Poll: Cuts will shift brand loyalty

Sunday, December 31, 2006

YARMOUTH, Maine - Providers convinced CMS officials to relent somewhat on their plans to implement draconian cuts to power mobility devices. But cuts are coming nonetheless, whether by way of the capped rental of oxygen products, reduced PMD payments or national competitive bidding for DME.
With these cuts come ramifications for brand-name products. In a recent HME NewsPoll, more than half (57%) of 356 respondents said marquee product names would play a lesser role in purchasing decisions. One of five respondents said brand names would play a greater role in their inventories, and another 20% said there'd be no change to their preference.
Now that CMS has tempered cuts to PMDs, the doomsday scenarios detailed in comments submitted for this poll are less likely to occur. But supplier comments do offer a glimpse of buying habits in the midst of change. Simply put, most suppliers say that Medicare decides the quality of their patients' equipment.
"I have to run my business the same way that Medicare pays for service," said Rob Snyder of O2 Etc Inc. in Davie, Fla. "If I can purchase a CPAP for $500 or $150, I will buy the unit of least cost."
One anonymous supplier was more strident: "We will have to sell more junk products if the reimbursement only covers junk products."
Many suppliers feel that cuts to reimbursement are backing them into a corner.
"What other alternative do we have?" asked Justin Brown of Resp-a-Care in Tyler, Texas. "You either buy cheaper or stop providing certain products when reimbursement is slashed this way."
Not everyone plans a descent to the basement, however. Many providers are loathe to sacrifice patients for lower quality products. They've voiced the need to seek "overall" value, which means that they'll be shopping for the best brand name at the cheapest price. This was the single greatest flavor to responses in the NewsPoll. But if forced to make cuts, providers say, manufacturers will be obliged to come down with them.
"Vendors will have to be ready to negotiate for lower prices," said another anonymous provider. "They're going to have to share in the pain."
As providers brace for cuts, they are casting about for cheaper options.
"We need to find a comparable product that costs 20% to 40% less, and that is turning out to be a doable deal," said Liz Francke of Northwest Durable Medical Equipment in Salem, Ore.
Some respondents vowed to restrict the quality of their products by their ability to maintain a certain profit margin. John Marra at Marra's Homecare in Watertown, N.Y., called a 40% gross profit margin his company's basement.Still others resigned themselves to less profit and more widespread use of the Advanced Beneficiary Notice (ABN) to maintain quality levels. While many say they'll resort to the ABN, others doubt that option will have much traction among customers.
"Usually, a patient is unwilling to pay more for a more expensive product on non-assignment and are easily swayed to the standard models," said Julia Purcell Brown of Madden's Pharmacy in Elberton, Ga.
Despite the looming cuts, several suppliers said that innovative technologies will be a cost-saver and plan to invest in brand-name technologies.
"We are looking for products that allow for fewer deliveries," said Frank Page of Great Lakes Home Health in Jackson, Mich. "As costs drop, we may be looking at home oxygen filling devices and portable concentrators."
Lastly, some vow to make no changes.
"We react daily to changes to purchasing habits," said Bill Stelzer of Green Bay Home Medical Equipment in Green Bay, Wis. "We will adjust accordingly. Seldom are things as bad as they seem."