‘This is flawed in so many ways’

Monday, March 31, 2008

WASHINGTON – Three economists who spoke at AAHomecare’s Legislative Conference last month could not have been more clear: National competitive bidding, in its current form, is a boondoggle and doomed to failure.
“When there are fewer people to compete with, prices go up,” said Brian O’Roark, an assistant professor of economics at Robert Morris University. “This is the pattern that happens time and time again.”
O’Roark co-authored “The Impact of Competitive Bidding on the Market for DME” with economist Stephen Foreman— the Pennsylvania Association of Medical Suppliers (PAMS) commissioned the study.
During his presentation, O’Roark was quick to point out that over the past 25 years or so, the trend in business has been toward deregulation. That’s not surprising. Deregulation tends to increase competition, lower prices and improve customer services, he said. By applying competitive bidding in its current form to home medical equipment and regulating the industry to a greater degree—and driving many providers out of business—CMS may see a temporary reduction in reimbursement, but in the long, prices will go up.
Likewise, O’Roark said, competitive bidding will not decrease fraud and abuse. Crooks aren’t stupid. They’ll bid low to get into the program.
With fewer providers catering to increased demand, competitive bidding’s “unintended consequences” will include reduced competition, increased prices and a longer wait time for beneficiaries, O’Roark said.
Economists Brett Katzman (Kennesaw State University) and Kerry Anne McGeary (Drexel University) concurred with many of O’Roark and Foreman’s findings (See story above).
“We looked at a process that wasn’t set up very well,” said Katzmann. “If there is going to be competitive bidding, it needs to be formulated in a much better way. This is flawed in so many ways.”HME