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Changes to Medicare could make it more difficult for patients to obtain certain medical equipment. The changes could also bankrupt small medical equipment companies.
The changes will save Medicare billions of dollars — billions of taxpayer dollars.
The question, though, is at what cost those savings will come.
U.S. regulators are continuing to rollout a program requiring durable medical equipment providers to bid on selling specific products.
Those products include oxygen and related equipment, wheelchairs, walkers, hospital beds, respiratory assist devices and others.
The new competitive bidding process started with nine of the largest metropolitan areas in 2008.
Problems with the bidding process caused it to be stopped two weeks into the process. It was tweaked and rebid in November 2009, with new prices rolling out in January 2011.
The Centers for Medicare and Medicaid Services, the government branch responsible for the programs, announced in August the second phase of competitive bidding would include 91 metropolitan areas.
Equipment providers, like La Grange-based Evercare Medical Supplies, began the bidding process in January.
New prices will take effect in July 2013.
As that date draws closer, Evercare general manager Alex Hicks is becoming increasingly worried.
He’s worried about his own business, of course, but he’s even more worried about his customers.
“They’re not patients, they’re people,” he said. It’s difficult, he said, to know next July those relationships could disappear if Evercare doesn’t win bids for every item.
Hicks is also worried many beneficiaries, and even many healthcare providers, will be blindsided by problems caused by the competitive bidding process.
“They’re putting the burden on our shoulders,” Hicks said. “Then there is confusion and animosity between equipment providers and doctors.”
But, agency officials say they will be conducting extensive outreach to beneficiaries in the round two areas before the program takes effect.
So far, that hasn’t happened.
When economist Peter Cramton, a professor at the University of Maryland, studied phase one of the competitive bidding process, he agreed it is time for change.
“Economists and other auction experts agree that using administrative prices from 25 years ago to set Medicare prices is a bad idea,” he wrote. “A much better approach is to price Medicare supplies in competitive auctions.”
But, the process now in place in 100 major cities is “fatally flawed.”
Suppliers must place bids on thousands of items, something Hicks estimates will take him at least 120 hours.
There are more than 300 items in the wheelchairs and power chairs category alone, he said. For each type of item, Hicks must provide a bid along with a manufacturer’s name and model number.
He started filling out bid sheets in February, working on them both at the office and from home in the evenings.
The paperwork sites six inches deep on his desk.
When prices are set, they’ll remain in effect for three years. Hicks must place a bid under the currently established cost, and estimate his costs for the next 36 months. Fuel costs will change; so will raw material costs, he said.
Cramton, who presented his report to the House Ways and Means committee in September 2010, pointed to four main problems with the bidding process.
First, the bids are not binding commitments. That encourages providers to make bids they won’t actually accept, driving the price down below the cost for all providers.
That leads into problems with the median-bid pricing rule, Cramton said.
“The median-bid price is significantly biased downward and possibly below the cost of all suppliers,” he said.
It also means half the winning bidders are offered a contract below their own bid amount.
The process also weights bids using government demand estimates, allowing companies to skew bids away from actual costs.
Cramton said bidders can submit low bids on products for which the government has overestimated demand, and vice-versa for high-demand products.
That will lead to individual products not aligning with actual costs and result in selective fulfillment of orders.
Last, Cramton said a lack of transparency in the process is a major issue.
He said it is unclear how product quantities are determined and how bidder capacity is used to select the number of winning bidders. Also, quality standards and performance obligations are unclear.
Hicks worries that the bidding process will reduce the overall quality of products and of service in the industry.
“Equipment manufacturers are already creating products to meet minimum requirements,” he said.
And, it’s possible people with multiple, chronic conditions will have to work with multiple vendors to obtain everything they need.
“You’ll have to make arrangements for three companies to bring it in and set it up,” he said, “and then God forbid something happens and you need service.”
As a provider, Hicks knows he’ll get calls from customers about products he didn’t provide.
“But as a good steward, I morally and ethically have a responsibility to go out there and help them,” he said.
Hicks looks at data from Cincinnati, the nearest round one participant, for predictions of what might happen in the Louisville Metro area.
According to data from the American Association for Homecare, there are 305 Medicare suppliers in the Cincinnati area. The Center for Medicare Services extend offers to only 101 suppliers in phase 1.
That reduction in suppliers means a 200 percent increase in the ratio of beneficiaries per supplier, which could overwhelm suppliers and limit timely access to care.
The study found an estimated 13,700 patients on feeding tubes in the Cincinnati area will be forced to choose one of 11 suppliers — an average of 1,245 patients per supplier.
While the AAH reported 500 beneficiary complaints from cities in round one, U.S. officials claim to have received only 45.
There are, Hicks said, both inquiries and complaints tracked by the government agency, which he believes could explain some of the discrepancy.
Officials from CMS believe the program is working as planned. Competitive bidding is part of the Patient Protection and Affordable Care Act passed by congress in 2010.
The bill, along with the Health Care and Education Reconciliation Act, make up the health care reform under President Barack Obama’s administration.
Agency officials estimate the competitive bidding process will save Medicare, seniors and taxpayers more than $28 billion over the next decade.
The program reduced prices for nine types of equipment by an average of 35 percent, according to agency administrator Jonathan Blum.
Blum also said a review of claims data didn’t uncover evidence that patients required additional care — indicating the program didn’t harm their health, he said.
With only nine cities participating in the program for 12 months, the data pool is still fairly small.
Hicks wonders how the changes might impact health. Claims filed for standard folding walkers went down by 12,000 in Cincinnati during round one, he said.
“How many of those people fell and broke a hip?” he asked.
Especially, he said, since Medicare pays less than $100 for each walker and a hip replacement costs closer to $30,000.