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Home Health & Hospice Week

Competitive Bidding:

Suppliers Bid Farewell To Anti-Bidding Hopes

Published on Thu Dec 04, 2003

No good news for DME in newly passed legislation. 

The new prescription drug benefit is grabbing all the newspaper headlines, but front-page news for the durable medical equipment and home respiratory industry is the disastrous competitive bidding provision in the newly passed Medicare bill.

House Republican leaders pulled out "a back room victory for a Medicare bill that will restrict access to quality medical care for millions of beneficiaries," American Association for Home-care President and CEO Kay Cox said upon its passage. The industry has "deep outrage over the potential damage that this bill will do to our Medicare beneficiaries," Cox said.

Opposition, coming both from conservatives claiming the entire Medicare bill will spend money wildly and liberals arguing the drug benefit doesn't go far enough and the managed care privatization goes too far, ultimately wasn't enough to stand in the way of the politically popular legislation.

 

Congressional leaders pulled out "a back room victory for a Medicare bill that will restrict access to quality medical care for millions of beneficiaries," American Association for Homecare President and CEO Kay Cox says.

 

Waves of DME suppliers will be closing their doors thanks to the implementation of competitive bidding called for in bill, predicts Joan Cross with the Florida Association of Medical Equipment Suppliers. Here are the basics the bill lays out for the bidding process:

  • Phase In. Bidding would begin in the 10 largest metropolitan statistical areas in 2007, and would move to the 80 largest MSAs by 2009. After 2009, the Centers for Medicare & Medicaid Services could apply bidding prices nationally to all items bid upon.

  • Bid items. DME and related supplies and drugs are up for bidding, but lawmakers excluded inhalant drugs and parenteral nutrition from the process. Enteral nutrition still is covered. Inhalant drug prices will be affected by separate drug pricing changes, however.

  • Bidding cycle. Contracts would come up for rebid after three years. But once suppliers' Medicare business is gone for three years, it's unlikely they will still be in business to rebid, points out Cross, whose state saw its own bidding demonstration in Polk County.

  • Exemptions. CMS may exempt low-population areas in both rural and urban categories, unless they have significant mail order business. Items for which cost savings wouldn't be realized can also be exempted, AAH points out in its summary of the legislation.

  • Supplier qualifications. Suppliers must meet financial and quality standards to bid. In fact, CMS will require all suppliers who wish to do Medicare business to meet certain quality standards, including acquiring certain accreditation.

    Cross criticizes the measure that will require small suppliers to obtain costly accreditation just to bid on Medicare contracts, then easily leave them with the accreditation expense and no contract - and thus no Medicare income.

  • Safeguards. The bill does specify that Medicare beneficiaries must have access to multiple suppliers to furnish Medicare-covered items, and pledges not to inflict inherent reasonable payment cuts on items that already have bidding prices.

  • Studies. Numerous studies are proposed, including ones examining the program's cost savings and gauging the impact of the program on suppliers and manufacturers.

    The rest of the Medicare bill brings only more bad news for suppliers. The length of the payment rate freeze for DME and off-the-shelf orthotics was shortened somewhat from the proposed seven years to five years starting in 2007. That means no inflation updates for half a decade.

    And a handful of items will see even further cuts starting in 2005, to the price paid under the Federal Employee Health Benefit Plan. Those items include oxygen, oxygen equipment, standard wheelchairs, nebulizers, diabetic lancets and test strips, hospital beds and air mattresses, notes the Visiting Nurse Associations of America.

    Get Ready For ASP Instead of AWP 

    Drug prices, including those for inhalation medications, will be reduced to 85 percent of average wholesale price in 2004. In 2005, Medicare will begin paying based on the average sales price system, and payment rates for inhalation drugs will be ASP plus 6 percent, reports AAH. Infusion drugs will remain at 95 percent of AWP until they go up for bidding in 2007.

    Of course, since the bidding program won't commence until 2007, suppliers have a few years to convince Congress to rescind the policy that will wipe out many of them, experts note.

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