Competitive Bidding Compromise Could Doom Providers
Despite pressure from health care industry groups eager for a provider giveback bill and voter groups, such as the American Association of Retired Persons (AARP), eager for a prescription drug benefit, Senators were still seeking a workable compromise bill just two weeks before the Senate was set to adjourn. Would competitive bidding be part of the final equation, creating “savings” that could fund physician, hospital, and rural home health spending increases and possibly a prescription drug benefit, too?

“Right now our allies are really fighting hard for us,” says David Williams (right) of Senator Max Cleland (D-Ga) and Senator Mary Landrieu (D-La), not pictured.

“That is the $64,000 question,” says Thomas Connaughton, president and CEO of the American Association for Homecare (AAHomecare). “We hope we have provided [the Senators] ... with the ammunition and the reasons to oppose [a competitive bidding] provision, but this is going to be a nail biter.”

At press time, things looked bleak for competitive bidding opponents as the latest compromise—reached by Senate Finance Committee Chairman Max Baucus (D-Mont) and Charles Grassley (R-Iowa)—included competitive bidding for Metropolitan Statistical Areas (MSAs) with a population of 500,000 or more.

Excluding MSAs under 500,000 made competitive bidding much more palatable to Senators, such as Grassley, that had worried about its effects in rural areas. However, it could be a cure worse than the disease, warned Asela Cuervo, vice president and general counsel for AAHomecare. “I understand that the theory behind it is to get Senators on board who come from rural states, but this creates a patchwork medical system where even within one state some beneficiaries are getting one thing and others are not. So this seems like it is even more unworkable,” she says.

But don’t count on anyone in government to point out that a patchwork competitive bidding program will be even harder and more costly to administer than nationwide competitive bidding, says David Williams, government relations chair for Invacare Corp, Elyria, Ohio. “The thing we have to remember is that this has nothing to do with establishing a workable competitive bidding plan,” he says. “This is a money issue. This is ‘How do I find the money to pay for pet projects?’ Under the House plan, they have until October 2004 to have the first one third of the MSAs on line and until October 2005 to get the second two thirds online. Between now and then they could say, ‘This really doesn’t work, let’s do something different.’”

According to early figures Cuervo had compiled, there are 82 cities that meet the definition of an MSA with a population of 500,000 or more. In Florida, for example, they would include Miami, Ft Lauderdale, Tampa, St Petersburg, and Jacksonville, but not Polk County, the site of the original competitive bidding project.

One factor that could keep the compromise from being passed was the cost. Among the givebacks to physicians, hospitals, and nursing homes was money for the elimination of the pending 15% cut to the home health care benefit, extension of the 10% rural add-on for home health through 2004, and exclusion of a home health co-payment. While it was still too early to get a firm cost for the entire package, the preliminary figure of $41 billion was higher than the Republicans wanted, Cuervo says. Furthermore, many Republicans were still uninterested in any final compromise that did not include a Medicare prescription drug benefit.

Any bill passed would also need to be reconciled with the procompetitive bidding House (HR 4954) bill passed in June, and House Energy and Commerce Committee member Representative Richard Burr (R-NC) has indicated that the House may be unwilling to go along with a Senate bill that does not include a prescription drug benefit.

Survey Reveals Decline in Revenue Growth
The American Association for Homecare’s 2002 Financial Performance Survey Report, released on September 16 paints a bleak picture of the state of the home health care industry.

According to the report—which was based on information from 119 firms—on average companies experienced a 3% fall in industry revenue growth in 2001, from 13% in 2000 to 10% in this year’s survey. In addition, the average days sales outstanding (DSO) increased for the first time since 1998 from 81 days in 2000 to 85 days in 2001. “[This increase] is substantial,” says survey consultant William Cron, PhD, professor of marketing at Texas Christian University, Fort Worth.

Because accounts receivable financing represents about 40% of the average HME company’s total assets, the investment in terms of accounts receivable for participating companies went up just short of $33 million as a result of the increase in DSO, according to the report. “For the average dealer, that means it went up about $42,000,” Cron says.

However, early 2002 statistics on Medicare DSOs gathered by RemitDATA Inc, Memphis, Tenn, may indicate that the trend is turing around. “We have seen Medicare denial rates and DSOs drop 14% and 12% from the first quarter of the year to the second,” says RemitDATA president Bentley C. Goodwin.

Other survey results indicated that Medicare and Medicaid remained dominant payors in 2001, accounting for a combined 46% of revenue. Companies in all size ranges also reported an increase in managed care as a payor source, but responses indicated low reimbursement and slow payment causing firms to terminate contracts with managed care.

Legislative/Regulatory News

Former Miss America Nicole Johnson and CAMSET’s Peter W. Thomas join forces to fight competitive bidding.

Former Miss America and Senators Speak Against Competitive Bidding
The Coalition for Access to Medical Services, Equipment, and Technology (CAMSET) pulled out all the stops to convince Senators to vote against competitive bidding at a press conference on September 18. In addition to CAMSET representative Peter W. Thomas, Senators Max Cleland (D-Ga) and Mary L. Landrieu (D-La), and Miss America 1999, Nicole Johnson, spoke against the proposal. Johnson, a diabetic, and Cleland, a disabled military veteran, both shared how important access to quality HME and supplies is to them. Competitive bidding would harm that access by attracting “second-tier” providers that competed only on price and not on service, Thomas warned. “The last thing we need to do is balance the books on the backs of the disabled,” Landrieu said.

Record Number Attend AAHomecare Fly-In
When Thomas Connaughton, president and CEO of the American Association for Homecare (AAHomecare), proposed organizing a 1-day lobbying event on September 18 to oppose competitive bidding and the scheduled 15% cut to the home health benefit, he imagined that about 50 people would be able to make it to Washington, DC. Instead, a record 260 HME and home health agency company representatives—including 90 non-AAHomecare members—came.

“The industry came and spoke; there is no excuse for anyone on Capitol Hill not to know that this is extremely controversial,” Connaughton says. “They have been touched by an awful lot of people. That doesn’t necessarily mean we are going to win, but it improves our chances. If we don’t win, it will not be because they weren’t hearing from their constituents.”

45 States Cut Medicaid
With rising health care costs and reduced tax revenue, 45 states were forced to limit Medicaid spending during fiscal year 2002, says a report released by the Kaiser Commission on Medicaid and the Uninsured.

In addition, Health Management Associates, which conducted the study, found that 41 states plan to take similar actions in fiscal year 2003. Of those, 40 plan to implement prescription drug cost controls, 29 will reduce or freeze Medicaid provider rates, 15 will reduce Medicaid benefits, 18 will restrict Medicaid eligibility, and 15 will increase co-payments.

The report, Medicaid Spending Growth: Results From a 2002 Survey, is available at www.kaisernetwork.org.

HHS Finds Problems in Polk County Competitive Bidding
Medicare beneficiaries in Polk County, Florida—site of the first competitive bidding demonstration project—are experiencing a reduction in services, says a September 12 Department of Health and Human Services (HHS) report evaluating the project.

New home oxygen beneficiaries reported a decline in access to portable oxygen. New HME users were more likely to have their equipment delivered by someone other than their provider and reported a reduction in maintenance visits. Finally, wound patients reported a substantial reduction in the number of contacts with their surgical dressing suppliers.

The report supports the position that more studies must be done before the government extends competitive bidding nationally.

State Watch

North Carolina—North Carolina DME providers dodged the competitive bidding bullet last month when the state Health and Human Services Conference Committee eliminated the Senate’s proposal to competitively bid Medicaid DME contracts from the final version of the state budget. Medicaid reimbursement will still be reduced, but Beth Bowen, of the North Carolina Association for Medical Equipment Services (NCAMES), counted the fact that the reductions would not come through competitive bidding as a victory for both her association members and for all states. If North Carolina had passed Medicaid competitive bidding, other states might have followed its lead, Bowen says.

The defeat of the competitive bidding proposal was a team effort. NCAMES hired the North Carolina Retail Merchants Association lobbyists and encouraged grassroots lobbying by association members to convince the Health and Human Services Appropriations Chairs to remove the Senate competitive bidding proposal from the final budget package.

Representatives Edd Nye and Beverly Earle and Senator Bill Purcell were particularly helpful, Bowen says. Earle and Nye initially removed the competitive bidding language from the budget. Nye then removed the 5% across-the-board cut to Medicaid and instead left it up to the Division of Medical Assistance (DMA), which administers the state’s Medicaid, to determine the cuts necessary to save approximately $569,000 from the budget.

While the cuts are bad news, Bowen says it is far better to work with the DMA on rational cuts than deal with either across-the-board cuts or cuts through competitive bidding. “We have a good relationship with the DMA,” she says.

Florida—The Florida Association of Medical Equipment Services (FAMES) plans to host the first bilingual Health Insurance Portability and Accountability Act (HIPAA) compliance seminar in the nation on January 10, 2003, at the Hyatt Regency Pier 66 Resort in Ft Lauderdale. Randy Schluter will give the seminar and Ivonne Gonzales, a member of the FAMES Board of Directors and owner of Health Medical Equipment and Direct Billing Services of Miami, will provide translation services.

“The FAMES board of directors has been wanting to reach out to the Spanish-speaking DME community and rehab providers in Florida and this is our first attempt,” says FAMES President Joan Cross. “Understanding the government regulations is difficult enough, but more so if English is your second language. We are hoping that by offering this program ... it will enable those providers to more easily assimilate this information.” For more information, call FAMES at (407) 895-5573.

Texas—Even in the face of rising case loads, the Health and Human Services Commission (HHSC) of Texas plans to find $7.3 million in general revenue savings in the next 12 months by cutting reimbursement rates and restructuring reimbursement methodologies, reports the Medical Equipment Suppliers Association (MESA) Coalition of Medicaid Providers Workgroup.

The MESA Coalition has identified its own $6.77 million in potential annual savings that could be achieved without cutting back on benefits to Medicare patients by eliminating waste, inappropriate utilization, and inefficiencies. It is discussing its alternative with HHSC, but has an uphill battle since many members of HHSC do not fully understand how the HME market works, says James Garner, workgroup chairman and president and CEO of ActivMedical, Denton. “We are pursuing all strategies our combined best thoughts could put together, but how it is going to come out we just don’t know.”

One positive aspect of the HHSC declaring that it intends to cut Medicaid spending for HME and related services and supplies is that the public backlash against the cuts forced HHSC to recognize and begin working with the MESA coalition, Garner says. “One thing that has been made very clear in this whole process is that they just don’t understand us,” he says. “I know that is trite because it has been said and repeated so many times, but that is the truth. One very bright aspect of this is that I feel that we are now in a position to help them understand our needs and beneficiaries’ needs better. At least we have been provided a forum to speak to this.”

California—The state budget passed last month contains several changes that impact medical supplies and HME, reports Robert Ackerman of the California Association of Medical Product Suppliers. The majority of changes were cuts to reimbursements, but Ackerman, who lobbies for the association, was still pleased because it could have been much worse in a budget year where the projected deficit went from $12 million to almost $24 million. “It was a lot of bullets being fired as far as trying to save money in supplies and DME so we actively negotiated with the [MediCal] department to try to come up with some things that would still achieve the savings but would not be as dramatic reductions in reimbursement, and I think we were fairly successful,” he says.

Once the budget trailer bills are signed and implemented, MediCal supplies will be reimbursed at cost plus 23% versus cost plus the current 25%. Incontinence supplies will be reimbursed at the contract price plus 38% instead of the current 40%. Diabetic test strips will become a pharmacy-only benefit meaning that only a pharmacy can dispense them to a MediCal patient. Enteral nutrition product reimbursement will change from the cost plus 50% to cost plus some different percentage that CAMPS is still negotiating with MediCal. Finally, MediCal will be allowed to contract with manufacturers for medical supplies, enteral products, and diabetic test strips. “We don’t know what that will yield, but certainly it will impact the price we are paid,” Ackerman says.