The aftermath

Friday, March 22, 2013

My projection is that all companies within  the Round 2 competitive bidding territories will eventually look at the viability and unsustainable economics of the program and terminate their Medicare participation. The impact of this program ultimately will fall on the shoulders of the Medicare program beneficiaries. Thus, those most vulnerable will be the ones incapable of obtaining the product and services that they require. Therefore, they or their families will have to obtain equipment from non-participating providers to the Medicare program, resulting in a cash bidding war among DME suppliers. This will be either an intended or an unintended consequence of a poorly conceived legislative program.

Institutions and people are reticent to change. Thus, DME companies have existed for years servicing large entities and their discharges with walkers, wheelchairs, hospital beds and oxygen. These DME companies will have either won or lost bids in these categories. Companies who won bids had 13 days to (1) make the decision to enter into or reject the three-year Medicare contract, (2) consent to an exit strategy to be purchased by an investment company or, (3) rush to sell to another company who believes that the ability to continue to bill Medicare in certain categories is an intangible asset that will allow the combined entity to remain a “going concern.” In no time at all, they will realize that cutting staff and having to fulfill increased demand is unsupportable and, at best, the revenue will remain where it was prior to the new fee schedule. Unfortunately, to meet the increased demand of deliverable product, staff and equipment will need to be increased in every area of the business. This represents the “lose-lose” scenario. The paper trail will grow exponentially and CMS audits will increase, resulting in substantially more claim denials. The documentation requirements will remain intact if not more demanding. DME companies will have no choice but to look to less expensive equipment to bolster the cash flow and bottom line. This will have the costly result of greater warranty service and/or replacement. At this juncture, there will cease to be supplier/beneficiary advocacy but rather survival of the fittest. 

Hospitals and facilities that had customarily arranged for required durable medical equipment to be awaiting a discharged patient will not obtain a quality product in a timely manner. It will not be possible. These large entities will now have to source from several different suppliers for a single patient depending on who won that specific category. When a patient is finally settled at home with the required equipment, each will have the burden of tracking the source for notification purposes. Availability of service and repairs will be less than timely. Patients will look to the hospitals and facilities for resolution. As a result, there will be a scramble to find new, reliable companies to service their needs only to find that none will exist within their geographic region that have the privilege of being a Medicare provider. At that point, the nation will understand the “crisis.”

—David E. Farrer, president, Cane & Able, Inc., Langhorne, Pa.