New study is wake-up call for providers, says Ryan

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Friday, October 21, 2016

WASHINGTON – Medicare payments under the competitive bidding program are below providers’ costs and therefore unsustainable, says a new study.

Medicare reimbursement rates cover, on average, only 88% of overall costs for companies providing HME services, according to the study, “Analysis of the Cost of Providing Durable Medical Equipment to the Medicare Population: Measuring the Impact of Competitive Bidding,” conducted by Dobson DaVanzo & Associates.

The study examined the cost of goods, direct and indirect costs, repair costs, administrative costs, billing costs, and licensures and accreditation fees.

“No business can sustain a 12% loss on everything they do,” said Laura Williard, senior director of payer relations for AAHomecare, which commissioned the study.

CPAP and supplies has the biggest loss, getting paid on average at nearly 69% of costs.

If CMS continues to under pay providers, there won’t be anyone left to accept Medicare contracts, she added.

“The belief has been that the larger providers can come in and take over patient care,” said Williard. “This study shows that this will not and cannot happen (because) there really is no where else to cost-shift.”

Seeing in black and white the losses incurred by the bidding program should have providers taking a hard look at whether they can accept those rates, says Tom Ryan.

“It’s a wake-up call for providers,” said Ryan, president and CEO of AAHomecare. “You cannot stay in business when you continue to lose money.”

While previous studies, like a recently released report from the Government Accountability Office, have focused on beneficiary access and utilization, the cost study shows that the current rates are unsustainable over the long term, which could help boost support for competitive bidding relief legislation.

“The people we spoke to on the Hill yesterday wanted to see the study and they were encouraged that we finally had something to show that there’s a problem here,” said Ryan. “They want to see numbers that are showing that (providers) are underwater.”