May 26, 2019 Harmony Home

The Current Affairs of Medical Supplies in the USA

There have been a lot of changes with the prescribing, selection, delivery, and payment of medical supplies in the last decade. During the course of this tumultuous time, more than 40% of all medical supply providers have either closed their doors or been bought up by larger companies, often for pennies on the dollar of prior valuations. What caused this? How has it affected Americans? And what is in our future in terms of medical equipment and supply?

Historically, aging seniors and those with disabilities have relied on Medicare and MediCaid programs to cover their medical equipment costs. While some items were out of pocket, the majority were covered and paid enough that providers actually distributed quality products for those reimbursements. This landscape started to change around 2009 when two things happened. One, many Medicaid programs switched to using HMO’s and care management companies.

This required providers to contract and negotiate new pricing with each of these new providers in order to bill for Medicaid patients. This was difficult and left many unable to bill them or unable to collect secondary payments. Pricing also started to take a small hit. Then came competitive bidding for the Medicare program. Competitive bidding was Bush Era policy that came to fruition under Obama, but Obama did not create the program. It was intended to bring down over-priced allowables and weed out fraudulent billers.

While it definitely lowered reimbursements for medical supplies, it did it to a detrimental level for both the providers and eventually for the American people. The rates were cut an over-all rate of 42% in California and anywhere from 35-50% across the whole nation. The new rates were not sustainable and not conducive to quality products or care at home, as home medical equipment is the cornerstone to good at-home medical care.

As a result, providers were forced to purchase less-than-ideal quality products and service went out the window. Since only a limited number of providers were “awarded” the bid in each area their percentages of market share went from average (10-30%) to as high as 90% in certain areas. They thought this would be a good thing, but the rates being paid were not enough to be profitable. In many areas, like San Diego, they went out of business, out of state, or simply stopped accepting Medicare. In some rural areas there were no providers and horror stories of ER visits and even deaths as a result of not having access to oxygen and other life-saving medical supplies started to emerge. Increasingly, those who could afford to buy what they needed just started to do that and others had to suffer with the poor quality equipment and increased difficulty to even get approved.

A round 2 of Competitive Bid was done three years later, with hopes of rates going up and new regulations making the bid more equitable the American people and medical suppliers were sharply disappointed when little to no improvements came out of round 2. New providers tried to hack it and provide under the new slightly higher rates, and in the end most of those closed or surrendered Medicare billing for those codes too. With no provider providing all medical supplies under the nod (some provided wheelchairs, some did beds, not any one provider really did all products) it became a logistical nightmare for case managers and discharge planners to get their patients home. Once again turning to paying out of pocket was often the best and only method to get someone everything they needed to go home safely.

This trend is now the new norm. We as a nation and durable medical equipment providers have learned that we cannot rely on Medicare to dictate what medical supplies we or our patients can get and what we use to live at home safely. If we did this, all our seniors would be living in and out of skilled nursing facilities. It is more important than ever for healthcare providers to align themselves with quality medical equipment providers to recommend, deliver, and set-up the appropriate medical supplies for patients’ in-home. This is the advantage of a local dealer over Amazon or CVS, the personal touch. As round 3 of competitive comes upon us, we can expect that little improvement or shifting of financial burden will happen. The current government’s biggest concern seems to be to not spend more money on social programs, including Medicare, and personally, I think they want to do away with it completely.

This trend has been noticed by the biggest retailers in the world, as they try to come into this space and offer patients solutions. CVS, Walmart, and Amazon have all made significant strides to participate in this new opening left by low to no insurance coverage. With Baby Boomers coming into their silver years the retailers can “smell the blood in the water” and are implementing various divisions, policies, and functional capabilities to their businesses that cater to this population. CVS and Walmart have both bought insurance agencies, seeing that if they provide the coverage they will be “double dipping” so to speak in the distribution profits of DME and prescriptions. It could improve the likelihood insurance would approve these items, or it could do nothing, but land the senior in a CVS or Walmart to eventually just pay of out of pocket for the walker, wheelchair, or toilet riser they need. Either way it is a great move for their bottom lines.

One area where these giants have a hard time being nimble enough to excel at is customer service and custom equipment. They cannot spend the time and money it takes to bring one sales person to a full understanding of the depths of medical equipment available, sizing, and proper applications. Really getting the tailored solution is still only available in small medical supply stores, be it out of pocket or not. They also cannot extend into installations and home-based products that require measuring (ramps, lifts, grab bars), so those will always be better handled and serviced by the local medical equipment dealers.

It is an interesting time in US History, and a pivotal one, that will shape the future of our ability to care for our aging population. I think the best solutions and true ingenuity is going to come from entrepreneurs and innovators in business and not Congress or the President. I hope I am wrong to some degree, but over the last 10 years the national safety nets seems to be getting pulled in smaller and smaller. That’s why Harmony Home Medical exists and we will continue to try to come up with the best home access and safety solutions as well as equitable ways to give people access to them.