34% of Round One Suppliers Suffer Shaky Credit
Study by Invacare calls into question CMS financial standards for bid winners.
- By David Kopf
- Dec 02, 2010
Thirty-four percent suppliers chosen by the Centers for Medicare & Medicaid Services to sell to Medicare beneficiaries under a new bidding program have some sort of questionable credit issue, according to a study contracted by DME manufacturer Invacare Corp.
CMS announced on Nov. 2 the names of the 356 bid winners that were offered contracts in the nine competitive bid areas covered by the Round One re-bid. Following that, Invacare conducted it study.
Since many providers finance their purchases of DME with manufacturers, and because Invacare is the largest manufacturer in the industry and maintains its own captive financing company, Invacare Credit Corp., Invacare was able to review the credit and financial data available for the Round One contract holders.
“... This means that over one third of the firms that are authorized to provide Medicare beneficiaries home oxygen therapy, power wheelchairs, enteral nutrition, home care beds, CPAPs and RADs (respiratory devices), walkers and mail order diabetic supplies are in a precarious financial situation and are unlikely to be able to provide the medically necessary items and services over the three-year contract period,” read a public statement from Invacare.
The statistics uncovered by the Invacare study are startling:
- 8.5 percent have credit limits of less than $10,000, which means they can purchase very little equipment.
- 5.4 percent are on credit hold, which means they can’t purchase any equipment.
- 6.7 percent are so far behind on their payments that their accounts have been turned over for collections or legal process, which also means they can’t purchase any equipment.
- 14 percent have no account with the company, which could indicate they are new and inexperienced companies.
These findings draw into question the Nov. 2 claims made by Jonathan Blum, deputy administrator and director of CMS that all of the contracted suppliers “… meet quality and financial standards and they are all accredited by an independent organization.”
David Kopf is the Editor of HME Business.