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Small Medical Equipment Suppliers Criticize New CMS Rule

The Pittsburgh Post-Gazette on Friday examined how a new CMS competitive bidding rule "has some small medical suppliers ... worried that they'll be locked out of a market that historically has provided a third or more of their business" (Toland, Pittsburgh Post-Gazette, 1/11).

Under the current system, CMS uses prior sales data to determine prices for durable medical equipment, which acting CMS Administrator Kerry Weems says leads to overpayments. The new system requires suppliers to have accreditation and to submit bids. Only suppliers that submit bids less than a threshold established by CMS can participate in Medicare (Arkansas Democrat-Gazette, 1/9).

The Post-Gazette notes that the rule "theoretically will reduce the price Medicare will pay for 'durable medical equipment' by up to 20%, a tight shave for small businesses that don't buy equipment in bulk." Providers that are considered small businesses say that the new rule will favor large suppliers. The rule also will create a list of "authorized" Medicare providers, with small businesses guaranteed 30% of the total business, according to the Post-Gazette. Michael Reinemer of the American Association for Homecare said under the new rules, several thousand suppliers will be cut from the nationwide list of about 20,000. "Our fear is that it may create a sort of rush to the bottom, in terms of quality," Reinemer said (Pittsburgh Post-Gazette, 1/11).

Predictions for the Healthcare Industry in 2008

The Kansas City Star columnist Julius Karash on Monday examined PricewaterhouseCoopers Health Research Institute's predictions for the top eight issues that will affect the health care industry in 2008. Summaries of the issues appear below.

• Medicare: A new Medicare reimbursement system designed to better recognize the severity of patient illnesses could result in decreased revenue for specialty hospitals and other facilities that see fewer acutely ill patients, while urban hospitals that treat sicker patients could benefit.
• FDA: Increased oversight might improve the public's trust in prescription drug safety, but it also could increase the regulatory burden on pharmaceutical companies. The agency now can require drug companies to conduct additional trials after a drug has reached the market.
• Individual coverage: The market for individual coverage "could get much broader" if states and the federal government impose coverage mandates similar to the Massachusetts health insurance law, according to Karash. Individual coverage also could get a "boost" from Republican proposals to provide tax incentives to help consumers purchase individual policies.
• Retail health clinics: The "surge" in the number of retail health clinics "will force states, payers and policymakers to consider the best ways to deliver primary care," Karash writes. Hospitals could benefit if the clinics draw in the uninsured, and pharmaceutical companies might need to increase marketing to nurse practitioners who run the clinics.
• Retirees: "Retirees are playing a greater role in funding their health care coverage," as employers increasingly are shifting the costs to retirees, Karash writes.
• Pharmaceutical companies: Large pharmaceutical companies will continue to purchase and collaborate with life-science companies to improve their product pipelines, but biogenerics could affect drug company revenues.
• Not-for-profit hospitals: New Internal Revenue Service rules will require not-for-profit hospitals to disclose more details about the community benefits they provide, as well as executive salaries and benefits to justify their tax-exempt status.
• Asia: "Asia is poised to become the world's largest pharmaceutical consumer and producer," according to Karash. U.S. drug companies have increased marketing and clinical trials there because of the size of the market, increasing wealth and a "growing awareness of health related issues," Karash writes. In addition, because of inexpensive labor, several Asian drug companies "aim to become worldwide pharmaceutical powerhouses, not just contract manufacturers," according to Karash (Karash, Kansas City Star, 1/14).