CMS' prices for round one of DMEPOS competitive bidding raising concerns

May 12, 2008

This article reveals the industry's reaction to CMS' announcement of DMEPOS prices for round one of competitive bidding.

The home care industry is very concerned about the Centers for Medicare & Medicaid Services' announcement that it will pay on average 26% less than current levels for 10 product categories included in the first round of competitive bidding for durable medical equipment, prosthetics, orthotics, and supplies (DMEPOS). The first round of the program begins July 1 in Charlotte, Cincinnati, Cleveland, Dallas, Kansas City, Miami, Orlando, Pittsburgh, Riverside, and San Juan.

Bill Popomaronis, R.Ph., VP, long term and home healthcare pharmacy services for the National Community Pharmacists Association, is worried that many providers may be forced to go out of business. "Twenty six percent is a big percentage. A small supplier may say, 'I'm going to bid low.' But sometimes you can pick up business and go out of business. If you pick up business too fast or don't have the financial resources and staffing to address the increase in business, there could be cash flow problems. I'm concerned that the big guys are going to go after the little guys in this case. What if access is affected? They (CMS) have already cut down the number of suppliers significantly."

Popomaronis believes that although CMS said that 64% of the winning bidders were small suppliers, community pharmacies were disenfranchised in the bidding program. "Community pharmacies are also small suppliers, but we're defined as large suppliers. The average community pharmacy based on 2007 data does about $3.5 million in sales. If you own more than one pharmacy, your total aggregate business says whether you're a small supplier or not. In an aggregate, they'd be above the small supplier definition. The feedback we're getting is that community pharmacies were not bidding in large numbers mainly because of the high cost of accreditation and the fact that they are defined as large suppliers. My question to CMS is, 'How many community pharmacies are represented in the 64% of small suppliers they are talking about?' I would guess not many."

The Council for Quality Respiratory Care chairman Peter Kelly warned that "the magnitude of current and pending Medicare cuts will make the oxygen benefit unsustainable and the impact on beneficiaries dangerously unpredictable."

Walsh agreed with Kelly's prediction, saying that Medicare equipment suppliers will be forced to make weekly or monthly deliveries to patients instead of on an as-needed basis.

Complex rehab products, which Walsh pointed out require a high level of employee training and relatively high compensation for credentialled clinicians and technicians, will also be negatively impacted by the price reduction. "This will result in higher costs in rehab facilities and hospitals," Walsh asserted.

Walsh foresees that diabetes patients will be forced to pick up their supplies or receive them in the mail less frequently than when they were delivered by their provider and that they may not receive the brand of supplies that they prefer.

Meanwhile, The American Association for Home-care said it has heard from DME providers in many states that they have been improperly disqualified and thereby removed by CMS from the bidding process. "We're alarmed about the volume of the mistakes made by Medicare's contractor tasked with evaluating bids and implementing of the bidding program," said Heather Allan, executive director of the Florida Association of Medical Equipment Services. "A process this obviously flawed needs to be stopped, analyzed, and corrected, if it can't be done away with altogether. If it's not, the ramifications for Medicare beneficiaries and small businesses alike will be much worse than we anticipated."

Finally, Walsh added, "We know of a joint venture of two large regional hospital chains in the home medical equipment business who submitted a package to bid and were told they didn't meet the financial criteria."

Additional information on the DMEPOS competitive bidding program is available at http://www.cms.hhs.gov/CompetitiveAcqforDMEPOS.