AAHomecare Conference Bolstered by Second Competitive Bidding Study

WASHINGTON — In a spectacularly timed twist of luck, the home medical equipment industry got a tremendous boost in its battle against competitive bidding last week when a new study surfaced that takes deadly aim at the process.

The industry spent the week marshalling forces against the scheduled July 1 implementation of round one, sending letters, signing an online petition and calling legislators to appeal for its suspension. (See related stories in this issue.)

Then on Friday, just as stakeholders prepared to set off for the American Association for Homecare's Washington Legislative Conference, which begins tomorrow at the L'Enfant Plaza Hotel, they acquired new ammunition when the study--titled "Will Competitive Bidding Decrease Medicare Prices?"--came to light.

Authored by Brett Katzman, PhD, associate professor of economics at Kennesaw State University near Atlanta, and Kerry Anne McGeary, PhD, associate professor of economics at Drexel University in Philadelphia, the peer-reviewed study takes an in-depth look at the 1999 competitive bidding demonstration projects in Polk County, Fla., and San Antonio. It concludes that CMS' format for competitive bidding is fatally flawed and, in many instances, results in higher prices and poorer quality of service.

"The problem with the CMS process is that the bid scoring and price formulation procedures are inconsistent with the bidding behavior CMS wishes to induce," the authors conclude. "That is, overly complex rules for choosing winners and setting prices distort the incentives that bidders face and may actually result in increased prices for some consumers."

The study notes that, while no data on service quality was available, "there is anecdotal evidence of diminished quality that comes from CMS itself." CMS felt compelled to initiate quality check site visits for all winners and hired an independent contractor to conduct quality assurance surveys, according to the study.

"Further problems with the process are evidenced by the fact that some winning firms have attempted to withdraw from the program," the study says.

Jubilant stakeholders said the new study provides significant data for them as they gear up to meet with legislators and ask for delay or suspension of DMEPOS bidding pending an analysis of both the process and its results.

"I think it gives us a lot of really great ammunition. We are going to use it on the Hill, no question," said Cara Bachenheimer, senior vice president, government relations, for Elyria, Ohio-based Invacare.