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Medicare Bidding Process Slams Home Medical Equipment Providers With Arbitrary Reimbursement Rates









Severe Industry Fall-Out Expected, as Stakeholders Rally Congress to Replace the Program, Protect Medicare Beneficiaries

WASHINGTON, Feb. 5, 2013 /PRNewswire-USNewswire/ -- The plummeting reimbursement rates set by Medicare last week for Durable Medical Equipment (DME) demonstrate why its procurement system for home medical equipment is a defective process likely to produce troubling results.  The bid program allows the Centers for Medicare & Medicaid Services (CMS) to impose arbitrary pricing on oxygen therapy, power wheelchairs, and other critical equipment and services for beneficiaries.

"If this kind of manipulated procurement process were utilized by an industry in the private sector, it would be panned as price-fixing and the Justice Department would be investigating," said Tyler Wilson, president of the American Association for Homecare (AAHomecare). His members, the providers and manufacturers of home medical equipment, are outraged over the devastating reimbursement rates released this week.

CMS announced that in Round 2 of its bidding process, which takes effect on July 1, reimbursements for a wide range of home medical equipment will drop on average by 45 percent, with diabetic test strip prices plunging an average of 72 percent.  These prices will be deployed as the poorly designed program expands to include more metropolitan areas in California, Colorado, Florida, Illinois, Maryland, Massachusetts, Ohio, and other states.

The current procurement system has been harshly criticized by prominent economists and auction experts such as Dr. Brett Katzman, Interim Chair of the Department of Economics, Finance & Quantitative Analysis at Kennesaw State University.

"While the CMS system does involve bidding, it is far from competitive," Katzman said. "Yes, there are winners and losers, but winners are chosen based on their willingness to game the system rather than their cost competitiveness. The problem is that the CMS system entices providers to "low-ball" bid whereas a true competitive bidding system would reward providers for being cost efficient."

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