Is competitive bidding creating a class system?
- By David Kopf
- May 01, 2016
For anyone who’s worked in the
industry over the past six or seven years the phrase
“unintended consequences” has unique meaning.
The expression was used regularly during the early
years of the fight against competitive bidding, prior to
implementation, when a variety of academic studies
examined CMS’s proposed system and determined it
Economists use the phrase “unintended
consequences” to describe unforeseen outcomes
that result from the implementation of a new
system, changes in a marketplace, or public policy.
Sometimes, the unintended consequences can be
good, but often they’re detrimental.
In the case of competitive bidding, we’ve seen
nothing but bad unintended consequences: patients
have seen more limited access to the equipment,
supplies and services they need; providers have gone
out of business, which means job losses, money
falling out of local economies, and a compounding of
patients’ reduced access; and now with the national
expansion we will likely see rural communities feel
those impacts even more than the larger urban areas
of Rounds One and Two.
But there’s another unintended consequence
coming into focus, and I don’t like the picture that’s
developing: competitive bidding is starting to create
“classes” of HME users. No, I’m not trying to establish
myself as some kind of wild-eyed class warrior
for healthcare, but I do think competitive bidding
is starting to foster a dynamic that runs counter
Medicare’s fundamental nature as an entitlement.
Let’s start with how things were, before competitive
bidding: When a patient needed a piece of equipment
that patient would get evaluated by his or her
physician and possibly other health professionals,
the medical necessity would be documented, and a
device with the right features and capabilities would
be provided to that patient. The underlying dynamic
was that Medicare, providers and partners were all
focused on getting the patient the right item.
After competitive bidding happened, we have
seen an entirely different dynamic develop. The
goal is still to get the patient equipment that will
provide the necessary therapeutic benefit, but
might not necessarily deliver all the features the
patient might have received in the original scenario.
Moreover, because competitive bidding has so
substantially cut reimbursement for covered DME
items, provider businesses are now in a position
where they must factor profit margins into their
inventory-purchasing decisions far more than before.
And while manufacturers might want to offer more
innovations, they can only trim so much cost from
Simultaneous to this, the lure of retail sales as a
revenue diversification and expansion opportunity
has given providers the opportunity to provide top-of-the-line solutions to patients who are willing to pay
out of pocket for the exact solution they need and
want, with all the bells and whistles possible. Now, I
have absolutely no problem with this. People should
be able to buy what they want and get all the features
imaginable. Moreover, that kind of marketplace drives
the kind of innovation that ultimately improves care
and quality of life for HME users.
The problem is that on the other side, by creating a
situation in which providers are financially forced into
offering no-frills options for Medicare beneficiaries,
competitive bidding is lowering expectations of what’s
possible for patients. Where the Medicare program
would have once paid for a much better solution in
the past, it is now only giving beneficiaries the least,
while more affluent beneficiaries have the option of
obtaining much better solutions via cash.
My worry is that this gap will only widen over
time and beneficiaries will get less and less than they
would have if competitive bidding hadn’t existed —
regardless of what they paid into the program. That
lowering of expectations doesn’t sit right with me,
and I don’t think anyone should be happy about it;
beneficiaries are getting less for their money than they
did just a few years ago.
Now, it can be argued that the product advances
and features that develop in the retail market for
HME could trickle down to Medicare beneficiaries.
That might very well happen, which would at
least narrow the gap between the developing HME
“classes,” but it still doesn’t fix the competitive
bidding flaws that drive providers to seek no-frills
solutions in the first place.
One competitive bidding reform that could help
turn this trend around is part of the Senate rural
bidding reform legislation (S.2736; see “News, Trends & Analysis,” on page 8 to learn more). Specifically,
one of the bill’s provisions would prohibit CMS from
using single price amounts from the previous round
of bidding as the ceiling for future bid rounds. Instead
CMS would be required to preserve the bid ceiling at
the unadjusted fee schedule rates from Jan. 1, 2015. Removing that bid ceiling could create a marketplace
that would see better HME solutions re-proliferate
among Medicare beneficiaries while preserving the
innovations available to the retail market.
This article originally appeared in the May 2016 issue of HME Business.
David Kopf is the Publisher and Executive Editor of HME Business and DME Pharmacy magazines. Follow him on Twitter at @postacutenews.