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.
News of the study, which appeared in January's issue of the Southern Economic Journal, spread like wildfire through the industry, which just a week earlier was buoyed by the announcement of a study by two economics professors at Robert Morris University in Moon Township, Pa. That study, commissioned by the Pennsylvania Association of Medical Equipment Suppliers, blasted competitive bidding, saying it would result in substantial market failure, the loss of 21,000 jobs and increased prices. (See HomeCare Monday, Feb. 25.)
"This dovetails exactly with the PAMS study," said John Shirvinsky, executive director of the state association. "Obviously, there is no relation between the two. This is an analysis of the demonstration projects in Polk County and San Antonio. It was four years in the making, and it is in a peer-reviewed journal. It took a year to get published. But it unveils some serious flaws in the Medicare HME competitive bidding program that have been pretty much glossed over by CMS."
The Robert Morris study, said Shirvinsky, "did a great job on what problems are going to result from competitive bidding. And lo and behold, here comes this study that no one knows about and it substantiates virtually every point that the Robert Morris study made.
"I'm hoping we get enough people fired up about what's going on here," he continued. "This new study is earth-shattering for our industry. It lends credence to every gut-checking reaction we have had on what this program will do and what it won't do. [Competitive bidding] is a sham. And it is a disgrace that [CMS is] trying to force this on the Medicare beneficiaries."
Seth Johnson, vice president of government affairs for Exeter, Pa.-based Pride Mobility, said the two studies might turn the tide for HME.
"I do think these two studies could result in a delay in round one, which would be very good. If they are closely evaluated, it could end up stopping the program altogether," he said.
"This certainly helps the cause," said Don Clayback, vice president, government relations for Lubbock, Texas-based The MED Group, adding it is particularly notable that the two studies are by "outside sources that have looked at this from a business-economic standpoint. At a minimum, you would hope that it would create some doubt in Congress' mind so that some in Congress ... will take a look."
Tom Ryan, former chairman of AAHomecare and president and CEO of Home Care Concepts, Farmingdale, N.Y., said he hoped the studies would push Congress "to slow the train wreck down."
The points made by the two studies, he said, should prompt Congress to put the brakes on "because they might not get the results they intend," he said.
The association will urge conference attendees to talk to their legislators about the issues that are most important to them, such as a reduction of the oxygen cap or elimination of the first-month purchase option for power mobility, said Michael Reinemer, vice president, communications and policy, for AAHomecare. But the overarching message of the lobbying event this week will be that competitive bidding should--at the least--be delayed.
"We are recommending ... that Congress urge CMS to suspend round one. That will be particularly important for providers in the 10 round one metropolitan statistical areas," Reinemer said.
"The message right now is to delay round one," echoed Clayback. "The second message is: Don't move on to round two before you've digested what's happening in round one. The whole program needs to have more parameters, more analysis, more due process for bidders."
A delay of the program could work in the industry's favor, Bachenheimer said. "Some people have been pretty negative about this delay tactic," she said, "but delay buys us time; time is opportunity."
The conference is expected to draw at least 350 providers and other HME advocates. In addition to meeting with their legislators, attendees will have opportunities to learn more about the legislative and regulatory sides of HME. Guest speakers include Laurence Wilson, director of CMS'chronic care policy group; keynote speaker Sen. Pat Roberts, R-Kan.; Rep. Jason Altmire, D-Pa.; Jim Nussle, director, Office of Management and Budget; Sen. Ken Salazar, D-Colo.; and Kristen McCosh, Ms. Wheelchair America.
In addition, Brian O'Roark, PhD, and Stephen Foreman, PhD, JD, MPA, authors of the Robert Morris University study, and PAMS' Shirvinsky will speak.
For further information on the conference, visit www.aahomecare.org.
