NCB to Kill 2,500 Jobs, Cost $200M in Iowa
VGM-commissioned university study projects massive negative impact for Hawkeye State alone.
- By David Kopf
- Aug 02, 2012
Competitive bidding for home medical equipment will have a significant negative impact on Iowa, including the loss of 2,500 jobs and $200 million in economic activity, according to “Competitive Bidding for Durable Medical Equipment: An Estimate of the Economic Impact on Iowa,” a new study conducted by Ken Brown, Ph.D., from the University of Northern Iowa Department of Economics.
“Some members of Congress mistakenly believe there would be no impact in Iowa, but this report refutes that view,” said Mike Mallaro, CFO of VGM Group Inc., which commissioned the study. “The economy is already fragile, and this ill-conceived approach from Washington will damage the Iowa economy, small businesses, and the frail elderly and disabled populations.”
Some key findings form the study:
- Overall, the nine competitively bid DME categories make up on the order of 75 percent of total DME revenues, implying that competitive bidding will apply to approximately $236.6 million of DME revenues in Iowa. During the first round of competitive bidding the average reduction in reimbursements for the bid categories was 42 percent. Altogether, this implies that, once competitive bidding applies to Iowa, Iowa will see an initial reduction in total DME revenues of about $99.4 million.
- That said, a portion of that reduction will be returned to Iowa consumers of DME, since Medicare patients pay a 20 percent deductible. According to a report by the Kaiser Family Foundation, 48 percent of Iowa Medicare beneficiaries have a Medigap policy that would cover the 20 percent deductible. Therefore, of the $99.4 million reduction in revenues, 52 percent of the 20 percent deductible will be returned to Iowa residents, reducing the overall loss in revenues to Iowa by $10.3 million, bringing the total loss in revenues to $89.1 million.
- Using software to determine the total indirect and direct impact on the state, competitive bidding for DME will reduce total output in the state by $155.9 million and will reduce employment in the state by 2,285 jobs.
- As competitive bidding is rolled out across the country, many of these suppliers will go out of business, reducing VGM Group’s and Medline Industries Inc.’s client base, which will force both companies will be forced to scale back operations. Losses from these two companies could result in more than $60 million in additional output lost and more than 400 additional jobs lost.
“These closures will reduce the proximity of patients to suppliers, reducing access to healthcare in much of Iowa,” Brown noted in his report’s concluding remarks. “For example, in locations that once had a provider and now do not, the length of time to discharge from a hospital may increase. It might increase the wait time for wheelchair repairs. Or, it could reduce the frequency of delivery of portable oxygen tanks or impact the ability of providers to respond promptly in cases of widespread power outages. While it is difficult to place a dollar amount on these impacts, these are nonetheless additional negative consequences associated with competitive bidding for DME.”
VGM said it will continue to work with The American Association for Homecare and the Midwest Association of Medical Equipment Suppliers to ensure that Congress see this study and understands its impact, and will also work with Brown to explore potential economic impact studies in other states.
David Kopf is the Editor of HME Business.