Providers warming to Medicare price freeze

Thursday, July 31, 2003

WASHINGTON - How sharp is the contrast between national competitive bidding for durable medical equipment and a seven-year freeze on consumer price index and cost of living allowances?

In a spiritual context, it’s the difference between “nirvana and hell,” said Don White, president of Buffalo, NY-based Associated Healthcare.

“Compared to competitive bidding, the CPI freeze is a much preferred situation,” White said. “I operate in 11 markets across New York state. To have different pricing [determined under competitive bidding] would be a nightmare and to administrate those prices would be hell.”

Though a Medicare CPI and COLA freeze proposal being floated by the Senate Finance Committee is less than ideal, Jim Walsh, president and general counsel for Waterloo, Iowa-based VGM says it is the lesser of two evils.

“The impact should be minimal; we haven’t gotten very many increases anyway,” Walsh said. “In an environment of mistrust and misunderstanding about what HME dealers provide, we’re unlikely to get a raise in any year.”

For the most part, a new CPI freeze merely puts a formal stamp on a policy Congress has implemented regularly since the Gramm-Rudman era, White said.

“Every Congress reserves the right to not give you a CPI update,” he said. “They often exercise that right, so to say we would have gotten the CPI every year for seven years is wishful thinking anyway.”

Because inflation remains low, overhead costs should be controllable, Walsh said. In fact, Federal Reserve Chairman Alan Greenspan has said the general economy is close to a cycle of deflation – a 0% inflation rate.

“The wording of the CPI-freeze proposal isn’t that allowances are not to exceed zero, but they will be zero,” he said. “We may actually benefit from that.”

Even so, providers have seen margins shrink over the past five years due to growing disparity between rising business costs and static prices imposed by the Balanced Budget Act of 1997. Small independent providers have struggled hardest, said Jennifer Keirn, director of marketing communication for Roscoe Medical, a Strongsville, Ohio-based HME distributor.

“Many of our customers are small-time dealers who are affected by this the most,” she said. “We’re trying to ease their pinch by providing a variety of options, giving them a choice of multiple lines that give them the widest variety of price points as possible.”

Besides carrying a broad selection of product brands, Roscoe also offers aftermarket brands and low-cost equivalents, Keirn said.

Extending a product’s life cycle is also gaining importance in the provider community, said John Vadeboncoeur, sales and marketing manager for the Invacare-owned Aftermarket Group in North Ridgeville, Ohio. Prolonging each product’s life generates considerable savings by reducing new product outlays, he said.

“As a result of the CPI freeze, I would expect that most providers will try to increase the life cycle of their equipment through additional servicing and repairs,” Vadeboncoeur said. HME