Professors to present competitive bidding findings at AAH conference

Sunday, March 2, 2008

WASHINGTON, D.C. - Providers who attend AAHomecare's Legislative Conference this week will have plenty of firepower when they visit Capitol Hill legislators to lobby against national competitive bidding.

As part of the three-day lineup of events, March 4-6, two university economists will give providers a primer on why competitive bidding is one very bad idea.

Professors Stephen Foreman and Brian O'Roark, both of Robert Morris University in Pittsburgh, researched and wrote "The Impact of Competitive Bidding on the Market for DME." They'll present the report's key findings at the conference along with John Shirvinsky, executive director of the Pennsylvania Association of Medical Suppliers. PAMS commissioned the study. Pride Mobility Products paid for the study, which was released Feb. 11 and has since attracted widespread coverage in the mainstream media.

"It is reaching a lot of places that aren't in the industry, and I think it is great," said Kirsten DeLay, Pride's senior vice president of sales management and operational planning "Because it is called competitive bidding, the layperson thinks it means that it is really good, but what it is doing is putting less competition in the marketplace."

Coincidentally, a study published in January in the Southern Economic Journal confirms many of the finding in the PAMS study. This study, "Will Competitive Bidding Decrease Medicare Prices," states the following in its conclusion: "The theoretical results found in this paper show that the CMS format will likely result in an inefficient supply of medical equipment, increased prices on a number of goods, and potential problems for beneficiaries in obtaining equipment."

Among other things, the PAMS report states the following:
-- Regulating this industry by reducing entry fundamentally changes the nature of the market, and while government price controls are viewed as a way around the high priced nature of non-competitive markets, history does not provide support for such a view.
-- The trend in industries over the past 20 years has been one of deregulation. The economic literature is replete with studies that show consumer benefits flowing from deregulation.
-- CMS claims that increased market intervention in DME will produce "savings." This contention flies in the face of decades of study, empirical observation and economic theory. Market deregulation--not increased regulation--is more likely to create cost savings, which will lower prices.
-- More consumer choices leads to preferred outcomes.
-- Increased (consumer) demand coupled with reduced supply (of providers) is a recipe for huge price increases. This is basic economics. Economies ignore these precepts at their peril.
-- There is no evidence that if fraud exists competitive bidding will eliminate it.

PAM's Shirvinsky said that once the economists started digging into competitive bidding, they said: "It doesn't make any sense. Why DME? You are a miniscule part of the Medicare budget and your costs have been so much more under control than virtually any other area."