VGM: Competitive bidding ‘business killer’
From: Cedar Valley Business
WATERLOO — Opponents of the Medicare Competitive Bidding Program for durable medical equipment say it’s no bargain for patients in immediate need of oxygen, a wheelchair or other life-sustaining apparatus.
They also say it’s poison for the related industry.
Competitive bidding is on its way to a national rollout, and it likely will be a common topic of conversation at VGM Group’s annual Heartland Conference. The event is scheduled Monday through Thursday at the Five Sullivan Brothers Convention Center in Waterloo.
Competitive bidding, which was part of the Medicare Modernization Act of 2003, was designed to save costs by requiring the use of the lowest bidder for government-funded medical equipment. Opponents of the changes, which are now the law in nine U.S. markets but not yet in Iowa, say the bidding process shuts out small companies and leaves patients — especially in rural areas — more vulnerable with fewer choices and longer wait times.
Iowa could lose as many as half of its home medical equipment providers when the program is implemented nationwide next year, according to Ken Brown, an economics professor at the University of Northern Iowa. VGM, which is based in Waterloo, commissioned Brown to study the economic effects of competitive bidding.
In short, it doesn’t bode well for VGM’s clientele of small-scale, local providers.
“The system is designed to eliminate suppliers of (durable medical equipment),” Brown said. “Given that many of these suppliers are clients of VGM, it is likely that VGM will lose a large percentage of its client base.”
The total economic impact on the region will be about $60 million in lost revenue, which likely would result in the loss of more than 400 jobs in the region, according to Brown.
Mike Mallaro, VGM’s chief financial officer, doesn’t want to speculate on any impact the law would have on VGM’s employee roster.
“I’d leave it as half of our customers would go out of business, and that’s devastating to our company,” he said.
Mallaro added it could affect 4,000 to 6,000 businesses and hundreds of thousands of jobs across the U.S. It will be worse for patients, who will have to wait longer for oxygen, new walkers or wheelchair repairs, he added.
Under competitive bidding, “bureaucrats” will choose service providers, Mallaro said.
“The ‘winners’ will have the business in that city,” he said. “In Minneapolis, for example, there’s probably 60 providers of oxygen. When they’re done with this, they’ll probably have eight to 10. There won’t be anywhere else to go. It just collapses.”
Survivors in the business likely will be bigger operations that cover regions, rather than local businesses that cater to patients in their own communities, according to Mallaro.
Julie Weidemann is general manager of Palmer Home Medical in West Union and outgoing president of the Midwest Association of Medical Equipment Suppliers.
“If you have to deliver a $90 walker 70 miles away, you can’t do it, but that’s where you have to go,” Weidemann said.
Providers in larger metro areas can work around that shortcoming because they can try to make it up in volume, she added. Medicare patients are going to suffer, though, because they have no alternative, according to Weidemann.
Shirley Brubaker of West Union, who regularly accesses Palmer Home Medical for oxygen, is concerned about losing a local provider.
“I live a block from my current home oxygen provider and on numerous occasions, I have needed them quickly and they responded quickly,” she said. “I can’t imagine not being able to have a local provider supply my oxygen. I know them, and they know me.”
Brubaker said Medicare “should not be able to tell me where I have to get my oxygen from.”
Weeding out providers likely will occur as one round of bidding follows another, Brown said.
Bidding already has occurred in designated pilot markets. According to the Government Accounting Office report on Round 1 of bidding, 257 of 955 providers were awarded bids, Brown said.
“That means at least 698 (73 percent) were not awarded bids,” he added.
There has been some sentiment in Congress to at least change the requirements. The Fairness in Medicare Bidding Act would repeal competitive bidding for durable medical equipment services. The bill has 171 cosponsors, including all five of Iowa’s House delegation.
The bill hasn’t moved since its introduction, which is “not a good sign,” according to Jeff Giertz, spokesman for Rep. Bruce Braley, D-Waterloo. But Giertz also said the number of co-sponsors might be enough to get the bill moving.
All five House representatives from Iowa signed a letter opposing implementation of competitive bidding, and Braley has spoken out against the process.
Both of Iowa’s U.S. senators have voiced approval for a change in the rules, the implementation of which was expedited under the Affordable Health Care Act that President Barack Obama signed into law in 2010.
Sen. Chuck Grassley, a Republican, said in a statement he is open to “alternative legislative proposal.” He said he also introduced a bill to delay the new process in 2009.
“At this point, I’m concerned about how CMS is implementing the 2010 provision and am monitoring the agency’s work to make sure beneficiary impact is limited,” he said.
Sen. Tom Harkin, a Democrat, is chairman of the Senate Health, Education, Labor and Pensions Committee. He said he is “carefully monitoring” the impact competitive bidding will have on individuals and businesses.
“It is critical that individuals receive the proper and specialized equipment they need for a quality and productive life,” he said in an email.
Something needs to be done to stop a full rollout of competitive bidding, according to Mallaro.
“It’s a disaster. It’s a business-killer for us,” he said. “It’s a horrible, horrible intrusion of government in the free market.”
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