Medical Device Daily Washington Editor

Observers of Medicare may be inclined to think that the controversies over durable medical equipment will always prove more durable than the equipment itself, and the latest report from the Office of Inspector General at the Department of Health and Human Services does little to sweep away such thinking. Focusing on the cost of standard and complex rehabilitation powered wheelchairs, OIG notes that beneficiaries and the Centers for Medicare & Medicaid Services are paying substantially more for these items than the sums for which they could otherwise be obtained.

While OIG notes that an important set of services is often attached to these higher fees, what is not clear is whether the mark-ups enjoyed by DME providers are reasonable or represent another example of providers picking the taxpayer's pocket.

The raw numbers reported by OIG are eye-popping. The report notes that data from 2007 indicate that CMS paid an average of more than $4,000 for each standard powered wheelchair, a hefty bump up from the $1,048 paid by DME suppliers to get the chairs. In the case of complex rehabilitation powered chairs, CMS paid in excess of $11,000 on average while DME suppliers paid on average just less than $5,900 for those same units. OIG also notes, however, that the suspension of the DME bidding program carried with it a cut in reimbursement of 9.5% starting this past January.

OIG's report is based on data drawn from 201 providers who supplied standard power wheelchairs to Medicare beneficiaries and 71 providers who supplied the higher-end, rehabilitative units. It is not clear from the report whether these data sets include any overlap between the two groups.

Of the 201 standard-chair providers surveyed, fewer than two in three could claim to have assembled the wheelchairs and less than half of them reported having performed a patient evaluation. The most commonly reported services were delivering the wheelchair (99.8%), educating the beneficiary or his/her caregiver (93.1%), and performing a home assessment (89.4%).

As for the 71 DME providers who did business in the complex rehabilitation chairs, this group, too, accounted for less than two thirds of wheelchair assemblies, but almost three in four reported having performed patient evaluations. Interestingly enough, this group reported that it less frequently provided educational services to beneficiaries and/or their caregivers than the standard power wheelchair group (91.5% vs. 93.1%) and less frequently performed home assessments, roughly four out of five vs. the near 90% figure offered by standard wheelchair providers. Lost in all the numbers provided by OIG is how much of a mark-up of a wheelchair is generally deemed reasonable and whether these ancillary services are reasonably priced.

In a Sept. 3 statement, the American Association for Homecare (AAHomecare; Arlington, Virginia) says that the OIG report "ignored the substantial costs of services related to providing power wheelchairs, including complex rehab, to seniors and people with disabilities who require these items." Further describing the report as misleading, AAHomecare points out that OIG acknowledged that it did not determine "the cost of performing these services or other general supplier business expenses, such as billing, accreditation, staff salaries, or facility maintenance."

Tyler Wilson, the association's president, charged that the study "perpetuates the myth that suggests one could order a power wheelchair and have it dropped at your front door and get the same level of care, service, and professionalism that an accredited home medical provider would furnish for a senior or person with a disability."

The AAHomecare statement also notes that beyond the 9.5% cuts for power wheelchairs commencing earlier this year, CMS had erased consumer price index updates for the years 2004-2009 and that reimbursement changes in 2006 drove down reimbursements by 27% that year.

HMO market concentration effects mixed

One of the mantras of healthcare reform is the purported need for a public health insurance option in the interest of "keeping insurers honest," and the underlying logic behind this concept is that market concentration in a relatively few number of providers gives those providers substantial clout, which is then used to abuse the pocketbooks of enrollees.

However, a recent GAO report on health maintenance organizations (HMOs) suggests that market concentration is not as powerful a dynamic as is often supposed or, alternately, that HMOs are not as likely to abuse the privilege as reform advocates like to allege.

According to the GAO report, a literature review indicated that the top five national HMOs had a market share of 43.2% in 1994, a share which ran to 49.9% three years later as a result of industry consolidation. However, the report states that while "more competitive markets were associated with lower premium rates . . . mergers have not led to sustained premium increases."

GAO states that one study, which examined HMOs in operation between 1988 and 2001, concluded that more HMOs led to lower rates, thanks to the relative bargaining power of employers, but another sampling of 40 HMO mergers between 1988 and 1994 indicated that "the mergers did not result in increased pricing."

As for quality of care, GAO said that among the entries in the literature on the subject are one study that "found that greater competition was associated with lower quality of care" and another study, which "found an association with higher quality of care" to go with greater concentration. As one might expect, yet other studies were unable to establish any correlation at all.

GAO also examined the literature for clues as to whether a concentration of HMOs allowed them to put more pressure on hospitals to tighten up operations and provide better care. Anyone who bet that the results were again mixed wins the bet. GAO said the literature included one study that HMO market concentration "was positively associated with greater efficiency for hospitals" whereas another discerned no such correlation.

Mark McCarty, 703-268-5690;
mark.mccarty@ahcmedia.com