Pricing pressures handcuff vendors

Saturday, December 31, 2005

WASHINGTON - A U.S. Senate proposal to eliminate Medicare's cap rental option for DME has given manufacturers the jitters. If the proposal goes through, they know, it's only a matter of time before providers come seeking price reductions.
The problem with that: You can't draw blood from a stone, say manufacturers of bent metal. Others, especially sleep manufacturers, aren't saying anything at all.
"On our side, there's not a whole heck of a lot to do price-wise," said Tom Tucker, Medline's vice president of sales for DME and respiratory. "Pricing can't go down because we have pricing pressures with steel and aluminum."
Over and over, manufacturers say, further reducing the price of bent-metal HME is easier said than done.
"With raw material pressure and transportation pressure, we're struggling with intense competition to bring the best value--good quality at low prices--to market," said Mark Ludwig, president for respiratory and long-term care for Sunrise Medical.
At Invacare: "Manufacturers have been facing the challenge of providing lower cost product for the past few years due to lower reimbursement and managed care," said Judy Kovacs, vice president and category manager of IVC Products. "These challenges have led to overseas sourcing, manufacturing and changes in the delivery model."
Some industry watchers equate eliminating the cap rental option to a 13% reimbursement cut. If products must absorb that blow, many fear that price--more than ever--will dictate what products a provider buys. The result: a cheapening of quality across the board, say manufacturers.
"The people best positioned to offer the most aggressive price will be the companies without engineering and quality infrastructure," Ludwig said.
Short of cutting prices, manufacturers say, they'll respond to reimbursement reductions with logistical solutions that shorten delivery time, quality improvements that reduce maintenance and financing options that ease the pain of payment.
While there's not much that can be done on the price of standard equipment, eliminating the cap could deal CPAP a huge blow. Tucker estimates that the typical hospital bed is in the field for nine months, the typical concentrator for 14 months and CPAPs much longer.
CPAP manufacturers contacted for this article were unavailable for comment. But it's likely that sleep manufacturers will be subject to loud calls for pricing changes if Congress eliminates the cap, say industry watchers.
Long-term care products also will likely be affected if the proposal goes through, and that's a recipe for disaster, say manufacturers.
"(Long-term care patients) are in that bed for 24, 36 months, and they just lost all their service. So I'm not sure Medicare is going to get all their savings on it," said Tucker.