Study: Rural areas could see bidding impact sooner than they think

Thursday, September 9, 2010

WATERLOO, Iowa - Think competitive bidding won't hurt rural areas? Think again, says the VGM Group.

"We kept hearing from our senators here in Iowa, 'Don't worry, competitive bidding doesn't affect us,'" said Mike Mallaro, CFO. "We think there's a huge indirect effect in rural states."

In a study conducted for The VGM Group, economist Ken Brown, a professor at the University of Northern Iowa, studied the marketplace in Iowa, Montana, North Dakota, Wyoming and West Virginia.

Brown's prediction: A decline in HME providers of up to 50% in some areas.

"You have an industry that isn't thriving financially today," said Mallaro. "Three out of the four national (public) companies lost money in 2009 and there's a 32% reimbursement cut on the horizon. You are going to see them closing (local) branches."

If national providers, with their economies of scale are struggling, it's logical to assume that small, independent providers are also struggling, said Mallaro.

As Medicaid and other third-party payers adopt the lower reimbursement rates, the network of HME providers--both large and small--will shrink.

"By forcing down reimbursement so drastically, they are forcing consolidation on the industry," said Mallaro. "That's going to lead to a huge reduction in the number of suppliers in small towns in rural states."

When beneficiaries don't live near an HME provider, there are negative consequences, Brown stated in his study. Those include:

* Oxygen and other respiratory patients will be at greater risk during power outages, which are often more common and of longer duration in rural areas.

* Respiratory patients will have diminished access to portable tanks, which will lead to reduced ambulation and lower quality of life.

* Patients will have increased dependence on more costly institutional care.

* It will take longer to get equipment repaired. For a complex rehab patient, that could mean confinement to a bed for extended periods of time, which increases the chance of developing pressure sores or contracting pneumonia.

Lawmakers and providers need to understand the impact competitive bidding will have on rural areas, say industry stakeholders.

"There's a bit of apathy in the industry," said John Gallagher, vice president of government affairs for VGM. "People don't want to get involved. But, like the family farm, once (HMEs) are gone, they don't come back."