By the time you read these words, the fate of national competitive bidding for durable medical equipment will be decided — at least for a while. But no matter what happened during the final few days of the 107th Congressional session, one thing is clear: This is not the last the DME industry has heard of the issue. When the U.S. House of Representatives in June passed a prescription drug bill that included plans for competitive bidding, the vote proved that hundreds of federal lawmakers believe the system is a viable way to control DME costs. And they are not alone. Pockets of support for competitive bidding have emerged in state legislatures across the country — most notably in Florida, Texas and North Carolina, where this year DME providers fought hard to prevent the spread of competitive bidding to the Medicaid program.

Fanning the flames of competitive bidding rhetoric is a lagging economy, shallow state coffers and some lawmakers' belief that DME providers are inherently corrupt. On the House floor in June, Rep. Joe Barton, R-Texas, said that 90 percent of DME claims are fraudulent. But providers did not take this criticism lying down.

On the contrary, the issue galvanized an industry that historically has operated quietly and diligently outside the health care limelight. Small-town providers called and wrote letters to their representatives in Washington; trade associations and beneficiary advocates formed coalitions; manufacturers sent lobbyists to Capitol Hill; and competitors that normally would have distrusted each other stood shoulder to shoulder at town hall meetings. For the first time, many DME providers began thinking of themselves in a larger context — as part of a thriving industry that cares as much about service as it does about the bottom line. You gave Washington an earful, and now is your chance to give each other an earful. Following is a look at competitive bidding through your eyes, and in your words.

Industry Leaders Go a Few Rounds Over Medicare Competitive Bidding

Last month, HomeCare hosted a competitive-bidding teleconference. For a few enlightening minutes on Sept. 16, four industry leaders debated the merits and drawbacks of competitive bidding.

Participants: Mark Wynn, project director for Medicare's durable medical equipment competitive bidding demonstration projects in Polk County, Fla., and San Antonio, Centers for Medicare and Medicaid Services, Baltimore; Carmen Narganes, senior ombudsman, Medicare competitive bidding demonstrations, Palmetto GBA, Columbia, S.C.; Tom Connaughton, president, American Association for Homecare, Alexandria, Va.; Peter Thomas, co-chairman of the health task force, Consortium for Citizens with Disabilities, Washington Moderator: Brook Raflo, senior writer, HomeCare.

HomeCare: Do you think that the two demonstration projects have proven DME competitive bidding to be a successful way for Medicare to control Part B equipment costs?

Mark Wynn: Yes, we believe that the demonstration projects have worked out extremely well. They have, in fact, reduced costs while at the same time maintaining high quality and access to needed DME and [prosthetics, orthotics and supplies] products. In terms of the national implementation of this, the [Bush] administration believes that this would be a viable model to be rolled out more widely in the [Medicare] program.

Tom Connaughton: I guess it won't surprise you that we have significant reservations [about] what the projects show. We're very concerned about … the costs of the project [and] about whether indeed there has been a drop-off in services. We're hearing anecdotal reports that the quality of services and the extent of services have diminished, in Polk County particularly. We would need to study admissions at hospitals — emergency admissions for such things as respiratory distress — to see if there are costs coming up on the other side, because the therapies and the treatments that people are getting have been reduced.

We're also very concerned about the effect on competition. There were scores of people providing products in the demonstration areas prior to the bidding, and we believe in Polk County they're down to handful. Indeed, we're very concerned that, in Polk County, one company has become the dominant company in regard to oxygen. We suspect that is probably because other companies are having difficulties providing service. They are feeling the pinch of these prices.

Carmen Narganes: Just as Mark Wynn stated, I do believe that the demonstrations have worked well at both sites. Speaking from the ombudsman's position, in working at both sites, I think we work diligently on providing education and assisting with the transition. After working with the demonstration now almost four years, I think we have accomplished what we set out to do. Even suppliers that were not chosen have worked well with the competitive bidding staff to get this demonstration and the transition policies [in place]. Overall, I think it's worked as well as can be expected. It was very surprising to see how well they took to it.

Peter Thomas: I think the real answer to this question is that the jury is still out. I can't deny the fact that, perhaps at least in Polk County and, I expect, in San Antonio, the results of this demonstration project have shown some savings. But the question is not, “What has Medicare been able to shave off of its fee schedule?” The question is, “What is sacrificed in the context of saving that money?” I can't imagine there is a real accurate way to measure that in a relatively short amount of time, when only one of the reports is done.

If Medicare wants to figure out a way to reduce costs in a certain area, there are ways to do that. There are systems in place to … reduce the fee schedule. But to claim that this is a way to improve quality in this area really strikes me as being a very difficult argument to make. You're not going to get the best providers when [providers must] submit the lowest bids. When the driving factor is price, you're going to open the floodgates to what I would consider the second-rate providers. You're not going to get the first-rate providers to compete at lower rates under the Medicare fee schedule and still provide the same service. That's a major concern for the consumers — especially consumers with disabilities and illnesses [who] use this benefit to be functional and independent.

MW: [Peter] is implying that we are reducing prices to below a reasonable market price. In fact, that's not our intention. We're trying to achieve the market price, because there have been so many reports saying we are paying above market prices right now. As a result, I think there is adequate margin for the suppliers to do a good quality job.

Secondly, I think he does have a point that, through having several providers in the market, it's possible for the consumer, if [he or she is] dissatisfied with [his or her] current supplier, to go to another one. In fact, this is exactly what we did in the demonstration program. We have multiple suppliers in each of the product categories at both sites. If you're dissatisfied with supplier A, you can go to supplier B. Or, as is often the case, if you're a discharge planner or social worker or someone who actually works with these suppliers on a day to day basis, and [you] find out that supplier A is not doing a good job for [your] clients, [you] can recommend supplier B. So, in fact, this is a system that we have used, and we think it has worked effectively.

PT: I'm not suggesting that Medicare, as the dominant and the largest payer in the country, should not get a good price for the services that are provided. I'm suggesting … there are other mechanisms in place to adjust prices without sacrificing what I would consider to be the long-term quality of the Medicare service.

I'm glad that there's at least not a sole-source contract being considered. But, by definition, you have to have some curtailment of the range of providers that you can go to, or you don't have a competitive bidding system. In a sense, competitive bidding is an exchange of additional referrals of patients for a discounted price. It's really no different than managed care.

TC: First, I would challenge anyone to define market price. There have been studies comparing [Veterans Administration] prices [to Medicare prices]. There have been studies comparing the Federal Employee Health Plan's prices [to Medicare prices], but we have a big difference in the economic models here. It's very difficult to determine what market price is.

Second, I think this point Peter is making about choice is absolutely critical. Choice is the real enforcer of quality here, and we say that we've awarded the contracts to a number of bidders and [some] of them are small businesses. But when we look at Polk County, the only place where there have been two rounds [of competitive bidding], we find — particularly with oxygen, where we have the most details — we're down to a very few players that are participating, even though they may have been awarded contracts in the area. We think that choice is going to be significantly limited over a period of time.

HC: How do you think nationwide DME competitive bidding would affect Medicare beneficiaries?

MW: The three primary things that we're looking for, in terms of affecting the beneficiaries, are quality, access and price.

Obviously, as everybody agrees, the price would go down — so far on an average of 20 percent. I'd say that would be … a reasonable expectation on a nationwide basis for a large variety of … products.

This would reduce the co-payments for the beneficiaries as well. Many of the beneficiaries are paying their own co-payments. There are a lot of markets where people do not have wide access to Medigap insurance. They can't afford it, or they have not been with employers who are covering it. Therefore, this is a real help to their bottom line.

Second, in terms of the quality: The quality has remained high. I think that the research has borne us out on this. I do regret that the second independent evaluation report has not yet been published and made available. I am hopeful that it is due soon. But independent evaluations [in Polk County] have found that the quality has remained quite high, and that stands to reason.

As we pointed out before, we do have multiple suppliers involved in the market, and that does help a lot to keep all the suppliers on their toes. Because, if they're not providing good quality, then they're going to lose market share and they're going to lose their business.

Third, in terms of access, there have been no reported access problems. Though we had a few minor issues in the early days in Polk County, that was three years ago. Carmen solved those [problems] effectively, and, since then, there have been very few problems in the demonstrations at all. In terms of nationwide expectation, I think that, in fact, we have shown an effective model for more widespread implementation.

TC: I think one needs to recognize that CMS, in administering the Medicare program, has never really recognized the services that are critical to the proper delivery of medical technologies in the home setting. And so many of our products are critical.

Competition has enforced very high standards of medical service, but [these standards] are not recognized among the standards that were set out in the demonstration projects' requirements. We believe that, over time, we're just going to see those services deteriorating, diminishing, and eventually squeezed out of the system, even though they are the standard of care that physicians expect and recognize.

Second, we think there will be a [decrease] in the quality of products that will be available to the Medicare beneficiary. Clearly, the incentive to the bidder is to find the cheapest product available. Medicare is the dominant payer here. No one can afford to lose this contract and be out of the Medicare cycle for three years. In Polk County right now … we're told there are none of the more advanced and the more expensive portable oxygen units available, for example. No provider can afford to provide [these units] at the bid price.

Finally, as people stop buying and using these technologies, the manufacturers — who, at this point, are developing all kinds of exciting things for the home setting — are going to stop selling [innovative products] because they know the providers are not going to be able to buy those technologies. We have opportunities here to do an awful lot in the home setting. But, as we squeeze the prices, we're going to take that opportunity away, and the beneficiary is going to suffer.

CN: In thinking of this nationwide, and how it's going to affect beneficiaries, the thought that comes to mind is the need for education in [helping] beneficiaries, home care providers and referral sources make the transition [to competitive bidding].

I think we really need to look at knowledge and education in talking about expanding this on a nationwide basis. You have to let the beneficiaries, referral sources and suppliers know what's going on.

If the beneficiaries are knowledgeable, the transition into something like this will be a lot easier — a lot softer, as far as impact. We've learned — in the demonstrations that have occurred in Polk County and San Antonio — that one of the key factors in implementing the demonstration has been [answering questions like], What are my entitlements? What is the Medicare program? What do suppliers offer?

Going back to Mr. Connaughton's statement about Polk County suppliers not [being able to provide] higher technology — I have to disagree there. Working in the field, there are suppliers that are offering these services.

PT: I would love to have a crystal ball to see what the Medicare benefit in this area — and how the treatment of patients and beneficiaries in this area — will look 10 years forward, under competitive bidding. I strongly think that it's not going to look as good. It's going to be a very different benefit. The problem is that you can't put the genie back in the bottle once that's done.

Over time, if you competitively bid benefits in this area, you're going to have larger providers generally coming out on top and smaller providers generally coming out as the losers. Now I know that there are certain provisions making sure that small businesses get certain contracts and the like, but the fact is that if you're a larger provider, you're going to be able to come in and give a lower bid. You're going to be able to tout the fact that you're more entrenched and are able to provide better access, because you've got more facilities. You're going to make arguments that are going to get the attention of the people that choose these bids. If you're a smaller provider — a community-based provider — you're going to be on the outskirts of that argument.

Unfortunately, large doesn't [necessarily] equate to high quality. There are plenty of very talented community-based providers out there who really care about the people in their communities, and really care about the patients and their beneficiaries and who go the extra mile, regardless of what they get paid.

That whole structure begins to get lost when you start talking about coming in and offering the lowest bid. No one can really tell you what specifically is going to happen with this proposal, but [disability groups and consumer groups have] some very strong concerns — [as do] the providers — that this really is the harbinger of a very bad thing to come.

If [lawmakers] believe that competitive bidding is the right way to go in this benefit area, then why isn't it the right way to go for physicians' services and therapy services and hospitals? The bottom line is, politically, that would never fly. But if politically it wouldn't fly for those groups, then why is it flying for this group?

There is a service element connected to virtually every type of durable medical equipment and orthotic device — and even supplies. When you get into a situation where you're competitively bidding those types of things, you're going to have that service element largely drop out. What you're going to have is people who come in and say, “I can provide that device. I can do that off the shelf. I can do that with a prefabricated device.” They'll be under-bidding the people who really know what they're doing in this area, and they will probably wind up getting the bids.

What that will do is ultimately drive the professional element of care out of the system and rely more on a device-oriented type of benefit. You'll find things being drop-shipped to patients' homes, you'll find things largely being provided by technicians instead of trained and qualified orthotists, [for example].

MW: Let me just come back and point out that in fact I do have a lot of respect for Peter Thomas' point of view. He is certainly an excellent advocate in this area, and I would agree with him about the importance of having not just the giants but also the small businesses involved. We do believe that we've been successful in doing that. In fact, 75 percent of the winning suppliers at the two sites have been small businesses, so I think that we have successfully accomplished what we're trying to achieve here.

TC: I would just ask Mark, How much business do [the small providers] have? The only place I know where it has really been analyzed, they have small shares of the market. You can have a lot of small businesses winning, but if [larger providers] have the dominant share of the market … then they are dominant. I think that demonstrates the point that Peter was making: We are, over a period of time, going to see that the big companies, with their economies of scale, will have an advantage to dominate.

MW: I think that, unless we're going to demand that people buy from certain suppliers (which we don't want to do, because we want consumer choice in the market) we can only make it possible and accessible for people to buy from smaller suppliers. We do not intend to assign that particular beneficiaries have to buy from a particular supplier.

PT: But they do have to buy from suppliers that have a contract within that area.

MW: That's correct.

PT: If there are 100 potential providers of these types of benefits in a given area, and 20 get contracts, you've got choice within the 20. There's no doubt about that. But if you're one of the people who's been going to one of the 80 percent for 20 years, and you're absolutely convinced that they're the one for you — because they have the inside, longitudinal knowledge of your condition and how it's progressed through the years, you have a good personal relationship with them, and they bend over backwards to make sure that your phone calls are returned on time and your wheelchair is fixed in 24 hours — you're out of luck.

TC: I would just add, again, Mark — and maybe this is just something we just have to agree to disagree on — but I think that, as you squeeze prices, and these people have to bid low (and the way it's set up, I think it encourages them to bid artificially low), they have to have that contract. And, as they squeeze the prices, they're going to have much more difficulty in competing with the larger companies, and I think we're seeing that in Polk County.

Providers Tell it Like it Is

During the past six months, hundreds of small, independent providers like you have picked up the phone, written letters, attended lobbying events in Washington and generally made a fuss on Capitol Hill. Here is what some of your peers said about the struggle to avert competitive bidding.

Randy Freeman ▪ Title: owner ▪ Provider: Mediwell ▪ Location: Fort Worth, Texas ▪ Business Size: 23 employees; annual revenue of approximately $2.2 million ▪ Lobbying Efforts: met with Rep. Joe Barton, R-Texas, at Mediwell; helped form a coalition of Dallas/Fort Worth-area providers against competitive bidding; encouraged and helped beneficiaries to send letters to their federal legislators.

Competitive bidding inherently is geared toward larger players. That's what all of us fear. There is no way small dealers would have a fair shot at getting any market share. The politicians are telling us they want it to be fair. But we cannot envision how the government would be able to do this so quickly.

From what we are seeing with the [demonstration] projects right now, beneficiaries are expressing high levels of satisfaction. But these demonstrations were set up in limited areas, and ombudsmen are sitting right on top of these people, ready to settle disputes immediately. In the long run, beneficiaries will get cheaper equipment and have severely reduced service levels under the current competitive bidding reimbursement structure.

As we [in the Dallas/Fort Worth area] have gotten together, we've come away with the feeling of utter, dire helplessness, and that's what's motivating us now. This is going to turn into a groundswell. There are dealers all over the nation that are getting involved. I'm really thrilled about it.

Keith Ayers ▪ Title: vice president and owner ▪ Provider: Apple Discount Drugs/Apple Medical/Apple Infusion ▪ Location: Salisbury, Md. ▪ Business Size: 97 employees; three locations, including a 17,000-square-foot headquarters ▪ Lobbying Efforts: contacted his members of Congress many times; serves as a board member for the Maryland National Capitol Home Care Association, which actively opposes competitive bidding; gave letters to his customers, explaining the possible negative effects of competitive bidding and encouraged his customers to write to their lawmakers.

We're in a rural area, and I think [beneficiaries'] access to care would be greatly limited here under competitive bidding. Apple Discount Drugs offers a full line of products for Medicare beneficiaries, all under one roof. But, under competitive bidding, a patient would not be able to walk into one facility and get all the things [he or she] needs. In a rural area without public transit, it's hard enough for some Medicare beneficiaries to arrange transportation to make one stop. Imagine if they had to make several stops to obtain necessary health care supplies, because different companies were awarded contracts for only certain items.

[The Centers for Medicare and Medicaid Services] doesn't realize the other services bundled into DME, infusion and oxygen — services like the professional component of a nurse, a respiratory therapist, certified fitters, 24-hour emergency service and accreditation. It is very possible these services will be eliminated by [bid]-winning companies, to control overhead. The end result will be increased hospitalization of beneficiaries, costing more than what competitive bidding will save.

Frances Sponer ▪ Title: president and chief executive officer ▪ Provider: Ascentra ▪ Location: Las Vegas ▪ Business Size: eight locations; 45 HME employees ▪ Lobbying Efforts: arranged a video teleconference with staff members at the Washington office of Sen. John Ensen, R-Nev.; developed close working relationship with Rep. Shelly Berkeley, D-Nev.; contacted all of Nevada's federal lawmakers; encouraged employees to write letters and sign a petition opposing competitive bidding.

We have offices in some of the most under-served areas [of Nevada and Utah]. We're there for our patients 24 hours a day, seven days a week. We would not be able to provide that service if we had to reduce our prices to what the Veteran's Administration charges. It's not even the same product that's delivered. I don't think they factor service into the equation at all. [Under competitive bidding], I think beneficiaries would be forced into a situation that Congress wanted to avoid when it established Medicare in 1966. The beneficiary has a right to choose a provider. People who are sick and disabled are different than the rest of the population. You can't force people into a one-size-fits-all situation.

Joel Marx ▪ Title: president ▪ Provider: Medical Service Companies ▪ Location: Cleveland ▪ Business Size: 70 employees; serves an eight-county area in northeastern Ohio ▪ Lobbying Efforts: contacted his federal and state lawmakers many times; attended the Alexandria, Va.-based American Association for Homecare's lobbying “fly-in” event Sept. 18, 2002, and visited several Ohio congressmen during that event.

[If competitive bidding were implemented nationwide], I believe providers that bid competitively would grow, and smaller organizations with higher service levels and an inability to adapt would suffer greatly. The long-term value of our business would initially fall, as many would opt to exit the industry. The remaining businesses would grow significantly.

Medicare beneficiaries would suffer a reduction in service levels, due to reduced reimbursement and a significant reduction in competition.

John Kaiser ▪ Title: director ▪ Provider: Walnut Medical Services ▪ Location: Johnstown, Pa. ▪ Business Size: four locations; covers eight counties ▪ Lobbying Efforts: served as second vice president of the Pennsylvania Association of Medical Suppliers, which opposes competitive bidding; contacted his representatives in Congress many times; participated in AAHomecare-sponsored Washington lobbying events in June and September 2002; met with a local legislator at Walnut's Johnstown location.

If competitive bidding were implemented nationwide, I believe our company would be in for a struggle. We have gone through the golden commode stage, [and] the six-point plan and BBA of ‘97, and have found a way to survive. But each time it becomes more difficult. [Under competitive bidding], our patients might have to go to another supplier, we might have to cut some of our value-added services. I am not sure the direction we will take. Our first goal would be to survive.

[Competitive bidding also] would limit patients' choice. In Polk County, the company awarded the competitive bid was bought out by a national firm that claimed 70 percent of the business. It put quite a few small companies out of business and the patient had no — or very little — choice. Once awarded the bid, the provider had no incentive to include any value-added services. They could do it their way, because the competition was gone.

Jack Stafford ▪ Title: owner ▪ Provider: Quality Home Medical Equipment ▪ Location: Stroud, Okla. ▪ Business Size: two locations; eight employees.

Competitive bidding would be good if every company offered the same level of service to all patients, rural and metropolitan. But, in order for the larger metropolitan HME [providers] to deliver that high level of service to the rural areas, they will have to add more staff and supplies. This will increase their overhead. Are they willing to give the hometown, high-quality care that we in the rural area are currently giving to HME patients? My concern is that the larger companies will be more concerned about the overhead. This will hurt not only our rural business, but also the whole HME industry.

I believe that we will be able to compete effectively with our larger competitors. Because of being located [close] to the rural patients, I believe we will win most of the rural bids. [Still], I can just imagine how poor the service will be if [some companies] have to start counting pennies.

Patrick Martin ▪ Title: head of rehab ▪ Provider: Assistance Home Medical ▪ Location: San Antonio ▪ Business Size: 12 employees; one location.

[When] Assistance Home Medical Care opened its doors on August 15, 1991, the intention of the company was to provide the best in home health care in the areas of respiratory therapy, durable medical equipment and rehabilitation services.

The quality of our intentions has grown, but the competitive bidding process has limited our ability to provide for everyone in need. Because we believed that the competitive bidding process would cause patient care to suffer, the company chose not to participate [in the San Antonio demonstration].

The sheer nature of competitive bidding forces companies to focus on the “almighty” bottom dollar rather than the true nature of the industry: patient care.

Like other companies, we pride ourselves on quality and let our service speak for itself. That is what is at issue: service, which will suffer under this bidding process.

The Sunshine State Draws a Line in the Sand

In January, when Florida's legislature passed a budget calling for $4 million in cuts to Medicaid's durable medical equipment expenditures, competitive bidding seemed like the easy way out.

The state's Medicaid arm currently deals with “a couple of thousand” DME providers, according to Connie Rugles, assistant to the deputy secretary of Florida's Agency for Health Care Administration. But under the competitive bidding system that the agency introduced in February, the number would dwindle to fewer than 11 providers, easing AHCA's paperwork burden.

Avoiding some of the bureaucratic pitfalls of Medicare's version of competitive bidding, Florida's version would include “only the highest-cost services we provide under DME: hospital beds and oxygen-related services,” Rugles explains.

But the easy way out be-came less appealing when the state's DME providers weighed in on the issue.

Until AHCA issued a request for competitive-bidding proposals, members of the Florida Association of Medical Equipment Suppliers were negotiating a compromise with the agency “in good faith,” says Joan Cross, co-owner and vice president of C&C Homecare in Bradenton, and president of FAMES. “We were in their office negotiating the day the RFP came out. They basically lied their teeth off.”

Once the providers caught their breath, they filed suit against the agency, alleging the agency violated a U.S. law that requires state agencies to obtain a federal waiver ensuring the protection of patients' choice before implementing such a program.

FAMES filed an additional lawsuit alleging the agency had violated procedure by changing the qualification requirements for oxygen patients without allowing sufficient time for public comment, Cross recalls.

A state judge combined the two lawsuits, and the parties met in court this past summer. There, “AHCA objected to everything we did,” Cross says. “They objected to our witnesses, and they even objected to their own paperwork.”

Finally, the judge asked AHCA to write down all of its objections — 53, to be exact. He ruled on these objections June 26, bolstering FAMES' hopes of victory with the following statement: “The agency's institution of the subject project … without satisfying the federal certification requirements might be in direct conflict with federal law and hence invalid.”

Since uttering these words, the judge has remained tight-lipped, Cross says. FAMES had expected a final ruling in the case by Sept. 21, but as of Sept. 27, the judge still had not spoken.

“I've given up expecting,” Rugles admits. “I'm just waiting.”

Whatever the outcome of the case, the threat of competitive bidding is not going away, Cross admits. “Even if we win this,” we'll be back in [the legislators'] offices on a regular basis,” she says. “They could go back and ask for a waiver.”

Competitive bidding has one powerful ally whose support for the program may be difficult to overcome, Cross adds: Florida's governor, Jeb Bush.

“The governor's chief aide, Mike Hanson, told me he wanted competitive bidding. He quoted the fact that, if you can bid Firestone tires and airplane parts, you can bid health care. But I wouldn't want to get on an airplane where they took the lowest bid. Would you?”

Undaunted, Cross plans to explain her opinion to Bush and his democratic opponent, Bill McBride, at a Chamber of Commerce event this month in Orlando. “It can be a little bit intimidating with all those people around, but I'll just take a deep breath and go do it.”

The Tar Heel State Treads New Ground

In North Carolina, April showers brought May glowers this year, when the state's Medicaid arm convinced lawmakers to add a competitive bidding mandate to the 2002-03 budget bill.

Everyone knew the state was facing a $1.5 billion deficit, but durable medical equipment providers had no idea that the government might decide to pit DME companies against each other in a bid to save Medicaid money, says Clark Robichaux, president of Wilmington-based Oxycare and vice president of the North Carolina Association of Medical Equipment Suppliers.

Before anyone knew it, the competitive bidding ball was rolling, and it rolled through the Senate with ease. By summer, the only thing standing between North Carolina's DME providers and a Medicaid competitive bidding program was the state House of Representatives.

Determined not to let the ball roll further, NCAMES hired a lobbyist to take providers' message to the Hill, and developed what Robichaux calls “a multilateral approach to combating competitive bidding.”

While the lobbyist knocked on the doors of appropriations committee members, NCAMES negotiators set up meetings with the state's Division of Medical Assistance, in hopes of finding a viable alternative to competitive bidding. Realizing that DMA needed to cut approximately $1.6 million from its DME budget during the coming fiscal year, “we took a hard look at the fee schedule,” Robichaux says. “We determined, based on the amount of money we needed to save, that we could do an across-the-board, 3.73 percent cut of the fee schedule.”

The negotiators also suggested ways to simplify the agency's administration expenses, including cutting out “non-serious providers” and bringing the state's reimbursement criteria for home oxygen in line with Medicare's criteria, Robichaux recalls.

Less than two weeks before the Oct. 1 beginning of the new fiscal year, the providers' efforts paid off. A budget that no longer mandated the use of competitive bidding passed both houses of the state legislature, and DME providers seemed to be home free.

Or were they?

Robichaux admits there still are no guarantees. “We'll always be faced with the threat of competitive bidding, especially during tough times,” he says.

And the tough times are now, according to Allen Gambill, assistant director of DMA's financial affairs. “We need to make these cuts as early as possible,” he said. “The longer we wait, the higher the percentage of reduction must become.”

DME providers should not forget that the very agency now choosing cost-cutting methods initiated talk of competitive bidding in the spring, Robichaux says.

“The idea for introducing competitive bidding came from recommendations prepared by the agency and sent by the [state's health and human services] department to the governor,” Gambill explains. “Once you specify the level of quality, competitive bidding, by its own nature, allows you to obtain the best pricing.”

Despite these glowing words about competitive bidding, DMA is more than willing to work out a compromise with North Carolina's DME providers, Gambill insists. “If we can do something that works with the provider community, I would just as soon do that as anything else,” he says.

Nonetheless, competitive bidding remains on the back burner. And, depending on the economic winds, it could heat up at any time, Robichaux says. “The important issue here is for states to educate their legislators and get them more familiar with what goes on with providing DME to Medicaid patients. [We must] help them to understand that we do more than just hand over a commodity off the counter.”

The Lone Star State Digs in its Spurs

If it looks like competitive bidding and smells like competitive bidding, then it could be competitive bidding, a coalition of Texas' durable medical equipment providers concluded recently.

On Sept. 12, Texas' Health and Human Services Commission published a “draft Medicaid DME request for information,” which is a complicated way of saying the agency plans to ask DME providers to report their lowest acceptable prices for a wide range of products.

Although HHSC did not explain exactly how it plans to use the information, Michael Flores, co-owner of San Antonio-based Huntleigh Home Medical and president of the Medical Equipment Suppliers Association, says the writing is on the wall.

“We think they want to leave us out of it so they can do what they're trying to do,” he explains. “We don't know if they're going to take this information and set a whole new fee schedule. It is a request for information, but it has very strong potential to turn into a bid.”

Talk of competitive bidding began in May 2002, when HHSC asked the state's DME providers to submit proposals for supplying equipment to the Medicaid program in a “cost effective, customer-service-focused, quality-driven manner.”

As word of the RFP spread across Texas, Flores says he never will forget the public forum that ensued. On June 24, more than 200 DME providers packed into a room. Without warning, HHSC officials gave the attendees 30 minutes to come up with a 14-member subgroup to represent DME providers' interests in meetings with the commission.

Despite its rushed beginnings, the group came together more cohesively than anyone could have hoped, Flores says. Within two months, the providers had convinced HHSC to explore alternatives to competitive bidding.

On July 5, HHSC announced, “public comments received by HHSC on the draft DME RFP raised sufficiently significant questions about whether the RFP would achieve the desired results that HHSC is withdrawing the draft RFP.”

Nonetheless, the commission left the door open to competitive bidding. “[The agency] reserves the option to put forward another draft competitive pricing mechanism later this summer if it determines that such an approach is supported by the commission's further analysis.”

Initially, the providers offered HHSC savings of $6.77 million, and promised to find more cuts as soon as the commission provided historical data on code use. “We were far from through,” Flores says, noting that the commission's target savings for the fiscal years 2002 and 2003 was $18 million. “But we were waiting for them to give us back more data.”

Instead of data, the officials offered the providers only a dismissive “thanks for your suggestions” at the most recent meeting. “They did not answer a single question about the request for pricing information,” Flores recalls. “They consider their business with us through.”

The commission's press officer, Kristie Zamrazil, explains that HHSC is only trying to gather as much information as possible to determine the best ways to cut costs.

“We're pursuing both approaches at this time: an RFPI for pricing information and the workgroup's recommendations,” she says. “The budget rider specifically directs us to find savings through competitive pricing, and the workgroup's recommendations for the most part require policy changes and do not address prices per se.”

Before deciding which cost-cutting path to take, the commission must determine the administrative costs of implementing the providers' suggestions, Zamrazil explains.

HHSC gave providers until Sept. 26 to comment on the draft RFPI, and HHSC responded to providers' comments on Oct. 11. The commission will publish the final RFPI Oct. 28.

But while the commission may be finished talking to the providers, the providers are far from finished voicing their concerns. “Our coalition is not done,” Flores insists. “It is current, active and staying together. It came together as a result of the crisis, and it's been amazing.”