Medicare changes threatening to shut down local suppliers

Unless she’s going to church or a doctor’s appointment, Mildred Atkins rarely ventures outside these days.

The 80-year-old Chesterfield County resident is blind and suffering from cancer. She’s required oxygen treatment on an around-theclock basis since 2007, when she was initially diagnosed with blood clots in her lungs.

Still, she’s concerned that the federal government’s recently implemented national competitive bidding program for durable medical equipment (like the portable oxygen tanks Atkins uses) ultimately will leave her and countless other Medicare beneficiaries lacking much- lacking much-needed home health care supplies.

“It’s getting to the point where I’m afraid I won’t even be able to go to church,” Atkins said during an interview last week.

Atkins, a longtime customer of Richmond Respiratory and Medical Supply in Chesterfield, keeps eight portable oxygen tanks at home. Each tank contains a 45-minute supply of oxygen. She requires three tanks to make it through weekly Sunday School and church services.

That hasn’t been a problem in the past, she said, because Richmond Respiratory and Medical Supply delivered oxygen tanks to her home regularly enough that she never ran out. But changes to the Medicare program that pays for the tanks is threatening the company that brings the oxygen to her doorstep.

Wayne Campbell, owner of the Chesterfield-based company, said that maintaining the same level of service will be all but impossible under the terms of the contract he signed with the federal Centers for Medicare and Medicaid Services.

A company based in Virginia Beach originally was awarded the contract to service all Medicare patients requiring oxygen treatments in the Richmond “competitive bidding area,” which includes 18 localities stretching from Caroline to Dinwiddie counties, as far east as King and Queen County and as far west as Goochland County.

When that company declined the contract, Campbell was next in line. That appeared initially to be a significant victory, he said.

Statistics provided by the American Association for Homecare, a national advocacy organization, show that more than 92 percent of durable medical equipment companies nationwide failed to land a contract through the government’s competitive bidding process. The group claims that 38 percent of those companies already have gone out of business.

But when Campbell discovered that Medicare reimbursements for servicing oxygen patients had been cut by 41 percent for the new threeyear contract period that began July 1, he quickly realized that his business (which generates 98 percent of its revenue through Medicare) was in trouble, too.

“Do I think we can stay in business for two years on what Medicare is paying now? No,” he said. “Over time, we’re all going to be eliminated. As we go out of business, patients aren’t going to be able to get the service they need.”

Two years ago, Dave Patel sunk his life savings into purchasing a durable medical equipment company that has offices in Chesterfield, Maryland and New Jersey. Now he’s laid off all but one of his local employees and his company is on the verge of bankruptcy after failing to land a Medicare contract for servicing CPAP patients during last year’s bidding.

Patel said he’s already heard from former patients complaining about the subpar service they’re receiving from the large national companies who were awarded CPAP contracts in the markets his company serves.

“It’s a very tough situation,” he said. “I’m already in the process of evaluating if my company can survive this.”

The Centers for Medicare and Medicaid Services’ nationwide competitive bidding program is the result of 2003 legislation that scrapped price controls in favor of an auction process. Proponents of the legislation argued that applying free market principles to the process – requiring durable medical equipment companies to compete with each other – would both significantly reduce federal Medicare expenditures and ensure that beneficiaries have access to quality items and service.

A competitive bidding pilot program was implemented in 2008 in nine markets, including Miami, Dallas, Cleveland and Charlotte, N.C. It produced massive shortages of durable medical supplies and was promptly scrapped, only to be resurrected three years later by the Obama administration.

In June, 227 members of the U.S. House of Representatives wrote to the Centers for Medicare and Medicaid Services Administrator Marilyn Tavenner, who started her career as a nurse at Chippenham and Johnston-Willis hospitals, and asked that she delay implementation of the program in the remaining 91 competitive bidding areas.

Rep. J. Randy Forbes (R-4th), whose Congressional district includes part of Chesterfield, signed the letter and also has co-sponsored legislation that its backers say would repair fundamental flaws in the competitive bidding program.

“I am disheartened to see the implementation of a program which would force our area small businesses to lay off employees and potentially close their doors at a time when our economic recovery depends on their success,” Forbes said in a statement last week. “Many small business owners in the [Durable Medical Equipment] industry have personally expressed their concern to me that the process, as it stands, has created rates which are untenable for a small business to operate.”

In her reply to Forbes and the other representatives who signed the June letter, Tavenner said the program is expected to save taxpayers $25.8 billion in Medicare disbursements during the next 10 years and another $17.2 billion for beneficiaries through reduced coinsurance and premiums.

According to Patel, the Centers for Medicare and Medicaid Services hopes to achieve those goals by forcing small businesses out of the bidding process. The goal, Patel said, is to deal exclusively with large national companies with the buying power to purchase products (such as portable oxygen tanks) at cheaper prices.

“What Medicare is betting on [with significantly reduced reimbursement rates] is that the local guy will throw his hands up and say, ‘I can’t afford to service this contract,’” he said.

Patel said that’s a bad thing for customers because larger durable medical equipment companies don’t provide the same quality – either in products or service – as small businesses that are located near the people they serve.

For Medicare patients like Mildred Atkins, whose son frequently has to take time off from work to transport her to doctor appointments, greatly reduced service levels can have a major impact on her quality of life.

With more and more baby boomers heading into retirement, she worries that many others will face the same problems unless changes are made to the current program.

“I feel like [the government] has really slapped me in the face,” she said. “What are we supposed to do, just do without and die?”

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