By the time you read this, you will either be celebrating the defeat of nationwide competitive bidding or trying to figure out if and how your business will survive in this new environment. Regardless of what action Congress took on this year’s competitive bidding proposal, you should be thinking about what is next.

As legislators and government administrators in Washington, DC, and Baltimore continue to look for ways to preserve the Medicare Trust Fund for the onslaught of Baby Boomers that it will soon have to serve, four proposals are under active discussion that can affect the bottom line of everyone reading this column.

1. Nationwide Competitive Bidding. Even if Congress fails to adopt competitive bidding this year, you can bet it will be back next year. Like a monster that refuses to die, competitive bidding has been proposed in every presidential budget since Ronald Reagan was in office and, despite the fact that it may have been defeated this year, it will live to be debated anew.

The next time around, its proponents will be bolstered by more and more defensible data from the Polk County, Fla, and San Antonio, Tex, demonstration projects. Moreover, in the effort to defeat the proposal this year, the industry has shown all its cards, and the proponents of competitive bidding will be prepared with counterarguments the next time it is discussed.

If Congress passes legislation authorizing nationwide competitive bidding, the industry faces a whole different set of problems. As envisioned in the Medicare Modernization and Prescription Drug Act (HR 4954) that the House passed, the Secretary of the Department of Health and Human Services (HHS) will over the next 2 years decide which product categories are to be competitively bid, what geographic areas are to be included or excluded, and how the bidding process will be conducted. Each of these areas will require close monitoring and extensive lobbying by and on behalf of the HME industry.

2. Inherent Reasonableness. The Centers for Medicare & Medicaid Services (CMS) has published the final rule defining how it will use its inherent reasonableness authority to change the Medicare fee schedules for DME. In short order, the industry will see the inherent reasonableness process used to reduce the fee schedule for specific Healthcare Common Procedure Coding System (HCPCS) codes. It is true that the inherent reasonableness process can be used to increase fees for items that are underpriced, but do not look for CMS to identify any of these codes.

The inherent reasonableness rule requires CMS to use statistically valid and relevant data and to consult the industry when using its inherent reasonableness authority. At this time, it appears that CMS is ready to accept what the Department of Veterans Affairs (VA) pays for DME as a valid data point. Reports from various staff members within HHS indicate that they are comfortable using VA price plus 67% as a baseline for inherent reasonableness. This means that it is crucial for the HME industry to develop a solid understanding of how the VA works and what costs are associated with its DME distribution system.

Equally important, the industry must develop statistically valid information on all the costs associated with providing DME to Medicare beneficiaries. Anecdotes are no longer acceptable. The industry must develop defensible data on the costs of everything from maintaining products in inventory to submitting a Medicare claim and all the expenses in between. Indirect costs such as rent, utilities, depreciation, and administrative expense must be quantified in such a way to allow a provider to amortize them across all transactions. The same is true about the costs of meeting accreditation and Medicare provider standards.

In order to successfully challenge the results of an adjustment in the fee schedules done under inherent reasonableness as being too low, the industry must have complete and accurate cost data. Some companies do a good job of tracking all their expenses. Others are lucky if they have the time to balance their checkbooks once a month. The industry must find a way to protect proprietary information while developing a uniform method of managing and recording the costs of providing DME to Medicare beneficiaries.

3. Elimination of Service Payments. In a June 12 report to Congress, Janet Rehnquist, Inspector General of HHS, suggested that the maintenance payment providers receive at 21 months and every 6 months thereafter under the capped rental program should be eliminated. Instead, she proposed that providers should be paid only for the expenses associated with “repairs actually performed.” Rehnquist is apparently unfamiliar with either the spirit or the intent of the “six-point plan” as it was written in the Omnibus Budget Reconciliation Act (OBRA) of 1987. Her report ignores the fact that the current system was designed to compensate providers for the fact that they have inventory in use by beneficiaries for which they are not receiving monthly rental payments.

As one would expect, the Office of Inspector General (OIG) projects that elimination of service payments would result in huge savings for the Medicare program. This is especially true if reimbursement for repairs actually performed is limited by the guidelines for HCPCS E1340, which pays only for bench time and at a rate of less than $45 per hour. The good news is that the six-point plan is written in statute and thus would require an act of Congress to be changed, as Rehnquist has suggested. Nonetheless, the industry must be vigilant to ensure that this concept is not slipped into another piece of Medicare reform legislation in the future.

The industry must also create opportunities to educate Rehnquist (and other CMS staffers) on the six-point plan, how it works, and how her proposed changes would affect both providers and beneficiaries.

4. No More Purchase Option. There is another change to the six-point plan that is gaining admirers at CMS and in Congress. The elimination of the purchase option for products that fall within the capped rental payment category is seen as a powerful tool that could reduce perceived abuse and overutilization within some product categories. Several CMS staffers have wondered aloud whether Medicare would be paying for as many motorized/power wheelchairs (especially HCPCS K0011) if providers were forced to collect their fees over a 15-month period. Elimination of the purchase option would also require legislation, but there are a few influential members of Congress who find this idea attractive.

Once again, the industry must remain vigilant to ensure that no changes in the six-point plan are attached to other bills. Our biggest fear must be that one of these ideas develops under cover of darkness and gets slipped into legislation behind the closed doors of a House/Senate conference committee and then is adopted into law by a Congress that is in such a hurry to pass some proposals that it does not have (or take) the time to see what else is contained in the conference committee’s compromise bill.

Where Do We Go From Here?
In addition to the specific points raised above, the HME industry must continue to build bridges to consumer groups and to other Medicare providers. The HME industry is the target for competitive bidding, but other providers are keeping a close eye on the concept and the process. If DME is competitively bid, it will not be long before ambulance services, outpatient therapy, and other Part B providers start to feel the heat. The industry must educate other Part B providers that, as written in HR 4954, the Secretary of HHS is authorized to use competitive bidding for all nonphysician Part B services, not just DME.

One reason why the message from the HME industry to Congress has been so ineffective is that it has been delivered by HME providers, who some people on Capitol Hill perceive to be just one step above used car salesmen. Therefore, the industry must continue to develop standards and enforce an industry-developed code of ethics. All those in the HME business must demand excellence from themselves and their competitors. Done correctly, this will result in HME providers being seen as professionals who are part of the health care team.

Significant progress was made this year in the effort to get consumers—Medicare beneficiaries—interested in the issues important to the industry. Building on this success must be a priority for every HME provider. Consumers put a face on the work you do; a face that neither Congress nor the CMS bureaucracy can ignore.

The American Association for Homecare (AAHomecare) is a tremendous asset for the HME services industry. It is managed by a credible leader, who is respected on Capitol Hill, and directed by a board that is passionate about the home care industry. The association has attracted an excellent staff that is both professional and detail-oriented. All those who consider themselves to be part of the industry should be active members of AAHomecare.

If Congress failed to pass nationwide competitive bidding this year, get busy. There are lots of issues that demand your attention. If it did pass, that list just got longer.

David T. Williams is director of government relations for Invacare, Elyria, Ohio, and former executive director of the AAHomecare Re/hab and Assistive Technology Council.