Thursday, May 15, 2008

US: Industry, Officials & Lawmakers Debate Bidding For Durable Medical Equipment

A House Ways and Means Health Subcommittee hearing attended by lawmakers, officials and representatives of the durable medical equipment industry argued a Medicare competitive bidding program for Durable Medical Equipment (DME). The program when implemented is expected to yield an average decrease of 26% in the prices of medical instruments and equipment.

The Program

The programs requires Center for Medicare and Medicaid Services (CMS) to select durable medical equipment suppliers to participate in Medicare based on bids submitted. This program comes in the wake of the 2003 Medicare law that mandated the program as part of a bigger effort to execute competitive bidding.

To begin with the program will be executed in 10 of the largest Metropolitan Statistical Areas in 2008, and will be applicable to 10 of the top durable medical equipment, prosthetics, orthotics and supplies product categories. The next year in 2009 it would be extended to 70 MSAs and more thereafter. For now the product categories are limited, though in future a larger number of categories would be covered. There are various categories of medical instruments used in hospitals some are anesthesia instruments, cardiovascular instruments, surgical instruments, etc.

The program is expected to commence from July 1, 2008 and after it’s fully implemented by 2010, it could result in savings of about $1 billion. Given, that last year in 2007 Medicare spent $8.5 billion on Durable Medical Equipment (DME), a saving of about 26% should be a welcome consequence.

The Concerns

A couple of concerns expressed during the meeting included complaints from providers being unfairly rejected, the winning suppliers not able to provide equipment in areas where they didn’t have operations, and the losing bidders suffering business failure after rejection. To this the CMS representative offered missing documentation, lack of accreditation, prices not being low enough as reasons for rejection of bids.

The other concerns raised included, that the program could limit beneficiaries' access to equipment, result in quality deterioration of services and would be punitive to high quality service providers. Further, the DME suppliers would expect reimbursement cut from Medicare if the program came to an end.

The CMS sees the program to result in cost benefits to the beneficiaries as they pay 20% of the cost of their equipment. Moreover, if the program were delayed for a year the costs could be $3.5 billion for five years and $20 billion over 10 years.

While it might not be clear whether Congress takes action on the program this year itself, that it would surely do it next year is the expectation.

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