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Introduction to Competitive Bidding

Millions of Americans rely on medically-necessary home medical equipment to allow them to live an independent lifestyle.  Because of this equipment, they are able to live in their homes and not in hospitals or care facilities.  Home medical equipment also provides them the freedom to take trips to the grocery store or attend public events.  They can enjoy life to its fullest and be participants in their communities.  For these Americans, home medical equipment is a vital part of their lives, and they rely on their home medical equipment providers to provide them with quality care and services to make their lives easier.

However, because of a Medicare Law, this will all change.  

Access to quality care and services will be greatly diminished because many local home medical equipment providers will be forced to shut their doors.  Additionally, freedom of choice will be eradicated and technology advancements will be hindered.  They call it “competitive” bidding.  It should be called “suicide bidding”.  This law requires providers to bid for Medicare contracts, with the right to provide life-sustaining equipment and services being retained by only the lowest bidders, many of which will not be local providers.  Here are some facts about the program.

What Is Competitive Bidding?

Background

The program began on July 1, 2008 in 10 metropolitan areas.  Two weeks after implementation, Congress enacted a temporary delay due to a series of serious issues identified by the Government Accountability Office, including “poor timing and lack of clarity in bid submission information, a failure to inform all suppliers that losing bids could be reviewed, and an inadequate electronic bid submission system”.  The legislation that delayed the program, called the Medicare Improvements for Patients and Providers Act of 2008, included a requirement that the Centers for Medicare and Medicaid Services (CMS) begin a second run of the first round of the program in 2009. That put the process on track for expansion to 91 additional metro areas in 2010.  On schedule, last December CMS subjected Medicare home medical equipment (HME) providers in nine markets to rebid the “competitive” program resulting in cuts across all product categories averaging 32 percent.   Providers were forced to bid on the ability to continue billing Medicare for HME, with contracts going to just a few of the lowest bidders.  

Bidding is segmented into product categories such as oxygen, power wheelchairs, mail-order diabetic supplies, and hospital beds.  In the end, while most providers will lose their ability to provide items to Medicare patients altogether, very few will retain the ability to continue providing their entire array of products and services. 

Everybody loses.  The patients who rely on ease of working with one source for all their equipment needs will now be forced to get their equipment and services from numerous providers which can become complicated and confusing for the patient.  

Ultimately, the program will result in reduced services, decreased product innovation, difficulty with hospital discharges, increased dependence on institutional care, and lost jobs.  Patients will experience significant decreases in access to quality homecare and freedom of choice.  The program will make it significantly more difficult for patients to stay in their home and out of hospitals and nursing homes.  

Competitive Bidding Reduces Quality of Care for All Homecare Patients

The simultaneous drastic reductions in payment rates and the number of providers can lead to nothing but reductions in the quality of care.  Remaining providers will be forced to reduce services, such as 24-hour and weekend service calls and timely delivery.  Reducing payment rates by more than 30 percent to an industry that operates on approximately 5 percent margins will force providers to seek cost-saving measures.

Additionally, remaining providers in bid areas as well as all rural providers will no longer have the ability to invest in innovative new technologies.  New technologies, while almost invariably more efficient for the patient, are generally more expensive.  Lack of proper funding will all but guarantee that providers will avoid more expensive newer technologies, and homecare patients will be left with cheap equipment.

Taking the quality of care issue one step further, to date providers have generally been paid the same rates as their competition by most payer sources, including Medicare.  The primary competitive factor in the home medical equipment industry has been quality of products and services delivered.  Now, with CMS eliminating the majority of a provider’s competition, the remaining provider is left with little motivation to deliver the highest quality products and services.  This is not to suggest that providers do not desire to deliver quality care.  Instead this is to suggest that, when pushed into a corner, providers will do what it takes, and cutting quality of products and service will be a necessity, especially given that this will no longer be a competitive factor.

Taking all these factors into consideration leaves no question that the patient and their families will be the hardest hit by these new policies.  They will experience more emotional and financial burdens due to longer stays in the hospital, more trips to the ER or worse yet, left with no choice other than to relocate their loved one to a nursing facility.  Patients who are fortunate enough to remain at home will be at risk of losing their local homecare provider who has been taking care of them for years.   Changes like these cause disruption in the patient’s care and create an uncomfortable environment for the patient and their families.  The sense of security felt by the patient and family will be threatened because the 24 hour on-call service will be cut or eliminated due to budget constraints of those few providers left or the fact that the service provider is coming from a distant city.   Please take the time to view the attached video of Ms. Angie Plager, former Ms. Wheelchair Iowa 2009 speaking about her life in a wheelchair and the importance of quality equipment and services offered by her homecare provider.

Click here to watch Angie's video

“Competitive” Bidding Affects All Providers

The Patient Protection and Affordable Care Act (PPACA), enacted March of 2010, mandates that payment rates to providers in bid areas must be spread to non-bid areas, no later than 2015.  Most analysts agree, however, that rates will be spread even sooner.  This mandate will affect providers in both metropolitan and rural areas.

Furthermore, our legislators frequently underestimate the power they’ve got over the world of health care payers.  Medicaid and private insurance companies generally follow Medicare’s lead when it comes to determining prices.  Subjecting providers to rates that were determined by a suicide bidding program all but ensures that half or more of those providers will be forced to close their doors shortly thereafter, leaving hundreds without jobs and thousands without a provider in their area.

Legislators and CMS often contend that rural providers are exempt from the competitive bidding program.  This notion is blatantly false.  While providers in rural areas, including all metropolitan areas of less than 250,000 are exempt from the actual bidding process, they are far from exempt from the negative impact of this destructive program.  In rural states, removing half of all providers means that patients will frequently be forced to seek health care from a provider located hundreds of miles away.  They’ll spend additional days in hospitals and nursing facilities waiting for a home medical equipment provider to make it to their area.  Additionally, when equipment malfunctions, patients will be confined to their homes and immobile while they wait extended periods of time for a provider to help them.

Competitive Bidding is Bad Public Policy

One of the major components of CMS’ competitive bidding program is a selective contracting process.  CMS, through an undisclosed formula, will determine what it believes to be a sufficient number of providers to meet beneficiary demand for a given market.  All other providers (80-90% of most markets) are left without the ability to provide services to Medicare beneficiaries.

The consequence to selectively contracting with a limited number of home medical equipment providers is the significant reduction in the Medicare patient’s freedom to choose a provider of their liking.  In many cases, long-standing relationships between patients and providers will be severed when a provider loses in the bidding process (as if there are any winners). New patients who do not have an established provider are forced to choose from a small list of government-contracted providers.  Prior to competitive bidding, providers were chosen from a long list of Medicare-eligible providers.  Not anymore.

By implementing its bidding program, CMS will simultaneously:

  • Drastically reduce the number of Medicare-eligible providers in 100 of the nation’s largest markets,
  • Reduce reimbursement at a devastating rate to those few providers who remain Medicare-eligible,
  • Spread those devastating rates to providers in non-bid areas set the pace for Medicaid and private insurance companies to follow suit by selectively contracting at similarly reduced rates.

Medicare is by far the largest payer for users of home medical equipment.  By stripping their ability to provide to Medicare patients, CMS is essentially forcing nearly half of all providers in bid areas out of business.  Collectively, these providers going out of business as a direct result of program implementation in their area employ approximately 100,000 people.  Furthermore, those left with the ability to provide life-sustaining home medical equipment to Medicare beneficiaries will be paid at rates that will not allow them to hire additional staff.  In fact, several industry analysts have indicated that it’s more likely these providers, even with Medicare contracts in hand, will be forced to consider staff cuts as well.

These numbers don’t include the impact on rural health care.  A recent university study conducted by nationally-known professor of economics, Kenneth Brown, Ph.D., concluded that the impact of competitive bidding felt in rural areas will result in the loss of 40-50% of providers in already underserved states.  Rather than selectively contracting with a limited number of providers, CMS will implement policy changes, including drastic reductions to reimbursement that will collectively force approximately half of all rural providers out of business.  Loss of freedom of choice (and access) comes through elimination of providers. With the significant decreases in access to providers in rural areas, hospital discharge planners will be forced to resort to institutional options until a provider may be available to set up a patient in their home.

CMS frequently touts competitive bidding as a program that saves significant dollars to the taxpayer.  The reality, however, is that durable medical equipment and associated services make up only 1.6% of the total Medicare budget.  For the taxpayer, keeping a patient in their home means significant savings to the Medicare trust fund.  CMS-published data indicates that the average night in the hospital cost in the upwards of $4000 and as high as $7000 per day to the system.  A day in other institutionalized care, such as a nursing facility, costs more than $200.  A day on home oxygen care, the largest sector of the Medicare Part B DMEPOS program, costs the system $5.69.  

With your help, we can protect our love one’s right to quality care and independence!  Please take a moment and contact your U.S. representative and senators and let them know that Americans with disabilities deserve access to quality care and equipment. 

Call the Capitol Switchboard at (202) 224-3121.