Why The Spike in DME Utilization at Medicare

Saturday, May 31, 2003

The increase in DME utilization is a white-hot issue. Some argue that the increase is unwarranted and the products “over utilized.” They suggest that suggestive marketing campaigns have lead many to pressure physicians to prescribing equipment they don’t need. There is also a concern that unscrupulous vendors are submitting fraudulent claims. In their defense there will always be a small hypochondriac effect with any prescribed medical treatment from antibiotics to back surgery. Additionally, there are some unscrupulous vendors out there who are raiding the Medicare trust fund. Efforts to combat utilization associated with insufficient medical necessity and outright fraud should be both commended and encouraged.

The question is, does misuse and fraud account for the large increase in DME utilization? Those at CMS and elsewhere who think that utilization should increase no more than 12% per year are implicitly making a set of assumptions which on the surface seem quite plausible. The argument assumes the rate of illness in the population is constant. It also assumes that all consumers and their physicians have perfect information on their treatment and that all physicians proactively act in their patients’ best interest. A closer examination of those assumptions, however, shows something different.

Over the last several years the prevalence of diabetes, asthma, and obesity has increased dramatically. In fact, a recent CDC study shows 65% of Americans are over-weight or obese and many, including Secre-tary Thompson, con-sider obesity to be a top healthcare priority. All available evidence suggest that Americans’ neglect of their health has lead to both greater and earlier onset of chronic illnesses such as emphysema, diabetes and congestive heart failure. Concurrently, medical advances such as beta-blockers, pace makers, defribulators and other devices and surgical techniques have enabled people to live longer with those conditions. Needless to say, as the baby boomers have aged and these factors have come into play, the potential demand for DME equipment has risen dramatically.

In fact, DME growth, as shown in the May edition of HME News, has been concentrated in four product categories; power wheelchairs, respiratory drugs, blood glucose testing, and home oxygen. All four categories require medical documentation of conditions that are either directly or indirectly related to the conditions stated above. Unfortunately, at the current course and speed the demand will continue to grow arithmetically.

A logical person would surely ask, “Wouldn’t physicians have been regularly prescribing DME equipment which would show up as a more gradual growth in DME utilization?” The short answer is no. Many physicians carry very large caseloads; 2000 patients per physician is not unusual. At the same time many physicians perceive the rate of Medicare reimbursement to be below their market wage level. The net effect is that physicians often do not proactively intercede on behalf of their clients.

What has happened to enable the increased demand for DME products to be met?

What has occurred is that some DME vendors have employed traditional marketing techniques to increase the awareness of products which beneficiaries might be eligible to receive. The marketing by specific vendors has increased consumer and physician awareness. Consumers have requested that their physicians evaluate their health status and potential suitability for products, which can increase their independence and comfort. The beneficiaries with demonstrated medical necessity have received products and the utilization numbers reflect the match of pent-up demand with available supply.

It should be noted that increased demand and increased consumer awareness are market forces, which ultimately reduce expenditure per item and increase product quality and service. As the market for DME grows, more companies enter the market creating downward pressure on prices. Additionally, competitive markets lead companies to innovate and improve service to gain a competitive advantage that serves Medicare beneficiaries and the taxpayers equally as well.

As a final note the increase in DME utilization and hence spending should be viewed within the proper context. We can all agree that reducing aggregate healthcare expenditures and enhancing the quality of life are objectives we should be striving for. The increased demand and utilization for DME products, especially oxygen and mobility equipment, enable people to remain in their homes and be independent. That independence is preferred to the more costly alternative, which would be institutionalized care and or costly treatment for falls or acute respiratory dysfunction. We can only hope that some of the root causes for DME utilization — poor diet, lack of exercise, and smoking — will cease to be issues for future generations of Americans. HME

— JR Murray was consultant to Ruben J. King-Shaw Jr., past COO of CMS. He is currently a principal in the TGC Group, a management consulting firm focused on healthcare. He can be reached at 202-296-1533 or www.thetgcgroup.com.