New Study: NCB Risks ‘Life and Death’ Reduction in Care

Study by Robert Morris University Economist likens competitive bidding to a franchise bid.

Competitive bidding will result in decreased competition and lead to a concentrated HME industry with higher prices, reduced services, according to “The Impact of Competitive Bidding on the Market for DME – An Update,” a new report from economist Brian O’Roark, Ph.D.

“There appears to be no honorable explanation for why this bidding process is being used,” O’Roark states in the report, the full version of which can be downloaded at

O’Roark, an economics professor at Robert Morris University, Pittsburgh, previously conducted an independent evaluation of the likely economic consequences of Medicare’s proposed “competitive bidding” program for DMEPOS.  The 2008 study labeled CMS’s competitive bidding program as “uncompetitive” and “poor public policy.”

“The outcome of this bidding plan will be to reduce price for a time, but also to reduce the quality of service provided to patients to whom service matters a great deal.  In some cases, the service itself becomes a life or death issue,” O’Roark said. “If the regulators do not understand the market, a bidding plan will not provide the proper incentives.  More problematic is when a competitive bid plan is put in place for an industry that is already competitive.  This would, it seems, defeat the purpose of the bidding.” 

O’Roark has likened to the program to a “franchise bid” and suggests the notion of competitive bidding needs to be addressed in a more “forthright manner.”  Citing noted economists Robert Burton Ekelund and R,P Saba’s 1981 “A Note on Politics and Franchise Bidding”, he summarizes that “Market competition ‘would likely prove a more efficient cost-price tracking system than the system enshrined by politically involved bilateral bargaining between regulators and regulatees.’  The most telling failure of the DME plan is that it is being applied in the wrong kind of market.”   

Mike Mallaro, VGM’s CFO/CIO and president of Last Chance For Patient Choice, a 527 non-profit organization, said, “O’Roark’s independent analysis of the so-called competitive bidding scheme devised by former Congressman Bill Thomas and pushed forward by CMS bureaucrats exposes many of its fundamental flaws.  Limiting beneficiary access, arbitrarily reducing the number of suppliers and picking winners based only on price is bad health care policy. 

“Considered in totality, this flawed system will significantly damage the ‘infrastructure’ that provides vital medical equipment, assistive devices and technologies that help people stay in their homes safely.  Now is not the time for our government to destroy the infrastructure that is needed to serve millions of frail elderly, people with disabilities and the wave of aging Baby Boomers that will need more, not less, medical equipment, home care services and assistive technology during the next three decades.  I urge all HME providers to get this study into the hands of their Congressional representatives immediately.”

Related feature: Square Peg Round Hole - Can competitive bidding fit the HME industry correctly?



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