Price drops seen as Medicare equipment bidding intensifies

Hundreds of additional suppliers are approved for round 2 of competitive bidding, but the industry wants a delay until the program can be investigated.

By — Posted April 19, 2013

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Federal regulators, in enlarging the scope of a Medicare competitive bidding program for durable medical equipment, anticipate that prices will continue to drop. The trade group that represents suppliers asserted that the program will impede beneficiary access as well as hurt the industry’s bottom line, and it has called for Congress to hold off on expanding the program.

Starting July 1, Medicare beneficiaries in 91 communities across the U.S. who need wheelchairs, oxygen, scooters, prosthetics, orthotics and other supplies must receive them from suppliers chosen during the second round of Medicare’s competitive bidding program covering durable medical equipment. Under this program, Medicare suppliers submit bids to provide certain types of equipment in these regions of the country.

The program, which aims to weed out fraudulent suppliers and drive down the prices of equipment to patients, yielded more than $200 million in savings in its first year. The Centers for Medicare & Medicaid Services estimated that Medicare Part B will save nearly $26 billion during the next 10 years, with beneficiaries realizing out-of-pocket savings of about $17 billion.

The initial round of competitive bidding covered nine metropolitan areas and approved 356 suppliers. CMS announced April 9 that it will be awarding a second round of contracts to 799 suppliers for the expansion. In addition, 18 suppliers will be providing mail-order diabetic testing supplies at competitive prices across the country. Overall, roughly 1,150 DME contract suppliers will be participating in the program starting in July.

CMS estimates that Medicare beneficiaries will see prices for medical devices go down by 45%, and that mail-order diabetic testing supplies prices will decrease by 72% under the program’s second round.

“Our extensive monitoring in round 1 showed that competitive bidding reduced spending without jeopardizing access to medical equipment and supplies,” said Jonathan Blum, deputy CMS administrator and director of the agency’s Center for Medicare, in a statement. “Medicare contract suppliers signed contracts that included protections to ensure that they will furnish beneficiaries with necessary equipment and quality customer service.”

Access problems alleged

The suppliers maintain that the program has structural problems and should be put on hold. Both industry leaders and outside experts “believe there will be unneeded hardship on beneficiaries and home care providers as round 2 gets under way on July 1,” said Tyler J. Wilson, president of the American Assn. for Homecare.

Most of the contract payment rates, he said, are well below the costs of providing the equipment. “As home care businesses struggle under unsustainable payment rates, their ability to meet the needs of beneficiaries will be undermined,” he said. One concern has been that many beneficiaries would have to change suppliers with whom they have developed relationships, if they weren’t already using one that was participating in the Medicare competitive bidding program.

The organization wants CMS to delay the program’s implementation in these new areas until lawmakers have had the opportunity to investigate the results from the round 1 bidding areas, as well as reported problems with the round 2 bidding process.

DME suppliers and manufacturers also have concerns about the Obama administration’s fiscal 2014 budget proposal and how legislation it recommends may affect payment rates for equipment under the Medicaid program. The blueprint effectively would limit Medicaid DME payment rates by basing them on what Medicare pays, a provision the administration estimates would save $4.5 billion over 10 years.

This provision, along with proposals to reduce pay for clinical lab services and require prior authorization for advanced imaging services, has the potential to “chill continued medical innovation affecting current and future Medicare beneficiaries as well as significantly harm access to lifesaving, life-enhancing medical technology,” said Stephen J. Ubl, president and CEO of the Advanced Medical Technology Assn.

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