Roughly 64 percent of the suppliers of home medical equipment such as oxygen machines and electric wheelchairs will be cut out of the Medicare market for those products in select areas of the country under a competitive bid program that CMS expects will save $17 billion over 10 years, according to CMS data. Agency officials say the losing bidders may still subcontract with winning bidders, but that isn't enough to appease DME suppliers who are seeking action on a bipartisan House bill with 252 cosponsors that would scrap the bidding program.
The release of the data comes as CMS plans to enlarge the bidding program in its second round in line with a health reform mandate.
In nine areas of the country, payments in nine product categories will drop 32 percent on average, CMS Deputy Administrator and Director for the Center for Medicare Jonathan Blum said in a conference call with reporters. That's on top of the 9.5 percent that was implemented when competitive bidding was delayed in 2008 (see related story).
The program could be delayed again, an analyst said, as in the coming months Congress will get a ear full from losing bidders in their home districts who will say the program will put them out of business. However, the analyst predicts an all-out repeal is unlikely because it would cost $9 billion. The House bill (HR 3790) to eliminate the program has no Senate companion.
Blum said Medicare has been paying above market price for home medical equipment. For example, on average Medicare pays $173 for oxygen concentrators. When the competitive bid amounts kick in next January, that price will drop to $116, a 33 percent reduction. Power wheel chairs cost Medicare $3,641 now. That price tag will drop to $2,554.
The savings will be realized through the first round of a competitive bidding program that will be used to determine the price that Medicare pays for certain durable medical equipment, prosthetics, orthotics and supplies (DMEPOS).
But the DME industry says the bids are not market based. "Those alleged savings are the result of 'suicide bids' from providers in this ill-advised race to the bottom that will put thousands of homecare providers out of business and reduce patients' access to care," American Association for Homecare states in a release. "Recognizing that the program is bad healthcare policy, a bipartisan group of 252 lawmakers in the House of Representatives support legislation that would repeal the bidding program."
There were 1,011 suppliers who submitted bids, and CMS is sending 1,287 contract offers to 364 suppliers. If some offers are turned down, CMS will offer contracts to other qualified bidders to meet market demand, Blum said.
CMS expects to announce contract suppliers in September. The agency will notify losing bidders of the reasons they did not qualify for the program when the contracting process is complete.
Blum noted that the 72 percent of the winning bidders already have a presence in the markets they will serve. That's noteworthy, he said, because industry predicted that many of the selected bidders would not have presence in those areas, thus would have a difficult time servicing them. Blum said CMS beefed up its review process to ensure that the winning bidders will be able to service the markets and not leave beneficiaries without access to the products they need. The 28 percent of winning bidders that do not already have a presence in the markets they will serve have proven to CMS that they can move into the markets by the January launch, he said. Many already service those areas with other products or supply those products in other areas.
Another industry concern was that only big suppliers would win contracts, but Blum said 48 percent of the winning bidders are small suppliers, which is higher than the 30 percent goal.
The first round of the program takes place in Charlotte, NC; Cincinnati; Cleveland; Dallas; Kansas City; Miami; Orlando; Florida; Pittsburgh; and Riverside, CA.
This is the second document in a week's time that affects the DME competitive bid program. The other changes, although minor in comparison to payment levels, were included in the Physician Fee Schedule that CMS issued on June 28. That proposed rule expanded the competitive bidding program to include 21 additional metropolitan statistical areas as part of the second round of bidding, following through on the health reform law's call for the program to be enlarged (see related story). By 2016, the program is supposed to be nationwide.
The Physician Fee Schedule also called for an appeals process for suppliers that CMS deems to be in breach of contract. And the proposal exempts community pharmacies from DME competitive bidding, which was aimed at ensuring that diabetics may still buy diabetes test strips at their local pharmacy (see related story).
The regulation also solicits comments on whether CMS should continue paying for rentals to contract suppliers when beneficiaries are no longer receiving capped rental or oxygen equipment from those suppliers. There also are new safeguards to beneficiary access to oxygen and oxygen equipment. -- John Wilkerson