With the threat of competitive bidding expanding to encompass beds, providers who sell beds and support surfaces may soon be facing some serious changes. According to Chuck Blackburn, RP, ET, owner of Blackburn’s Physicians Pharmacy, Tarenton, Pa, the margins for beds, which are narrow to begin with, may disappear completely if competitive bidding enters the picture. “As allowables drop and funding becomes less, the quality of the beds will drop—it is sort of an inverse proportion,” he says. This is not surprising considering a February 28 Wall Street Journal article Blackburn cites in which an industry leader predicted the trend toward cheaper and less durable beds. Competitive bidding is not the only problem facing bed providers. The margins are already disappearing because of the 13-month rental rule in Medicare Part B.

The Road To Competitive Bidding
As of January 1, bed providers can bill for a bed for only 13 months. At the end of that period, the bed becomes the property of the patient. This new rule supersedes the old capped rental rule that dictated at the end of the rental period, the patient had to pay 20% of the price of the bed before ownership was transferred. “At least [with the capped rental], you had some leverage,” says Blackburn. “Now you have no leverage. And that can have a very definite effect on business.”

Medicare pays a $140.46 allowable for a bed, but under the new rule Medicare Part B does not bill this full amount. For the first 3 months, it bills 80% of the $140.46 figure for a total of $336.90. Beginning with month four and ending with month 13, Medicare then reduces the allowable by 25% and bills for 80% of that figure or $842. If the patient does not pay the 20% deductible, then the provider is out $110 as well. “A lot of Medicare patients do not pay their deductible, so that low figure is cutting it very close,” says Blackburn.

Chuck Blackburn, RP, ET, owner of Blackburn’s Physicians Pharmacy, Tarenton, Pa

If competitive bidding goes into effect, then this figure could fall to as low as $900, says Blackburn. This could adversely affect small mom-and-pop dealers, but medium-sized dealers like Blackburn’s Physicians Pharmacy (which employs about 150 and distributes beds and other DME equipment in Pittsburgh and Erie, Pa, and Buffalo, NY) are able to buy in large enough volume to weather the coming storm.

The if and when are up to Medicare, which has yet to issue any rules to dealers, like Blackburn, who are in one of the metropolitan statistical areas slated to take part in the pilot project.

But cold hard cash is only part of a web of worries facing Blackburn as Medicare fitfully lumbers down the path to competitive bidding. He has concerns about the patients as well.

The Drop-Ship Standard
Since beds are not the first product to be subject to competitive bidding, Blackburn has some predictions, in light of other industry experiences, as to what could happen to the most important thing bed providers supply—service. “Industry lobbyists have told [lawmakers to expect that] the standard will be drop shipping,” he says.

He predicts that the days of the traditional equipment vendor could be coming to an end because of this development. “I think we are getting closer to the day when [providing equipment] will be handled only by a mass marketing [sort of store like Wal-Mart],” he says. “And then the service aspect will have to be a separate entity.”

Service is an aspect of the bed business that costs Blackburn both time and money, but is part of his commitment to his customers. With competitive bidding, this aspect of the business may have to be one of the areas in which he cuts back. Again it will probably be coupled—by necessity—with lower quality equipment.

Another area that could be affected by competitive bidding or a similar program is the appeal of denied claims. Blackburn says the biggest misconception among providers is that Medicare will fund only semielectric beds. That is not the case. “Medicare is perfectly willing to consider extenuating circumstances,” says Blackburn.

Blackburn’s wife is the company’s compliance officer and spends all of her time making sure claims are as clean as possible, and helping to iron out denials, which Blackburn says is an expensive and time-consuming process. Chuck Blackburn sees this sort of service fading away, if competitive bidding becomes the de rigueur way of doing business. “Only 30% of providers are JCAHO [rated]. How many have compliance officers now, and how many will [if there is competitive bidding]?” he says.

Bye-Bye CMN
Not every change that Medicare has wrought is bad news. There was a good change, albeit one that has caused a little confusion: the elimination of the certificate of medical necessity (CMN). As of October 1, 2005, the CMN is no longer needed to prescribe a bed. Instead, clinicians have to submit the pertinent part of the medical record. This has caused some confusion among clinicians, says Blackburn.

During a seminar that Blackburn’s Physicians Pharmacy recently sponsored, the facilitators discovered that before that day 51% of clinicians were unclear about how to prescribe equipment without the CMN. Blackburn says that many clinicians simply submit the entire patient record. Instead, all that is needed is “the portions where they have concluded and why they have concluded [the patient needs the equipment].”

The change is simply to let Medicare know that the patient was examined by a competent clinician. The good news is that after the seminar more than 90% of the attendees said they felt confident that they could prescribe under the new system.

In a strange way, the provider is both an advocate for the patient and Medicare. “Today, you have to be a Medicare [watchdog],” says Blackburn. “This is what they expect. I’ve had Medicare officials say this to me.”

As a consequence, providers have to be careful about what they do and do not include on a piece of equipment. According to Blackburn, Medicare is “coming down hard” on providers who break the rules. “One complaint and they are all over you,” he says.

The sudden interest in beds by Medicare may be a natural result of providers doing a good job convincing payors and policymakers just how important they are to the well-being of patients.

Importance of Beds
Blackburn says that today’s payors and Medicare officials have a much better understanding of the necessity of beds than their forebears. “There was a time when payors had a difficult time understanding beds,” he says. “They denied claims, not understanding what the product was.”

Several years ago, Blackburn found how much times had changed when he called a payor complaining about a denied claim. Getting to a supervisory person, he explained to her about beds and pointed out that the company routinely denied legitimate claims and paid for ones they should not be paying for. A few weeks later, he received a call asking if he would like to be a consultant for the company.

Much of the problem is one that faces providers and payors alike: finding good people who understand the rules. “You have to have people on staff—the payor, the clinician, the provider—who know how to describe the equipment,” Blackburn says. “If everybody is in sync then the system works.”

North of the Border
Kathy Fisher, OT, ATS, OT/Reg, ONT, education manager at Therapy Supplies and Rental Limited, Toronto, explains that the policymakers in her country have grown to understand that bedding and positioning is a 24-hour commitment. This understanding did not miraculously dawn on the medical payor community. “We have worked hard with administrators—writing lots of articles and making lots of presentations,” says Fisher.

One of the big differences between the United States and Canada is the way equipment is prescribed. Fisher says that “we tend to be more involved with the therapist in the prescription process.”

The Canadian system has an added bit of flexibility, allowing a patient to trial the equipment to make sure that it is suitable for their needs. However, there is one thing that Fisher says the Canadian system is not good about—service. For instance, she had a client who was a quadriplegic who was in the process of moving, and he contacted Fisher about moving his bed. Typically, patients would be on their own to handle this chore—arranging with a caregiver or professional movers to transport it—but Fisher moved it for him. In Canada, patients in long-term care tend to have better serviced equipment than those who live on their own.

The scenario Fisher presents, though not a competitive bidding one—with its lack of strong follow-up service—could be what is facing the United States if a new model of DME provision is followed. If competitive bidding is indeed the future for bed providers, then there is a big question mark for providers and their patients. “In the pilot competitive bidding programs [for oxygen], statistically everybody was happy,” says Blackburn. “But what is going to happen when 10 million people are under competitive bidding?” DP

C.A. Wolski is a contributing writer for Dealer/Provider.