Over the past decade, Skip Sawyer has seen the amount Medicare pays for the wheelchairs that his Goodlettsville-based company, Medical Mobility, supplies to patients decline by 30 percent.
Now, he’s concerned those prices could be cut by an additional 20 percent as Medicare’s overseer expands a cost-cutting program to cover the four largest metropolitan areas in Tennessee, including Nashville. The others are Memphis, Knoxville and Chattanooga.
Under the competitive bidding program, Sawyer would have to submit bids sometime next year in hopes of being picked as one of the vendors who could continue offering products to Medicare beneficiaries in specific ZIP codes.
The government program has been in a pilot stage, but now it’s expanding tenfold to more than 90 metro areas nationwide. It has already drawn stiff criticism from many of the home medical equipment suppliers who would be affected by the new auction process.
“I don’t mind being in a program where products are competitively bid or auctioned; we just don’t want to have to auction off our companies,” said Randy Wolfe, owner of Lambert’s Health Care in Knoxville and a board member of a new trade group, the Association of Tennessee Home Oxygen & Medical Equipment Services.
Products affected by the expanded program include oxygen, oxygen equipment and supplies; wheelchairs, scooters and related accessories; respiratory devices; hospital beds and accessories; walkers; and certain types of pumps, among other equipment.
New prices that would result from the competitive bidding process would go into effect July 1, 2013, here. Medicare would pay for 80 percent of the cost of covered equipment, while beneficiaries would pay the other 20 percent.
In announcing plans for the program’s second phase involving 91 markets, Medicare’s overseer, the Centers for Medicare and Medicaid Services, said the expansion could save $28 billion over the next decade. The first round, which involved nine markets, produced average savings of 32 percent to Medicare and the beneficiary on the items subject to bidding, said Ellen Griffith, a Medicare spokeswoman.
“At a time when people are concerned about health-care spending, for Medicare to be paying too much compared (with) any other payers … makes no sense,” Griffith added.
Tom Milam, a former medical supplier executive who sits on a committee created by Congress to advise Medicare’s overseer on competitive bidding, remains concerned that the program could hurt business owners and reduce consumers’ access to certain products.
“These people providing oxygen, walkers and beds need to know that 50 percent to 70 percent of them are not going to be here two years from now,” Milam said. “It’s a scheme designed to get a lower price, and Medicare just assumes people will figure it out.”
Low-ball bidsJesse Schwartz, an economics professor at Kennesaw State University in Kennesaw, Ga., says the current design of the bidding process encourages low-ball bids.
Plus, companies that win this initial round aren’t required to accept a Medicare contract; they can simply walk away from a deal and not supply the products.
“That’s a big problem because Medicare might not be able to meet demand because there won’t be enough suppliers,” Schwartz said.
Griffith, however, said that 92 percent of the bidders offered contracts in the first round of competitive bidding signed them.
Sawyer of Medical Mobility isn’t the only local vendor concerned about the potential impact.
David Baxter, president of Medical Necessities & Services of Columbia, Tenn., a supplier of oxygen tanks, power wheelchairs and other products, has offices in Nashville and Chattanooga. Those would be affected by the expanded competitive bidding program.
He expects to bid in hopes of being selected, but he still worries about the end result.
“What I’m trying to do is look at all the expenses we have — and anything that’s not directly supportive of keeping our doors open, I (will) try to reduce it or eliminate it completely to keep going,” Sawyer said.
