Critics say Medicare competitive bidding program not ready to fly

From: Chicago Tribune

Members of Congress, medical supply companies say process could leave millions of patients in struggle to retain immediate access to life-sustaining supplies

By Peter Frost

Less than two weeks before Medicare plans to roll out a program that aims to cut prices for some of the most-used home medical devices and supplies, members of Congress and medical supply companies are pushing to derail the plan, saying it would have severe unintended consequences.

Medicare’s competitive bidding program, which the agency boasts will save consumers an average of 45 percent on items like diabetic test supplies, walkers, hospital beds and oxygen tanks, is scheduled to go into effect July 1 for 91 metropolitan areas, including Chicago.

Medicare estimates as many as 125,000 patients in the Chicago area will benefit from lower prices and adds the initiative will save the federal government $25.7 billion and Medicare patients $17.1 billion in out-of-pocket costs by 2022.

Critics say the bidding process could leave millions of Medicare patients in a struggle to retain immediate access to life-sustaining supplies. Further, they say, Medicare’s process of selecting winning bidders and setting the prices it will pay for equipment and related services will artificially drive down prices to levels that will push many suppliers out of business.

In response, the federal Centers for Medicare and Medicaid Services is being petitioned to delay the program through the end of the year. In a letter sent last week to the agency’s administrator, Marilyn Tavenner, 227 members of Congress said they “are extremely concerned that any mishandling of the bidding process will impact Medicare’s ability to serve its beneficiaries in the respective bid areas.”

The lawmakers, including 12 Illinois House members — seven Democrats and five Republicans — pointed to problems in Tennessee, where Medicare this week voided the contracts of 30 of the 96 companies chosen to supply home medical equipment because they didn’t meet licensing requirements.

Industry and consumer advocacy groups say the issues in Tennessee expose fundamental weaknesses in the Medicare program.

They contend Medicare did not properly vet many winning bidders, including some that are either not in compliance with state and federal rules or are not in position to provide equipment and support to patients.

Medicare said it addressed the problems in Tennessee and said it is investigating additional claims of impropriety in Maryland.

The agency dismissed claims that competitive bidding would lead to adverse outcomes for patients, noting that it had few complaints after implementation of the first phase of the program in nine metropolitan areas in 2011.

“Competitive bidding is working, is saving taxpayers and beneficiaries billions of dollars and ends unnecessarily high payments for common purchases,” said Tami Holzman, an agency spokeswoman. “We remain confident that seniors will have access to their equipment, savings will continue, and we have no plans for delay.”

Still, concerns persist in Illinois and other states, many of which are centered on a rash of out-of-state suppliers that won bids in areas they’ve never served.

In Illinois, where state law does not require home medical equipment suppliers to have an in-state address, 17 of the 29 companies awarded rights to sell oxygen equipment to Medicare patients in Lake and McHenry counties had out-of-state addresses, according to federal data.

While some of them have long served the market through local offices, partnerships or subsidiaries, others never have done business in the state, records show.

That’s raised concerns about whether those companies will be able to set up facilities, staff and infrastructure in time to adequately serve Medicare patients, particularly those who require around-the-clock assistance if a piece of equipment malfunctions.

“It’s a fundamentally flawed program that has allowed for fly-by-nights to get into the system and disrupt the whole market,” said Kam Yuricich, who heads the Illinois Association for Medical Equipment Services, a trade group. “It’s caused all kinds of bizarre scenarios where companies are trying to sell their bids or sell their companies based on how many contracts they have.”

Philip Kerr, president of Home Medical Express, an Elmhurst home medical supply company, said he’s been approached by several out-of-state companies that won bids in Illinois but don’t have the capability to serve patients July 1.

His company dismissed most of the overtures because they’d require him to operate at a loss, but he reluctantly signed on as a subcontractor for a Tennessee company that will allow his firm to retain some volume and employees while it awaits an intervention from Congress or Medicare.

“Long term, there is no way” his company and others will be able to sustain drastically lower prices, said Kerr, who estimates Home Medical Express will lose $2.6 million of its $9.3 million in annual revenue because of the cuts. “The question is, how long before the whole thing collapses?”