reimbursement rates that fall somewhere between the lowest and highest bids that are made by providers. But at the same time, all the bids are non-binding, which has led some providers to make desperate "suicide" bids in an effort to win contracts in enough equipment categories to keep their businesses alive.  

What destroys the integrity of the bidding process is that the suicide bids are used by CMS in their formula to establish the unrealistic reimbursement rates. "The entire process lacks transparency because CMS never discloses exactly how these unrealistic rates are calculated," Wilson said. "This is government imposed pricing, not competitive bidding. It is eliminating competition rather than increasing it. Business owners are forced to cut jobs or close their doors."

Joseph Reutter, Jr. , of Billing Specialist, Inc., a home medical equipment provider in Gastonia, N.C., sharply criticized the reimbursements cuts. "The reduction in reimbursements is ludicrous," said Reutter. "We service several thousand beneficiaries throughout North Carolina" but these reimbursement cuts "will not allow us to purchase and provide DME supplies at this new contracted pricing."

He added: "The announcement of the Round 2 competitive bidding rates struck me so hard that it literally took my breath away. My first thought wasn't about my house, my car, or my upcoming credit card payment. It was about my employees and how I'm supposed to break the news to them that I will no longer be able to afford to employ them. Our initial estimation is that we will lose 60-70% of our employees on July 1st. This is roughly 22-25 jobs. If we are lucky, we will be able to survive with the little bit of business we still have. However, our cost analysis has our survival rate as very low."

Clearly, the bidding program is impacting providers, beneficiaries, and even entire communities.

Kaye Tefel owns Care Solutions in Hendersonville, N.C., and says the reimbursement rates are unsustainable. Tefel says many Medicare beneficiaries live in rural areas and do not drive. "We are often called out on the weekend, in the evening, for repairs, for deliveries….the new cuts will mean a drastic cut in service and availability to our seniors and disabled population." She continued, "I am ashamed that our country would target the very people we should be protecting…..I am not just talking about me and my business, but my parents, my disabled sister, and my patients."

Economists, bidding experts, consumer groups, members of Congress, and the National Federation of Independent Business have all said the bidding program is defective. And after a request from AAHomecare, it will be investigated by the U.S. Department of Health and Human Services Officer of Inspector General.

As a sustainable alternative, Wilson said the DME industry supports the Market Pricing Program, a plan that was recently introduced in Congress. It is a procurement system that is based on three core principles: market-based prices, binding bids, and transparency.   

"The current procurement system is destroying the Medicare program and its network of compassionate providers, while endangering patients," Wilson said. "Medicare can no longer be depended on to provide a health safety net for our seniors and people living with disabilities. Congress has to take action."

The American Association for Homecare represents providers of home medical or durable medical equipment and services who serve the needs of millions of Americans who require prescribed oxygen therapy, wheelchairs, enteral feeding, and other medical equipment, services, and supplies at home. Visit

SOURCE American Association for Homecare
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