Medicare DME bidding program on hold

Washington -- A new Medicare program designed to lower costs and prevent fraud in the durable medical equipment arena was as short-lived as the most recent payment cut to physicians.

The legislation enacted last month that reversed the July 1 rate reduction also delayed for 18 months a DME competitive bidding program that had gone into effect the same day. If Congress had not decided to stop the program, it would have limited Medicare coverage of selected equipment in 10 metropolitan areas to suppliers that submitted winning bids in a process completed earlier this year. With the cancellation of the bids, seniors in all areas can continue to receive their power wheelchairs, oxygen supplies, diabetic mail-order supplies and other previously restricted equipment from any supplier that bills Medicare.

The Bush administration and some lawmakers argue that Medicare substantially overpays DME suppliers and that medical equipment billing fraud is rampant. By phasing in a program that limits the number of suppliers through a competitive process, Centers for Medicare & Medicaid Services officials said they could reduce overall costs and ensure that all covered suppliers of the selected equipment categories were legitimate.

"This was a missed opportunity," said Laurence D. Wilson, director of the CMS chronic care policy group.

Organizations representing suppliers launched a massive lobbying effort that convinced Congress to rescind the bidding program, at least for the next year and a half. The suppliers maintained that the process was flawed in that it disqualified many legitimate firms that provide high-quality products to seniors.

"Were it not stopped in its tracks, we would have seen some real problems with respect to beneficiaries getting the access to care that they traditionally have had," said Tyler J. Wilson, the American Assn. for Homecare's president. As a condition of the program delay, all suppliers in January 2009 will sustain a 9.5% payment cut for the equipment that was covered by the bidding program.

Physicians on the line

Some physicians said they saw the competitive bidding program's ill effects on patient care even during the few July days the program was functioning. Doctors working to move patients out of the hospital found that the newly reduced list of approved equipment suppliers led to administrative delays and quality concerns.

Seth Gottlieb, MD, a pulmonary disease specialist at Mount Sinai Medical Center in Miami Beach, Fla., said during that first week that none of the licensed oxygen suppliers in the immediate area had submitted winning bids to serve Medicare patients. This meant that any patient requiring both a hospital bed and supplemental oxygen needed to receive the items from separate, unknown and remote suppliers.

"This will increase the work for my staff and the hospital discharge planner and will result in a delay in the patient's discharge, which will ultimately cost Medicare more in the long run," Dr. Gottlieb said.

Other physicians had financial considerations of their own at stake. Some doctors become suppliers themselves rather than make patients go elsewhere for the needed equipment. Self-referral rules prohibit physicians from offering most types of DME in the office, but items such as crutches, walkers and braces are allowed.

Although CMS also decided to exempt these items from the first round of the bidding process, the agency has the authority to expand the equipment types and the metropolitan areas covered in future rounds.

Orthopedic surgeons are worried that some physician-suppliers will be forced to compete with large supply firms to provide "off-the-shelf" orthotics, such as braces, splints and other appliances.

"I don't believe they can tweak the program enough to get it to the point where we can outbid the big companies," said Robert H. Haralson, MD, the American Assn. of Orthopaedic Surgeons' executive director of medical affairs. Dr. Haralson worries that a failure to exempt physician-suppliers from any future rounds of bidding would force those doctors to stop offering the convenience of in-office equipment.

The debate rages on

Durable medical equipment suppliers will try to use the next 18 months to convince Congress that competitive bidding is not necessary to cut costs, the American Assn. for Homecare's Wilson said. Also, CMS must tackle its DME fraud problem by moving forward with plans to accredit legitimate suppliers and exclude firms that cannot make the grade, he said.

Congress will use the delay to take a closer look at how the program could affect quality of care.

The administration will have an even longer time -- until the beginning of 2011 -- to decide if negative pressure wound therapy should be removed from the list of DME categories subject to bidding. Some suppliers say the therapy is so cutting edge that Medicare cannot yet compare the effectiveness of different products.

But the administration is not convinced that anything about the original program design needs changing, CMS' Wilson said. The agency sees the protesting suppliers as dead-set on protecting their profit margins and their access to the market by opposing competitive bidding at all costs. Some lawmakers agree.

"If Congress doesn't have the courage to implement a simple competitive bidding reform, how can the American people trust Congress to address Medicare fraud at more than $70 billion a year and an unfunded program liability at $85 trillion?" asked Sen. Tom Coburn, MD (R, Okla.).