Manufacturers look for ways to help providers reduce costs

Sunday, April 6, 2008

YARMOUTH, Maine - In the old days, if Medicare cut reimbursement, providers more often than not pressured manufacturers to decrease product pricing a comparable amount. If providers think they can dust off that old strategy to help offset national competitive bidding cuts, however, they're likely to hear this reply from manufacturers: No way, Jose.

"This is not an environment where manufacturers can fund these changes," said Carl Will, Invacare's group vice president for HME. "Even with competitive bidding, it's not likely that prices are going down. Manufacturers are under significant pressure and in an already low-margin business."

At best, providers can expect manufacturers to keep product pricing static this year. Officials at Pride Mobility and Golden Technologies said recently they hope to do that. Other manufacturers--Invacare, Sunrise Medical, Drive and Graham-Field--have already raised prices, and said additional increases later this year are possible, depending on the economy (the sinking dollar and rising costs of doing business in China).

That doesn't mean manufacturers can't help providers maneuver through competitive bidding.

They may not be able to decrease acquisition costs, but they can help control them by designing better products that are less expensive to make than those "that have been around forever," said Harvey Diamond, Drive Medical's CEO. "It also makes sense to look at ways to make packaging smaller to reduce the cost of incoming and outgoing freight."

At Pride, employees help providers with coding and billing, which speeds up the claims process and increases cash flow, said Seth Johnson, senior vice president of government affairs.

Manufacturers also stress the importance of high-quality products, which help providers reduce their overall costs.

"I don't want to produce anything that is not of excellent quality," said Sunrise Medical CEO Michael Cannizzaro. "That leads to costly service calls for providers."

To help its customers, Golden Technologies has revamped its freight policy, making it easier for providers to reach the 500-pound minimum for free shipping. Now, instead of having to ship mobility products and lift chairs separately, providers can combine them in one order, said CJ Copley, executive vice president of sales and marketing.

For HME manufacturers, the marketplace is "already pretty competitive" and price alone will not determine which of them flourish or flounder in Medicare's new world of competitive bidding, Will said.

"It will be who can best help providers take cost out of their business," he said. "And who can provide the services that allow them to be around."