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Home Health & Hospice Week

Legislation:

DME Industry Headed For Meltdown

Published on Thu Nov 20, 2003

Compromise over Medicare legislation harsh on suppliers. 

All suppliers' worst nightmares have been wrapped up in one neat package: the newly agreed upon compromise on Medicare legislation.

If the bill goes through as proposed, it could put the majority of the durable medical equipment industry out of business, critics say. "The bill will be devastating to the homecare industry," says the American Association for Homecare. And it "will jeopardize access to quality care for millions of homecare patients."

"It's going to be a disaster," says Joan Cross, president of the Florida Association of Medical Equipment Services. "They're going to be systematically wiping us out."

After months of near-secret negotiations, lawmakers whose duty was to craft a compromise between the House and Senate version of the Medicare bills have released a summary of that agreement. They're expected to release final language of the more-than-1,000-page bill after the Congressional Budget Office scores it, estimating how much it will cost.

Provisions affecting suppliers include:

  • A three-year freeze on inflation updates, keeping DME payment rates at the same level from 2004 through 2006.

  • Cuts to the top five DME items' rates, to "reflect prices paid" under the Federal Employees Health Benefit Plan. That will translate to reductions of up to 22 percent based on current FEHBP pricing, AAH says. The likely candidates for those top five items are oxygen, wheelchairs, nebulizers, diabetic supplies and hospital beds/air mattresses, the association adds.

  • Nationwide competitive bidding. The bill proposes bidding in "the largest MSAs" beginning in 2007, ramping up to 80 metropolitan statistical areas by 2009. And in 2009 the bid prices for the items under consideration would be applied to ALL items, nationwide.

  • Drug reimbursement rates reduced to 85 percent of average wholesale price in 2004, then switched to average sales price (ASP) plus "an additional percentage beginning in 2005." The summary doesn't spell out how ASP will be calculated, but it's generally thought to be the average acquisition price of the drug including rebates and other discounts, AAH says. The additional percentage is expected to be 3 percent.

    "We aren't too thrilled about the package," says Erik Sokol with the Power Mobility Coalition. The bill would pile on a number of reimbursement-reducing measures for power mobility products: the inflation freeze, the unspecified cuts to FEHBP levels, and eventually bidding.

    Plus the Centers for Medicare & Medicaid Services is sharpening its knives to make cuts using its inherent reasonableness authority. CMS Administrator Tom Scully repeatedly has vowed power wheelchairs will be first on the IR review list.

    "Overall it's a big loss," Sokol notes.

    One of the problems with reducing payment rates to FEHBP levels is that the program generally services a healthy, younger population in comparison with the Medicare population, AAH notes. And the program may not have the intensive documentation and regulatory requirements that increase overhead for serving Medicare patients.

    Nationwide Bidding Proposal Panics Industry 

    But the impact of those reductions will pale in comparison to the devastation a national competitive bidding program will bring, experts say. "People are just panicked," Cross tells Eli.

    In the pilot bidding demonstration CMS ran in Polk County, FL, suppliers had to change their service area if they didn't get chosen for a bid. "They're not going to have that option" if bidding takes hold nationwide, Cross points out.

    And suppliers won't be able to just subsist on their non-Medicare customers until the next bid rolls around years later, she maintains. Florida DME providers run about 80 to 85 percent of their businesses from Medicare, she estimates. Nationwide, it's probably closer to 75 percent. "You can't exist on 30 percent of business," Cross protests.

    Suppliers who furnish the most services along with their equipment will be the hardest hit by cuts, she adds. "A bunch of folks are going to go out of business for sure."

     

    The compromise Medicare bill contains "too many cuts to DME: a freeze, reductions, and national competitive bidding is unacceptable," protests the American Association for Homecare.

     

    The bill contains "too many cuts to DME: a freeze, reductions, and national competitive bidding is unacceptable," AAH argues.

    Suppliers' strongest hope is that the bill won't actually pass Congress, Cross says. Many Democrats are opposing the legislation, which was largely crafted by Republican leadership. And some conservative Republicans are against the compromises made, including moderation of the privat-ization provisions.

    But endorsement of the bill from the AARP has probably given the package a boost, notes Kathy Thompson with the Visiting Nurse Associations of America. Even though other seniors groups have come out against the legislation, AARP endorsement goes a long way.

    And the bill's backers are telling the press they are confident they can get the votes for the compromise bill by Thanksgiving.

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