Home Health & Hospice Week

Suppliers call for suspension of program.

Suppliers of durable medical equipment are stepping up the battle to stave off Medicare's competitive bidding program--and the latest volley comes from academia.

A report commissioned by the Pennsylvania Association of Medical Equipment Suppliers and conducted by researchers at Robert Morris University in Moon Township, PA, concludes that competitive bidding will ultimately "dramatically increase" the prices Medicare pays for DME by reducing competition.

On Feb. 22, the American Association for Homecare sent a letter to Health and Human Services Secretary Michael Leavitt citing the report and seeking a suspension of DMEPOS competitive bidding.

"This report reveals competitive bidding for what it really is: an anti-competitive exercise," John Shirvinksy, executive director of PAMS, tells Eli.

One-two punch: The study is the second academic effort to conclude in recent months that the competitive bidding program is ill-conceived. A report in the January 2008 issue of the Southern Economic Journal charged that the program would lead to price increases and a decrease in the quality of services (see Eli's HCW, Vol. XVII, No. 8).

If a small group of suppliers acted on their own to drive out competitors by fixing prices at a lower level, "that would be patently illegal," he says. "That would violate every aspect of the nation's anti-trust laws."

Furthermore, the researchers conclude that competitive bidding is illogical and unnecessary. "Medicare already regulates price and, if price is truly too high, could reduce it," write researchers Brian O'Roark and Stephen Foreman. "This leaves us to ask, what will we gain from competitive bidding?"

The Robert Morris researchers conclude that competitive bidding will knock out many if not most small DMEPOS players--which will have a long-term effect on pricing, supply and service.

And, ironically, once the universe of suppliers is slashed after the initial rounds of competitive bidding, the program as it's now conceived will not be possible.

"Having bid many of the small firms out of the market, there will be no alternative suppliers available to accomplish price reductions [in the future]," note the researchers.

AAHomecare's Walt Gorski is among the in-dustry representatives calling on the Centers for Medicare & Medicaid Services to rethink competitive bidding before launching into round one this summer.

"Clearly, I think the questions that are raised by the economic study, along with the impact that this proposal will have on small businesses, need much more evaluation," he says.

Resource: To download the full report, "The Impact of Competitive Bidding on the Market for DME," go to www.pamsonline.org.