A new economic study finds that the competitive bidding program for durable medical equipment (DME) being rolled out by the Centers for Medicare and Medicaid Services (CMS) would lead to reduced competition, lower quality of care, and higher costs.

Two Robert Morris University professors, Brian O'Roark, PhD and Stephen Foreman, PhD, conducted the study, which was released this week by the Pennsylvania Association of Medical Suppliers (PAMS).

"The limits on competition that CMS is proposing to implement will have great potential to produce higher prices and lower service quality," Foreman stated. "The franchise bidding process that CMS is implementing is at odds with everything that we know about markets, efficiency and incentives. We should be encouraging added competition in the market, not limiting it. Limits on competition like those proposed by CMS rarely, if ever, make consumers better off."

PAMS hosted a press conference on Monday at the United Cerebral Palsy of Pittsburgh, and the study has generated significant press coverage in the Pennsylvania media. Congressman Jason Altmire (D-Pa.) included comments in the PAMS press release. (See press release and study at pamsonline and press Pittsburgh Post-Gazette article at post-gazette/pg/08050/858499-28.stm).

John Shirvinsky, PAMS executive director, commented, "We have been gratified by the positive and accurate coverage that this important story has been receiving in the media. The study is so far proving to be a great boon in helping reporters to better understand the flawed nature of CMS's competitive bidding program for DME. We hope that Congress and CMS will heed the warnings of the study's authors about the high potential for negative and unintended consequences from competitive bidding and put this anti-competitive scheme on hold - at least until these impacts can be fully analyzed."

During the press conference, Foreman posed several questions, summarized below:

- Why target the DME industry since it's a tiny, slow-growing slice of the Medicare budget?

- Why destroy a functioning market since DME providers already compete on the basis of quality of service and patient access while the government sets prices?

- What happens when there are only a few DME suppliers left since market concentration is a bad idea on virtually every level - price, service, quality, innovation?

- Why haven't we learned from other industries that concentration is bad since healthcare sectors defined by concentration are characterized by high price increases, poor consumer satisfaction, and very high profits?

"This economic study underscores the potential harm of this Medicare bidding program and the urgency of a thorough reassessment by both Congress and the administration," said Alan Landauer, chairman of the American Association for Homecare and CEO of Landauer Metropolitan, a homecare provider based in Harrison, New York.

American Association for Homecare