“One fist is iron, the other one’s steel. If the left one don’t get ya, the right one will.” This line from the song “Sixteen Tons” perfectly describes the position that DME suppliers are in with competitive bidding and inherent reasonableness.

At press time, the House of Representatives had passed the Medicare Modernization and Prescription Drug Act (HR 4954), which includes a provision for national competitive bidding for DME, and the Senate was seeking a compromise on its Medicare prescription drug plan.

Neither the fist of iron nor the fist of steel is a reality. But both are nearly certain to become a reality for DME suppliers. It is more a matter of when than if.

The first part of this article presents compelling facts that will leave only the most optimistic to believe that the incumbents of the DME industry will dodge knee-buckling punches from a national competitive bidding program and reinstatement of inherent reasonableness authority for the Centers for Medicare & Medicaid Services (CMS). The second part of this article (which will appear in the November issue) presents strategies and tactics that will allow the companies that execute them to take the powerful blows of the competitive bidding program and inherent reasonableness and survive.

While the evidence strongly suggests that national competitive bidding and inherent reasonableness will become reality, this article would be skewed if it did not recognize the possibility that participants in the HME industry can defeat or postpone the legislation. Either will require a collection of sound strategies and tactics that are executed by a large unified body.

This article does not judge or evaluate the arguments that the framers of competitive bidding and inherent reasonableness have made, nor does it judge or evaluate the arguments made by those who have dedicated so much of their time and effort to the well-being of DME suppliers. This article presents an assessment of the environment that the industry is in generated from the review of hundreds of pages of testimony, opinions, statistics, legislation, and policy statements.

There are seven conclusions that can be made about the environment the HME industry is in:

1. National competitive bidding is a near-certainty for DME suppliers.
2. National competitive bidding will eliminate more than half of the DME suppliers from the Medicare program.
3. Unsuccessful bidders with more than 15% of their sales to Medicare beneficiaries are at risk of becoming unprofitable and losing all shareholder value.
4. Successful bidders are likely to remain profitable but may lose as much as 80% of their operating margin.
5. Inherent reasonableness authority can quickly and easily be restored to CMS, and it will likely occur during 2002.
6. The suppliers most adversely affected by inherent reasonableness will be those with strong concentrations of sales in a given line of products.
7. Medicare efforts to constrain prices for goods and services will escalate, unless some event of huge proportions changes the demographics of the United States, the health care delivery system, the health of US citizens, or a combination of the above.

1. National competitive bidding is a near-certainty.
There are five primary factors that will lead to the enactment of national competitive bidding for DME suppliers. They are as follows:

First, the DME industry is viewed as supplier. To be more specific, the perception of CMS and Congress is that this industry is a supplier of equipment and certain disposables, not a provider of services. Therefore, CMS and Congress believe prices should be consistent with the purchase of supplies, not supplies and services.

Evidence to support the prevalence of this view lies in the testimony of CMS and HHS officials, statements of members of Congress, language in acts of Congress, and bills Congress has debated.

The most telling sign is probably the fact that the House of Representatives has already agreed to increase Medicare spending by $340.7 billion during the next 10 years through the provisions of the Medicare Modernization and Prescription Drug Act. Yet the act includes a $7 billion reduction in spending for DME over the same 10 years. Curtailment of Medicare spending is clearly not the reason that this industry is dealing with the prospect of an iron and a steel fist. The impact that competitive bidding has on the overall scheme is like a drop in the ocean. This industry faces competitive bidding because it is perceived as a supplier, not a service provider.

On June 12, 2002, Janet Rehnquist, Inspector General of the Department of Health and Human Services (HHS), testified before the Senate Committee on Appropriations, Subcommittee on Labor, HHS, and Education. She stated, “You have specifically asked us to compare the price Medicare pays for certain medical equipment and supplies with that of other payors, including the Department of Veterans Affairs (VA), Medicaid, Federal Employee Health Benefits (FEHB) plans, and retail suppliers. Our price comparison demonstrates that Medicare overpays for some medical equipment and supplies.”¹

Note the comparison to retail suppliers. If HHS viewed DME as including services, why would Rehnquist’s office compare to retail suppliers or the VA? The VA acquires supplies and equipment and adds its service to the items as they are delivered to patients. But Rehnquist compares only the acquisition cost.

She did later testify that the “prices compared do not take into account the Medicare supplier costs associated with getting an item to a Medicare beneficiary.” However, she again referred to the “supplier.”

Thomas A. Scully, the administrator of CMS, testified before the same subcommittee on the same day and told the members, “We are also wrapping up a demonstration project to find better ways to obtain market-based prices for certain [Medicare] Part B items, such as DME.... This market-based approach is another tool we are using to ensure Medicare pays appropriately for these items.”²

Scully referred to the items as if there was no service involved.

In July 2000, the General Accounting Office (GAO) reported to the Subcommittee on Health that “The Durable Medical Equipment Regional Carriers (DMERCs) began their use of the streamlined inherent reasonableness authority by reviewing prices for products that were frequently used by Medicare beneficiaries, that could be purchased in retail stores, and for which Medicare appeared to overpay.... Despite these deficiencies, we believe that the surveys provide a sufficient basis to adjust payments by up to 15% for the product groups for which Medicare pays substantially more than 15% above the median retail price.”³

This statement indicates that the GAO believes the DMERCs and CMS are correct in comparing prices for six product groups to the prices available in retail stores.

One final example of how government officials perceive the HME industry as more supplier than service provider is in Rehnquist’s testimony in June. She states, “We found that Medicare paid substantially more for maintenance on rented equipment than repairs on purchased equipment. Medicare pays for maintenance even if the supplier does not service the equipment. Furthermore, our additional analysis of supplier documentation found only 9% of the capped rental equipment actually received any maintenance and servicing. We estimated that Medicare could save approximately $100 million per year by eliminating maintenance payments and, instead, pay only for repairs when needed.”

The findings that Rehnquist presented in this statement indicate to the committee that the service the industry is being paid for is not being provided and further bolster the notion that this is a supply industry, not a service industry.

HME providers know that they are delivering valuable services in addition to equipment and supplies and they want to be compensated for them. However, the customer (Medicare in this case) does not see it that way. Regardless of the merits, or lack thereof, that the marketplace may have in its perception, the fact remains that any market’s perception of any business or industry is the reality that the business or industry must work within. The reaction of a business or industry to its position in the market will be one of three choices. One, accept the position it holds and operate effectively for the environment. Two, accept the position it holds and work to change the position held, while operating effectively. Three, deny the position it holds and attempt to operate effectively for the environment it would like to be in.

The second reason competitive bidding is a near-certainty is that the demonstration projects are viewed as a success in Washington, DC. CMS, then the Health Care Financing Administration (HCFA), claimed success as soon the first bids were analyzed in the Polk County, Florida, demonstration project. Further, it is obvious that the demonstration did not undermine the measures used by CMS to assess beneficiary access to quality products and services, as well as product selection. We think Congress and the White House will pay attention to the following points.

• The number of suppliers that Medicare must administer dropped from 321 to 15 in round one of the Polk County demonstration. (Note: some CMS reports state that there were 16 suppliers in round one, but the list of suppliers revealed only 15 names.⁴)

• Prices dropped 17% for the demonstration items in Polk County, Florida.⁵ A 20% savings was reported for the San Antonio demonstration.⁶

• A White House press release from July 2001 states, “A number of studies and recent Medicare pilot programs indicate that Medicare’s outdated system results in Medicare beneficiary payments for these supplies could be reduced by between 15% and 30% if the traditional plan used the same kinds of competitive bidding tools that help reduce costs and improve quality....”⁷

• In the round two bidding in Polk County, the suppliers reduced their costs for the second time. This time the reduction was only about 4% but in the same period allowable charges for supplies went up by 4% for nondemonstration suppliers in Florida. The number of demonstration suppliers actually increased by one in the Polk County demonstration in the second round of bidding.

• CMS received a report dated September 2000 entitled Evaluation of Medicare’s Competitive Bidding Demonstrations for Durable Medical Equipment, Prosthetics, Orthotics, and Supplies (DMEPOS), First-Year Annual Evaluation Report. It includes the following points:

• “Through our latest site visits in May 2000, no systematic problems in beneficiary access had materialized.”
• “There have been no systematic reports of substantial changes in the quality of services or equipment provided to beneficiaries under the demonstration.”
• “Competitive bidding can be successfully implemented. Demonstration claims are being processed smoothly.”⁸

The third factor supporting competitive bidding is that prescription drug coverage is the carrier for competitive bidding and will conceal the issue. While the Bush administration and Congress have been unified in their support of national competitive bidding, the debate over competitive bidding will be muted by the noise level surrounding prescription drug plans.

The House passed the Medicare Modernization and Prescription Drug Act in late June. The White House supported it and specifically supported its inclusion of competitive bidding.⁹ However, the media coverage and the declarations of the supporting House members were about the prescription drug coverage and the $340 million in new benefits that senior citizens will receive over the next 10 years.

In the Senate, two prescription drug bills were introduced and read before the Senate Finance Committee. Senator Charles Hagel (R-Neb) sponsored S 2736 and Senator Bob Graham (D-Fla) sponsored S 2625. Neither of the bills included competitive bidding and neither made it to the Senate floor for a vote. However, both were offered as amendments to the Greater Access to Affordable Pharmaceuticals Act (S 812) in July.

Neither of the amendments stuck, but S 812 passed on July 31, 2002. So, at press time the Medicare Modernization and Prescription Drug Act was passed, the Senate had no similar bill, and many Americans were angry.

Florida Today reported on August 8 that 61% of US adults age 45 and older are “very angry” to “somewhat angry” that the Senate did not pass Medicare prescription drug proposals. The American Association of Retired Persons (AARP) paid for the poll, which states that 26% of those asked, said they would vote against their own senator this fall if the Senate fails to find enough common ground to pass a prescription drug bill.

At press time, I believed it likely that both the Hagel and Graham versions of prescription drug coverage would be resurrected in one form or another. Since Senator Graham’s bill was the most similar to the Medicare Modernization and Prescription Drug Act, it seemed more likely that it could prevail. Keep in mind that it did not provide for national competitive bidding, but whatever Graham offers in the future is likely to include competitive bidding. In a July statement, Senator Graham said he probably would introduce competitive bidding for Senate approval.

When the Senate debates its Medicare bill, the debate will be focused on prescription drug coverage. It has a huge price tag, directly and almost immediately benefits 35 million older Americans, and is worth lots of votes. It will, therefore, produce a great deal of noise that will mask whatever arguments, pro and con, that competitive bidding may produce.

Since the House has passed a bill and the White House has supported it, the Senate is backed into a corner. Therefore, it is likely to pass a prescription drug act by Christmas of 2002.

The fourth factor in favor of the passage of national competitive bidding is that Congress and the Bush administration are united on this issue. This article has already made reference to statements of the White House and Congress that give adequate evidence to conclude that whatever division may once have existed between the two regarding competitive bidding is no longer attendant. The parties and branches of our government are clearly in agreement.

The final factor making national competitive bidding a near certainty is that The Coalition for Access to Medical Services, Equipment and Technology (CAMSET) will be the only sizeable opponent to competitive bidding. The American Association for Homecare (AAHomecare) has rallied more than 20 consumer advocacy organizations under the CAMSET banner. This is a great achievement and this group will effectively be the lone voice in the wilderness.

The Congressional Budget Office Cost Estimate reports that of the 28 program items in Medicare only two will experience a net decrease over the 10 years covered in their analysis of the Medicare Modernization and Prescription Drug Act. The first is “Competitive Acquisition” under Title V part B. It will decrease by $7.7 billion. The second is a “limit on high cost medical education programs” under Title VI Parts A and B. The Budget Office estimates that it will decrease by $2.6 billion.¹⁰

Because the preponderance of line items associated with a national prescription drug act are reporting increases, other organizations are unlikely to lobby against either the bill or against competitive bidding.

On the other side of the debate is the powerful AARP lobby. There has been little if any talk about Medicare beneficiaries paying $1.3 billion out of pocket for DME. And an act of Congress that reduces the cost of DME by 20% will put $260 million a year into the pockets of senior citizens. That topic could become a big sales pitch for proponents of competitive bidding.

In addition to AARP, some of the other powerful lobbies expected to lobby for a Medicare prescription drug benefit and not oppose competitive bidding include the American Medical Association, the Pharmaceutical Research and Manufacturers of America, the National Governors Association, and the American Association of Health Plans.

2. National competitive bidding will eliminate more than half of the DME suppliers from the Medicare program.
This is no accident. The competition is designed to eliminate suppliers from the Medicare program. The essence of the competition conducted in the demonstration projects is to have suppliers submit bids for the selected products. The median price is identified from the range of bids. Suppliers that bid at or below the median price and meet the other criteria are successful bidders and will be paid the median price regardless of their bid. Unsuccessful bidders may rebid in the next round of competition.

The design of the competition inherently reduces the number of suppliers that submit claims to the DMERCs. First, some suppliers remove themselves from the Medicare program when they elect not to submit bids. In Polk County, there were 321 suppliers that billed Medicare for demonstration items in the year prior to commencement of the demonstration. Of the 321 predemonstration suppliers, 291 elected not to submit a bid in round one. Of the 30 bidders, 15 were successful.

In San Antonio, there were 79 bidders and 51 succeeded. This indicates that there were multiple bidders, which submitted what became the median price. It seems that there would be suppliers in San Antonio that elected not to bid, but my research has not uncovered a relevant CMS statement.

I expect that CMS will phase in national competitive bidding according to a schedule similar to that contained in the Medicare Modernization and Prescription Drug Act. It calls for one third of the competitions to be conducted in 2004 and two thirds to be conducted in 2005. Therefore, elimination of a large percentage of suppliers from the Medicare program will occur over 2 or 3 years.

The competitions are expected to be set up in areas that are not yet defined. Some think that the areas will be 261 Metropolitan Statistical Areas (MSAs) in the United States and Puerto Rico,¹¹ but the areas could just as easily be multiple MSAs or a state.

3. Unsuccessful bidders with more than 15% of their sales to Medicare beneficiaries risk becoming unprofitable and losing all shareholder value.
Financial statement studies of the HME industry indicate the following to be representative of an average company’s income statement per $100 in net sales. Net sales are after allowance for contractual adjustments (allowable charges). (See Table 1.)

Medicare states that it pays $6.8 billion for DME, which is equal to 40% of the expenditures for the $17 billion industry. Further, an examination of individual DME suppliers shows many derive 40% of their revenues from Medicare. If competitive bidding excludes a supplier company with an average income statement and 40% of its revenue from Medicare and the company made no other changes, the supplier would become unprofitable as shown in Table 2.

Further, the shareholder value for an independent company in the industry is most often a product of earnings before interest, taxes, depreciation, and amortization (EBITDA) for the company. A significant number of suppliers produce EBITDA equal to 10% to 20% of sales; however, there are no benchmarks. Companies that are attractive to acquirers produce EBITDA equal to 20% of sales or better. Thus, a company that is an unsuccessful bidder and an average performer (as shown in Tables 1 and 2) may not only have operating losses of 15% but will lose all shareholder value as a result of competitive bidding.

The company that derives 15% or less of its revenues from Medicare may be an unsuccessful bidder and still be profitable. Table 3 shows a company that is an average company in all respects except the mix of Medicare sales. It has only 15% of revenue from Medicare.

The scenario depicted in Table 3 may avoid an operating loss but should reduce shareholder value.

Some of the nonbidders and unsuccessful bidders in Polk County were able to enter into subcontracting agreements with successful bidders and thereby maintain a revenue stream and relationships with beneficiaries that they otherwise would have lost. However, before the launch of the San Antonio demonstration, CMS recognized this as a risk to the demonstration project and constrained subcontracting in the second demonstration.¹² Based upon the opinions of demonstration suppliers and the actions of CMS, I doubt that subcontracting will be an option for salvaging revenue and shareholder value for future unsuccessful bidders.

4. Successful bidders are likely to remain profitable but may lose as much as 80% of their operating margin.
So far the demonstration projects have resulted in prices for the demonstration items that are 21% to 22% below nondemonstration prices in Florida and Texas. The expectation expressed by the White House and cited earlier in this paper is that national competitive bidding will produce savings of 15% to 30%.

Given the actions of the suppliers in the demonstration areas, specifically that Medicare was granted price reductions of 17% to 20% in the first round and an additional 2% to 4% in the second round, it is difficult to refute that national competitive bidding might produce similar results.

Therefore, if we compare the average supplier company income statement to one of an average first round successful bidder, the successful bidder company would incur a reduction of 17% on 40% of its business, which reduces sales by 6.8%.

Since the supplier company will continue to serve the same patient population, it will not realize a reduction in cost of goods sold, but will realize a reduction in gross profit. Likewise, there is no anticipated reduction in general and administrative expenses, but a reduction in operating income. Table 4 provides the comparison.

Consider the effect of inflation on a company with such a thin profit margin. If the prices for items sold to Medicare are fixed for 2 to 3 years, and inflation is 2% to 3% per year, all profitability can be lost. Note that the proposed bidding cycle in the Medicare Modernization and Prescription Drug Act is every 3 years, and the demonstration projects have been rebid on a 2-year cycle. What an actual bidding cycle may be or whether prices will be subject to inflation adjustments is unknown at this time.

The effect on shareholder value for those who are successful bidders is uncertain. The companies will have a reduction in EBITDA, which tends to reduce value. However, for the first time ever, the industry would experience a significant barrier to entry as a result of national competitive bidding.

Barriers to entry, which prevent new competitors from entering the market, typically have a positive effect on valuations. However, it seems unreasonable that such a large decline in EBITDA could be totally offset by the intrinsic value of a barrier to entry.

I anticipate that a rebidding cycle of every 3 years, as stipulated in the Medicare Modernization and Prescription Drug Act, would cause companies to open branches just before the bidding for the area. Likewise, entrepreneurs may be driven to time the opening of their business for just before the bidding for an area.

The fact that a supplier becomes a successful bidder and thereby has a “license” to do business with Medicare will not produce shareholder value above the multiples of EBITDA that are currently paid for suppliers. If anything, it may weaken the multiplier.

The first annual report on competitive bidding advised CMS that allowing transferability of demonstration status may cause some suppliers to bid less aggressively and cause prices to be higher because if they lose, they still have the option of getting into the program by acquiring a supplier.¹³ So, CMS is likely to consider allowing transferability of supplier status on a case-by-case basis.

5. Inherent reasonableness authority can quickly and easily be restored to CMS, and it will likely occur during 2002.
Inherent reasonableness will not be as easy to exercise as it was after the authority was expanded in the Balanced Budget Act of 1997 (BBA ’97), but more easily exercised than it was prior to BBA ’97. In the Balanced Budget Refinement Act of 1999 (BBRA), Congress suspended Medicare’s inherent reasonableness authority until the following conditions were met:

• GAO releases its report regarding the interim final regulation and the DMERCs’ use of inherent reasonableness authority.
• CMS publishes a notice of final rulemaking on inherent reasonableness that responds to the GAO report and to comments received in response to the 1998 interim final regulation.
• CMS issues a final regulation that reevaluates the criteria included in the interim final regulation for identifying payments that are excessive or deficient.
• CMS takes appropriate steps to ensure the use of valid and reliable data when exercising inherent reasonableness authority.¹⁴

In July 2000 the GAO released its report titled Medicare Payments—Use of Revised “Inherent Reasonableness” Process Generally Appropriate. In the “Results in Brief” section of the report, the GAO becomes more definite in its statement that “HCFA acted properly....”

The report goes on to state that HCFA was successful in the use of the inherent reasonableness process in only one instance prior to BBA ’97 when the authority was expanded. In that one instance, the GAO states that it took almost 3 years to adjust the Medicare fee schedule for blood glucose monitors. BBA ’97 expanded the authority by simplifying and shortening the comment periods and by allowing CMS to delegate partial responsibility to the DMERCs that could make 15% adjustments in fees with less time and consideration for suppliers’ comments.

In June 2002 Scully addressed Senator Tom Harkin (D-Iowa) and his committee and reiterated that inherent reasonableness is a priority of his. Further, he stated that CMS has been working for months to finalize the regulation and that CMS intends to publish it soon.¹⁵

The CMS Web site states that it will publish its proposed inherent reasonableness rule in the Federal Register on July 26, August 23, or September 27. It was not published in July or August, and the September date was after press time for this issue.

The June 12 Senate committee testimony of Rehnquist includes the following statements:

• “In addition, inherent reasonableness authority and competitive bidding demonstrations have been promising approaches to reduce excessive reimbursement.”
• “CMS needs to complete its inherent reasonableness regulation, and the Administration and the Congress need to work together to expand the competitive bidding provision beyond the demonstration phase.”¹⁶

Considering the requirements that must be met to reinstate inherent reasonableness, the fact that the GAO completed its report 2 years ago and that it was favorable, the fact that Rehnquist is calling for CMS to complete its work, and the fact that CMS has indicated that its report could be available by September, it is logical to conclude that little stands between CMS and inherent reasonableness authority.

6. The suppliers most adversely affected by inherent reasonableness will be those with strong concentrations of sales in a given line of products.
The line of products will be whatever is determined by CMS whenever it deems that an excessive price is being paid. To demonstrate the effect on profitability, assume a supplier company derives 20% of its revenues from products. Then assume that CMS reduces the allowable charge under an exercise of inherent reasonableness authority. Further assume that CMS reduces the allowable charge by 15%. The result can be a reduction of 35% of the company’s profit and at least that much of the shareholder value. (See Table 5.)

One factor in business valuation not previously mentioned is that rapid sales growth tends to result in a higher multiple of EBITDA. Inherent reasonableness can make it difficult for suppliers to realize sales growth even though they are providing for more patients. That can result in loss of shareholder value.

7. Medicare efforts to constrain prices for goods and services will escalate.
The efforts can end only if some event of huge proportions changes the demographics of the United States, the health care delivery system, the health of US citizens, or a combination of the above.

In a July 2001 press release, President Bush said, “Medicare has long-term financial problems rooted in rising costs and an aging population that threaten the security of its promised benefits just when the Baby Boom needs it the most.”¹⁷

In the same release the White House goes on to discuss Medicare Part B premiums being financed mainly from income taxes and partly from beneficiary premiums. Part B’s expenses are projected to rise even more rapidly than Part A expenses, but Part B will not become insolvent because it is financed by income tax contributions that are increasing.

Finally, the release includes the White House recommendation that Medicare’s separate trust funds should be unified.

The accuracy of the statement regarding increasing income tax contributions and the wisdom of unification of the trust funds could become the topic of many great debates, but this article is not the place. The reason for referring to the press release is to make the point that funding Medicare is a huge and increasing challenge for this administration and several that will follow it.

The Congressional Budget Office released a report on July 3, 2002, that declares, “The first of the Baby Boomers will become eligible for Social Security in just 6 years, and the seeds for a long-term rise in federal spending begin to emerge shortly thereafter as more and more members of that generation draw on the government’s largest entitlement programs.”¹⁸

Ten years from now, the population age 65 or older will be growing rapidly. Currently, about 33.6 million Americans are 65 or older. By 2025 the over-65 population will be 57.9 million (about 18% of the population, up from 12% today).

As a result, Gross Domestic Product (GDP) should slow from having fewer workers. The unknown possibility for keeping GDP up is increased productivity as a result of future technologies.

If GDP slows, as the Congressional Budget Office projects, the tax base to support the growing demands on Medicare and Social Security will also slow. By 2016, Medicare is projected to have Part A expenses that exceed its new revenues, and then to head toward bankruptcy by 2029.

Therefore, short of huge changes, cost reductions will be “Do or Die” for Medicare. Other health care industries will become targets for reductions just as DME is today. In the future, it will be immaterial if an entity is a supplier or service company. If it sends a bill to Medicare, it will be subject to cost reduction efforts.

Wallace Weeks is the founder and president of The Weeks Group Inc, Melbourne, Fla. He has developed strategic business plans for the HME industry for the last 10 years. The second part of this article, which explains how to survive competitive bidding and inherent reasonableness, will appear in the following issue.

ADDENDUM
METHODS
The assessment of the environment has included research of more than 40 documents that contain hundreds of pages of testimony, opinions, statistics, legislation, and policy statements. Some were reviewed online and others were downloaded and printed for more careful consideration. The printed documents are described below for those that may have interest in retrieving and studying them.

• Senate Bill 812 with amendments through July 25, 2002
• Statement of Administration Policy HR 4954 Medicare Modernization and Prescription Drug Act of 2002, June 27, 2002
• White House News Release “Keeping Medicare Benefits Secure for the Future,” July 2001
• White House News Release “Strengthening Medicare’s Coverage Options: Affordable Health Care to Improve Lives,” May 17, 2002
• White House News Release “Fact Sheet: Strengthening Medicare” January 28, 2002
• “Who Fleeced Who?” Jim Sullivan HME News, July 2002
• “Because There’s No Reimbursement,” Jim Sullivan, HME News Wire, April 2002
• Testimony of Janet Rehnquist, Inspector General before Senate Committee on Appropriations, Subcommittee on Labor, HHS, and Education, Hearing: June 12, 2002
• Testimony of Thomas A. Scully, Administrator CMS, before Senate Committee on Appropriations, Subcommittee on Labor, HHS, and Education, Hearing: June 12, 2002
• Talking Points in Opposition to Proposals for National Competitive Bidding for Medical Equipment and Technology—American Association for Homecare, August 2, 2002
• Medicare, Medicaid, and SCHIP Balanced Budget Refinement Act of 1999
• Report to the Chairman, Subcommittee on Health, Committee on Ways and Means, House of Representatives, “Medicare Payments—Use of Revised Inherent Reasonableness Process Generally Appropriate,” July 2000
• The New Bureaucratic Order—Resource Requirements Needed to Carry Out the Mandates in Section 511 of the Proposed Medicare Modernization and Prescription Drug Act of 2002 by Multinational Business Services Inc. July 2002
• “The MBS Report on Regulatory Mandates Imposed Under the New Medicare Competitive Bidding Program—Section 511 of the Medicare Modernization and Prescription Drug Act of 2002,” by Multinational Business Services Inc. July 2002
• “Misunderstandings and Uncertainties Overstate Likely Savings from Competitive Bidding in the Medicare DME Market” by Jack Rodgers, PhD, Linden Smith, PricewaterhouseCoopers LLP, July 19, 2002
• Long-Range Fiscal Policy Brief from the Congressional Budget Office—The Looming Budgetary Impact of Society’s Aging, July 3, 2002
• Cost Estimate of Medicare Modernization and Prescription Drug Act of 2002—Congressional Budget Office, June 24, 2002
• Section 511 Competitive Acquisition of Certain Items and Services
• Interviews
• DME Competitive Bidding Demonstration Suppliers (Polk County Round 1) CMS August 3, 1999
• DMEPOS Winning Suppliers-Round 2 (Polk County) CMS
• Medicare Fact Sheet—Using Competition to Provide Quality Medicare Supplies At Reasonable Prices for Medicare Beneficiaries, March 2000
• Evaluation of Medicare’s Competitive Bidding Demonstration for DMEPOS, First-Year Annual Evaluation Report, September 2000

References
1. Testimony of Janet Rehnquist, Inspector General, Senate Committee on Appropriations, Subcommittee on Labor, HHS and Education, Hearing June 12, 2002
2. Statement by Thomas A. Scully, Administrator Centers for Medicare & Medicaid Service on Medicare Payment for Medical Supplies before the Senate Appropriations Labor, Health and Human Services, Subcommittee on Education, June 12, 2002, www.hhs.gov/asl/testify/t020612.html
3. US General Accounting Office (GAO) Report to the Chairman, Subcommittee on Health, Committee on Ways and Means, House of Representatives, “Use of Revised ‘Inherent Reasonableness’ Process Generally Appropriate,” July 2000; GAO/HEHS-00-79
4. “Florida DME Competitive Bidding Demonstration Suppliers,” www.hcfa.gov/research/dmesupps.htm
5. “Evaluation of Medicare’s Competitive Bidding Demonstration for DMEPOS,” September 2000, Revised January 2001, prepared by University of Wisconsin-Madison Center for Health Systems Research and Analysis, Research Triangle Institute Center for Economics Research, and Northwestern University Institute for Health Services Research and Policy Studies, RTI Project Number 7346-002-008
6. Medicare News, November 16, 2000, “Medicare Selects Suppliers for San Antonio Project to Lower Medical Costs and Protect Quality.”
7. “Keeping Medicare Benefits Secure for the Future,” President George W. Bush, www.whitehouse.gov/news/releases/2001/07/print/medicare5.html
8. “Evaluation of Medicare’s Competitive Bidding Demonstration for DMEPOS,” September 2000, Revised January 2001, prepared by University of Wisconsin-Madison Center for Health Systems Research and Analysis, Research Triangle Institute Center for Economics Research, and Northwestern University Institute for Health Services Research and Policy Studies, RTI Project Number 7346-002-008
9. Office of Management and Budget, www.whitehouse.gov/omb/legislative/sap/107-2/HR4954-h.html, “HR 4954 - Medicare Modernization and Prescription Drug Act of 2002”
10. Congressional Budget Office Cost Estimate, June 24, 2002, “Medicare Modernization and Prescription Drug Act of 2002”, www.cbo.gov/showdoc.cfm?index=3538&sequence=0
11. Multinational Business Services, Inc: “The New Bureaucratic Order: Resource Requirements Needed to Carry Out the Mandates in Section 511 of the Proposed Medicare Modernization and Prescription Drug Act of 2002.”
12. “Evaluation of Medicare’s Competitive Bidding Demonstration for DMEPOS,” September 2000, Revised January 2001, prepared by University of Wisconsin-Madison Center for Health Systems Research and Analysis, Research Triangle Institute Center for Economics Research, and Northwestern University Institute for Health Services Research and Policy Studies, RTI Project Number 7346-002-008
13. “Evaluation of Medicare’s Competitive Bidding Demonstration for DMEPOS,” September 2000, Revised January 2001, prepared by University of Wisconsin-Madison Center for Health Systems Research and Analysis, Research Triangle Institute Center for Economics Research, and Northwestern University Institute for Health Services Research and Policy Studies, RTI Project Number 7346-002-008
14. Statement by Thomas A. Scully, Administrator Centers for Medicare & Medicaid Service on Medicare Payment for Medical Supplies before the Senate Appropriations Labor, Health and Human Services, Subcommittee on Education, June 12, 2002, www.hhs.gov/asl/testify/t020612.html
15. Statement by Thomas A. Scully, Administrator Centers for Medicare & Medicaid Service on Medicare Payment for Medical Supplies before the Senate Appropriations Labor, Health and Human Services, Subcommittee on Education, June 12, 2002, http://www.hhs.gov/asl/testify/t020612.html
16. Testimony of Janet Rehnquist, Inspector General, Senate Committee on Appropriations, Subcommittee on Labor, HHS and Education, Hearing June 12, 2002.
17. “Keeping Medicare Benefits Secure for the Future,” President George W. Bush, www.whitehouse.gov/news/releases/2001/07/print/medicare5.html
18. Congressional Budget Office: “The Looming Budgetary Impact of Society’s Aging, July 3, 2002, www.cbo.gov/showdoc.cfm?index=3581&sequence=0
19. Porter, Michael E., “Competitive Strategy, Techniques for Analyzing Industries and Competitors,” 1980, The Free Press, New York, NY
20. HME News, “Because There’s No Reimbursement,” Jim Sullivan, Editor, April 2002.