HME Providers Look for Escape, "Just take my business over"

Adapted from HME News, HME Providers Look For Escape, by Leah Hoenen; Friday, April 25, 2014

We have blogged many times about Competitive Bidding for the HME/DME (Home Medical Equipment/Durable Medical Equipment) Industry.  (The Centers for Medicare & Medicaid Services (CMS) Medicare Prescription Drug, Improvement, and Modernization Act of 200, effectively known as H.R. 6331, or simply, Competitive Bidding)

Medicare Competitive Bidding and What it Means For the Consumer

We at Mountain View Medical Supply are a small, family owned and operated business and cannot competitively bid against the likes of CVS or Walgreens, so we made the decision to exit the Medicare/Medicaid provider program in 2009.  You see, the government Competitive Bidding program was tailored for large scale providers with many branch locations, so the mom-and-pop providers who couldn't compete or win bids, are struggling to survive.  As a result, some HME providers are asking other providers to purchase their businesses.  

"If CMS wanted to tear the industry apart and take the 'mom and pop' out of it, this bid has been successful," said Terry Luft, a vice chairman at Harrisbug, PA-based Dynamic Healthcare Services (DHS).  In April, DHS completed its third buy of this year, and after an acquisition is publicized, the company often receives several phone calls from other companies looking for an exit strategy, he said.  

In June 2011, Homecaremag.com took a poll asking providers, "Will you bid in Round 2 of Competitive Bidding?"  A shocking 60 percent of HME participants said they are trying to sell or close their HME businesses before Round 2 of competitive bidding.

Majority of Providers Want Out

Our HME/DME industry as a whole has been very vocal with Competitive Bidding concerns in Washington D.C., but not only did CMS continue with Round 2 bidding, a re-bid of Round 1 was launched in the first quarter of this year.  It is now clear that if Competitive Bidding has not reached your area, it is coming soon for those who have to go through Medicare/Medicaid for HME/DME.  

For those who can pay out of pocket, visit your local mom and pop shop!  Mountain View Medical Supply is one of the "lucky ones" who diversified by adding a second business (Laurel Uniforms & Apparel).  And even though it has benefited our business somewhat, it saddens us that several of our competitors have closed their doors in the Denver Metro area.  

"President Obama is committed to helping America’s small businesses grow and prosper." - The White House 

HME Claims in Round One See Staggering Plunge

Plummets as stiff as 82 percent point to patient access crisis.

By David KopfJan 19, 2012

Medicare claims for HME covered by Round One of competitive bidding dropped by as much as 82 percent during in 2011, according to analysis of Round One data conducted by University of Maryland economist and auction model expert Peter Cramton. At the same time, the risk of death and hospitalization for beneficiaries needing HME spiked sharply.

The sharp drop in claims suggests a dramatic decline in access to care for Medicare beneficiaries living in Round One bidding areas who need home medical equipment and services, according to report on Cramton's data by the American Association of Homecare.

The drop in access runs counter to the claims made by the Centers for Medicare and Medicaid Services (CMS) that its competitive bidding program would reduce the number of HME providers without reducing access to care or reducing claims.

Cramton and his colleagues obtained Medicare claims data through a Freedom of Information Act request. CMS has not previously shared this data with AAHomecare or with Congress, according to the association. The association says it has already started alerting congressional offices to these findings and will continue to analyze the information.

Comparing annualized 2011 claims data to 2010 claims, HME items subject to bidding in all Round One areas fell by the following percentages:

Complex rehab: -82.1 percent
CPAP devices: -63.7 percent
Diabetic supplies: -74.1 percent
Enteral nutrition: -65.0 percent
Hospital beds: -63.7 percent
Oxygen: -61.7 percent
Standard power: -81.5 percent
Support surfaces: -73.8 percent
Walkers: -71.5 percent

To determine the findings, Cramton and his colleagues also looked at the increased risk for Medicare beneficiaries who are eligible but not using prescribed HME items, compared to beneficiaries who are using the HME item.
The increased risk of death was 106 percent for non-users of mail-order diabetic supplies. Their risk of hospitalization was 36 percent higher. Non-users of oxygen in the “narrow access group” faced a 79 percent higher risk of death and a 54 percent higher risk of hospitalization compared to Medicare beneficiaries who receive home oxygen therapy.

Professor Cramton will issue more detailed analysis soon, and AAHomecare will provide more information in the days ahead.

"The startling and dramatic numbers from Round One underscore the fact that the current competitive bidding program is dangerously flawed and must be stopped," read a statement from AAHoemcaer. "Congress must include the alternative Market Pricing Program which will achieve market prices without jeopardizing beneficiaries’ health or destroying the HME community."

"Why Don't You Take Medicare/Medicaid?"

As a medical supply provider, we get asked the question "Why don't you take Medicare/Medicaid?".

A little over two years ago, we made the very difficult decision to exit our relationship with CMS, or Centers for Medicare & Medicaid Services, which is the US federal agency which administers Medicare, Medicaid. At that time, in an effort to reduce fraud, CMS was requiring providers to become "Accredited", which is a very lengthy and expensive process. For larger chain providers, this was not as big of an issue, but for mom-n-pop shops such as ourselves, this was a daunting task.

Couple the accreditation requirements adding substantial overhead, with the already low reimbursement rates, and it simply no longer made business sense.

As the years have come and gone, the government has added competitive bidding to the requirments for some areas of the nation. In an effort to reduce spending by streamlining vendors and subsequent billing, suppliers - and by suppliers we mean BIG suppliers - have to submit and win a bid to supply certain areas of consumers with DME products that are paid for by the government. Again, this was an issue for mom-n-pop shops and we were simply squeezed out because of the format provided to those that wanted to submit a bid.

Just last week, HME News, the business newspaper for the home medical equipment provders, discovered that accredited providers were potentially having to go through the accreditation process all over again. Why? Because, "WellPoint, a health plan that owns and administers Blue Cross Blue Shield plans in 14 states, has notified providers in Georgia that to remain part of its network, they must be accredited by one of only three accreditation agencies by March 1, 2012."*

This is a huge blow for two reasons.

For one, CMS gave a list of ten accreditation agencies for providers to obtain accreditation from. This means that if a provider chose one that is NOT one of the three WellPoint has approved, a provider has to switch accreditation agencies. It is unknown what that process entails, since nobody anticipated any reason to have to switch. And as stated previously, this is a very lengthy and expensive process, especially for a small mom-n-pop shop.

Second, WellPoint has only notified Georgia providers, but their industry stakeholders say that this is a "national policy". If they successfully make this a national policy, it opens the door for other healthcare plans to require suppliers to change their accreditations as well.

How does this effect you, the consumer? Several ways, actually. If you enjoy buying your Medicare/Medicaid products locally, these requirements will ensure that mom-n-pop shops can no longer provide them. Most smaller suppliers are interested in providing quality over quantity, which means lesser quality products will be the only option for Medicare/Medicaid recipients. Also, it is widely known in the industry that one of the biggest issues with these changes is service. If your wheelchair malfunctions, service and repairs will be very difficult to find.

Accusations that corporations are making money hand over fist is false. Several of our local competitors have closed their doors in the past few years. In this economy with these requirments, its survival of the biggest corporation, not survival of the fittest (or best). And unfortunately, we feel its the consumers that will suffer.

*HME News, November 2011, Accreditation: Medicare's requirement not foolproof by Liz Beaulieu

Majority of Providers Want Out

Are you or someone you love a Medicare recipient? If so, you need to know this!

Homecaremag.com conducted a poll: "Will you bid in Round 2 of competitive bidding?"

A shocking 60 percent of Home Medical Equipment (HME) participants in HomeCare's March web poll said they are trying to sell or close their HME businesses before Round 2 of competitive bidding.

Here is how the responses broke out:
Yes: 13%
No: 10%
Haven't decided: 4%
Audits may put me out of business before Round 2 is implemented: 13%
I'm trying to sell/close my business before I have to: 60%

Here is a Competitive Bidding overview, courtesy of www.homecaremag.com:
The original DME competitive bidding program was signed into law on December 8, 2003, as part of the Medicare Prescription Drug, Improvement, and Modernization Act of 2003 (MMA). In April 2007, the Centers for Medicare & Medicaid Services (CMS) announced the Medicare DMEPOS national competitive bidding program final rule and the first-round competitive bid areas and product categories.

After numerous problems were encountered during Round 1 of competitive bidding, the House and Senate voted in July 2008 to overturn President George W. Bush's veto of H.R. 6331. The Medicare package included a temporary delay of the DMEPOS competitive bidding program to allow time for critical process improvements and other reforms to bidding and HME policy. (View a summary of the competitive bidding provisions in H.R. 6331.)

During President Bush's last month in office, his administration issued an interim final rule that instructed CMS to restart the competitive bidding process, which is now commonly known as the Round 1 Rebid. The newly-elected President Barack Obama temporarily delayed all rules issued during the previous administration's final month, but this rule was allowed to become final after the 60-day delay expired in April 2009.

In August 2009, CMS announced the timeline for the Round 1 Rebid. (View a timeline with deadlines for competitive bidding.) On October 13, 2009, Rep. Kendrick Meek, D-Fla., introduced a bill to repeal DMEPOS competitive bidding. However, CMS opened the 60-day bid window on time for the Round 1 rebid of Medicare DMEPOS competitive bidding.

•Visit the CBIC Web site for further information on the Round 1 rebid.
•Read an overview of Medicare's DMEPOS Competitive Bidding on CMS' Web site.
•View the final rule on the Competitive Acquisition for Certain Durable Medical Equipment, Prosthetics, Orthotics, and Supplies (DMEPOS).

Click our previous post Medicare Competitive Bidding and What it Means to You for more information.

Medicare Competitive Bidding and What it Means For the Consumer

Chances are, you or someone you know have purchased or will have to purchase Durable Medical Equipment at some point. What is "Durable Medical Equipment"? According to Wikipedia.com, Durable Medical Equipment (DME) is a term used to describe certain Medicare benefits/items. The exact items are defined by Title XVIII the Social Security Act. Some examples are wheelchairs, iron lungs, hospital beds, blood testing strips, and only the seat-lift mechanism of a lift chair (why the seat, back and frame is not covered is still a mystery).

Competitive Bidding, or HR 6331, states among other things, that Medicare recipients will receive their DME from medical suppliers who have agreed to accept the lowest prices paid by Medicare for equipment and supplies they sell to Medicare recipients. Medicare’s intention is to reduce fraud and overall cost of DME, thus reducing the national deficit.

What they dont tell you, is that the reimbursement rate to suppliers is so minimal that only large, chain type suppliers will be able to participate in competitive bidding. In fact, all verbage in the application to be a provider is geared toward having many, many locations with one corporate office to make billing with Medicare simple. Volume, huge volume, is the only way to make any type of profit with this program. This eliminates any mom-and-pop medical supply shop from participating. Isnt that shame?

What does this mean to the Medicare Recipient? They still get the DME covered by Medicare, however where they get it from will likely change. In our experience, convenience is important for the population that Medicare serves, however recipients may no longer be able to patronize their neighborhood supplier unless that supplier is a competitive bid winner.

Another issue that has arisen with round one of the competitive bidding process is where consumers go for warranty issues for their DME. Because HR6331 is not clear on who is supposed to cover these issues, competitive bid winners are refusing to help consumers because if they do, any profit they made will be lost, and non-bid winners didnt sell the item in the first place, so why should they help? Imagine Joe, who is not able to get around without his walker, and on a fixed income, having to run around to get his broken walker fixed.

Round two of competitive bidding is in the works, because Medicare has decided it is working well. Are the best interest of our elderly population being served?

For more information from HME News, our industry voice, and CMS, visit:
Repairs
Competitive Bidding
Centers for Medicare & Medicaid Services