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DME dealers dread prospect of competitive bidding

Suppliers of durable medical equipment (DME) should be aware that Medicare is getting closer to implementing a national competitive bidding program. Under competitive bidding, the program will award contracts for particular items or services to providers who submit lower bids.

In addition to a House bill (H.R. 4954) passed in June, proposals for national competitive bidding are included in two recently introduced Senate bills. The first bill (S. 3018) was introduced in September, and the second bill (S. 3098), also known as the Graham-Gramm bill, was introduced last month.

There are many differences among the bills. For one, under the Graham-Gramm bill, competitive bidding would cover the following items: DME, off-the-shelf orthotics, surgical dressings, splints, casts, other devices in section 1861(s)(5), and infusion therapy. The previous Senate version of the legislation put these items under a mandatory demonstration project.

Another difference is that the first Senate bill requires competitive bidding to take place in Metropolitan Statistical Areas (MSAs) with populations over 500,000 that will have "probable savings." The House bill gives the Health & Human Services (HHS) Secretary authority to exempt areas that may have small populations and exclude items and services not likely to result in "significant savings."

Under the Graham-Gramm bill, the competitive acquisition area should be an MSA or within an MSA. However, population size is not specified. Therefore, more areas would be eligible under this version.

While both bills call for an annual report that would cover savings and access under the competitive bidding program, the House bill calls for a study of beneficiary satisfaction, and the Senate bill calls for the evaluation of the diversity of product selection available to the beneficiaries.

The Coalition for Access to Medical Services, Equipment, and Technology (CAMSET) was formed in June to oppose competitive bidding. The coalition is concerned that the expansion of competitive bidding from two ongoing demonstration projects to a national policy threatens to undermine quality of care, restricts patients' choice of service providers, stifle the development of new technology, and drive suppliers out of operation.

The American Association for Homecare's president and CEO, Tom Connaughton, who chairs CAMSET, told Drug Topics, "There are about 1,900 DME codes that may be involved in competitive bidding, so that's a lot of products. If I were the drugstores, I'd be upset about things like blood glucose strips. Pharmacies will have to bid in order to be eligible to be able to bill Medicare for these products."

Connaughton is also concerned that if competitive bidding is enacted, DME and home infusion providers will no longer be able to afford to offer the services that go along with the products they supply, and the health of beneficiaries could then be at risk. "DME is a very intensive service business. For example, companies that provide oxygen usually compete on the basis of the service they provide when making the delivery. Referrals come from serving those patients better, keeping them away from emergency rooms, and checking on them regularly. Most of my members have respiratory therapists visiting with those patients on a regular basis, testing them, seeing if there are problems, and telling their doctors if changes need to be made in how they take their oxygen and how much they take, for example. That [service] is going to go away over time because these standards aren't written into law. They aren't covered separately by Medicare," he explained.

Jim Walsh, president of VGM Management Ltd., a management service company for home medical equipment dealers, couldn't agree more that competitive bidding could potentially destroy customer service. "This competitive bidding idea that Congress has is flawed from the very beginning and is going to pay so little that no supplier will be able to afford to provide customer service. Congress is saying, 'We just want to save money.' They devised a system so that the person who gives the least service and has the lowest cost wins."

Connaughton is also fearful that since many DME companies are small, competitive bidding may force them out of business. "They can't afford to do without Medicare. Three years without Medicare, and you are going to be out of business—for most of them, Medicare is 50% or more of their volume. They can't afford to lose. Competitive bidding generates low bidding, and that puts them in a bind. The way it works, the government does some type of weighted averaging. You have to bid the designated price or below to qualify."

Is competitive bidding a done deal? "It's not a done deal yet," said Connaughton, "but there's certainly a very strong chance it will pass. For a number of our members, it will be life or death. I don't know if it will be that dramatic for retail pharmacy. But if I were a retail pharmacist, I sure wouldn't want to lose my Medicare business, and I'd be very concerned about the confusion that competitive bidding would create for my customers."

Sandra Levy

Sandra Levy. DME dealers dread prospect of competitive bidding.

Drug Topics

2002;21:56.