STATEMENT
of the
Honorable Heath Shuler, Chair
Subcommittee on Rural & Urban Entrepreneurship of the
House Committee on Small Business
Hearing on the
"The Impact of Competitive Bidding on Small Businesses in the
Durable Medical Equipment Community"
Wednesday, February 11, 2009
Good policy is defined by the same basic philosophy that governs good medicine — First, do no harm. That principle seems simple enough. And yet there are instances in which well-meaning legislation has unintended, and sometimes disastrous, consequences.
This was the case in 2007, when CMS established competitive bidding for Durable Medical Equipment. When it was first launched, competitive bidding was expected to save up to one billion dollars in taxpayer money. The idea was that it would drive down prices by increasing competition and creating more choices. But this was not the case.
Instead, it devastated small suppliers of rural communities. Although Congress intervened to stop competitive bidding, CMS used the last days of the Bush Administration to push it through. Fortunately, the new Administration has put a hold on that eleventh-hour rule. In the next two months, the Administration will review — and hopefully eliminate — the competitive bidding program altogether.
This morning, we will explore the effects of competitive bidding on small healthcare providers, and discuss the importance of ending the program entirely. The vast majority of Durable Medical Equipment providers are small businesses. Most of them deliver highly specialized products, which requires a depth of industry knowledge. But competitive bidding allowed many of the small suppliers to be outbid by larger, less knowledgeable firms. By nature, this process gives the upper hand to larger suppliers, who can churn out several medical devices and span an entire bidding area.
In the last year, this committee has held hearings to review the effects of competitive bidding on entrepreneurs. Time and again, our witnesses have said the exact same thing — the program hurts small businesses, and cripples rural communities. Because Medicare payments total a large percentage of revenue for many small suppliers, the effects of the program were devastating for those that failed to win contracts.
This was particularly true for Durable Medical Equipment suppliers in rural areas. If those firms are forced to shut their doors, entire communities will suffer both economically and in terms of access to care. Although the name would suggest otherwise, competitive bidding did nothing to encourage competition. If anything, it worked to suppress it.
In the long run, the program would have caused choices to dwindle, and prices to go up. We need to continue to work to ensure that small businesses are able to compete in this market. I look forward to today's testimony and thank the witnesses for their participation.
