ATLANTA — A tidal wave of trouble is on the way for those in the mail-order diabetic supply market as thousands of beneficiaries attempt to find new providers under competitive bidding, stakeholders predicted last week.
Some estimate that more than 90 percent of the Medicare diabetic beneficiaries in the nine competitive bidding areas will be forced to find new suppliers because the nation's top four diabetic supply companies — including giant Liberty Medical — and other established diabetic providers did not win contracts.
In fact, according to an analysis of the bid winners by University of Maryland economist Peter Cramton, an average 87 percent of existing providers in mail-order diabetic supplies lost contracts — with 100 percent losing out in five CBAs.
"It's going to be a huge problem," said Wayne Stanfield, president and CEO of the National Association of Independent Medical Equipment Suppliers. "It is going to get bigger and bigger over February and into March."
Why March? Diabetics generally get 90-day supplies, and it is likely that in most cases the last shipment of supplies went out in December, just before competitive bidding was implemented, Stanfield said.
Tom Milam, former COO of AmMed Direct, a diabetic supply company based in Nashville, and now a partner in Atlanta-based Tatum LLC, estimated that more than 200,000 Medicare beneficiaries in the CBAs will need to shop for new providers and new equipment, as well. They are likely to find that both are in short supply, he said.
"There have been multiple reports of people calling [Medicare's help line] about not being able to get the Johnson & Johnson or Abbott or Bayer products that they use," said Milam. "I think we are at the tip of the iceberg."
Under the Medicare Improvements for Patients and Providers Act (MIPPA), contract suppliers are mandated to carry 50 percent, by volume, of all types of test strips. But the reimbursement for mail-order diabetic supplies was slashed by an average 56 percent in the Round 1 rebid, falling to a range of $13.88 to $15.62. That means the majority of the top products are too costly for bid winners to provide.
In addition, said Stanfield, there is another problem. "The four nationals, including Liberty Medical, did not win contracts. The companies that did win contracts do not have the ability to cope with the amount of patients, in my view," he said. "These smaller companies are going to be totally overwhelmed trying to get the products. I don't think people realize how big Liberty and the other companies were."
"We have seen a definite increase in new diabetic patients. They are prior customers of national companies who did not win contracts," confirmed Chris Rice of Diamond Respiratory Care in Riverside, Calif., which won a bid in the category. "I wouldn't call it 'overwhelming,' but there has been a lot. We've streamlined our intake process just for them and have assigned specific personnel to diabetic intake."
Big Numbers
Milam estimated that Liberty Medical by itself would be sending 70,000 patients in the CBAs to other providers. Such numbers are already taking their toll.
"There have been reports of winning contract suppliers not being able to handle the orders," said Esta Willman of Medi-Source Equipment & Supply in Yucca Valley, Calif.
"Twenty-one of 32 [winners for mail-order diabetic supplies] have never done this before," Milam added. "There have been multiple reports of these small start-up companies receiving phone calls, and they have inadequate credit lines and they run out of products."
Funding is definitely a huge concern, stakeholders said. Companies with no track record in the field are unlikely to gain lines of credit when even companies with track records are having a hard time. Yet those credit lines are crucial.
Willman, who won an oxygen contract and has seen her business swell a bit as non-contract competitors shift oxygen patients her way, said she had to make infrastructure changes and equipment investments in order to serve her burgeoning patient roster. The mail-order diabetic supply firms will have to do the same thing — and some may not be able to, she said.
While Rice said his company's challenge isn't so much in filling the orders or the intake, "but rather getting the proper physician's orders signed and clinical notes when needed. We're having to educate lots of physicians on why this is happening," he said.
"Physicians will have to send orders to the new supplier before they can ship any products," Willman explained. "And physicians I talked to before the beginning of the year were unaware that they would have to write orders for all these patients. Physician offices are going to have to process all those orders."
"When that flood of patients hits physicians and the physicians go crazy having to write all those new prescriptions, that's when we're going to hear some complaints," agreed Stanfield.
Patients Call Providers for Help
Medicare's hotline might not be much use for airing those complaints, however.
Milam said when beneficiaries call to complain that they cannot get the products they are accustomed to using or they don't know who to go to for their supplies, "they are being given the names of companies who are not bid winners."
"I have heard reports that when patients call the Medicare service line, they are being told to go to retail outlets, which defeats the savings from competitive bidding," Willman said. Beneficiaries can go to local pharmacies to get their supplies and those pharmacies are reimbursed at the current Medicare fee schedule rate rather than the competitive bidding rate.
"That's triple what Medicare will pay in the competitive bidding arena," noted Milam. He said CMS has been apprised of the problems, but "won't respond."
The American Association for Homecare, NAIMES and various other industry groups have been compiling complaints about the bidding program and funneling them to CMS and legislators alike. "There is certainly a lot of effort to convey this to the right people, but no one is listening," said Stanfield.
Willman, a member of the Program Advisory and Oversight Committee, said she believes it will take beneficiaries to get CMS to listen. "If they don't pick up the phone and contact the ombudsman, [CMS doesn't] hear it," she said.
Instead of the ombudsman, she said, "Patients are calling their suppliers, whom they are used to dealing with. We need them to let Medicare know. But the generation of patient that is currently using Medicare supplies and equipment is a generation that has traditionally not been vocal about [their care]. They are not wave-makers. So it is up to other people to be their voice."
Stanfield said he is concerned that voice will be heard only when serious complications arise.
"We believe that the greatest risk of someone being harmed physically is with diabetics and enteral nutrition out of the whole products line," he said. "Enteral nutrition is not a huge part of bidding in numbers of patients. But a patient who is diabetic and insulin dependent and has to test three times a day and they get to March and don't have any test strips and can't get any — grave concerns. Big concerns."
Milam said it is an unconscionable situation. "To think over 200,000 Medicare beneficiaries have to obtain a new provider and, in most cases, new equipment and it is just not out there … It is egregious, uncaring, it is harmful — and not just to beneficiaries, but to the [Medicare] trust fund and therefore, the taxpayer."
In the end, said Stanfield, "it is going to screw up competitive bidding. Either the problems are going to show up or the patients are going to figure out they can get it from the corner drugstore."
If that happens, he added, Medicare's big savings in diabetic supplies will largely evaporate.
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