A new competitive bidding process implemented by the Centers for Medicare & Medicaid Services will significantly limit growth in the home care products market in the coming years, according to a new analysis.
Kalorama Information’s new report, “The Market for Home Care Products, 6th Edition,” indicates only a modest growth in the durable medical equipment sector of 2.2 percent annually between 2009 and 2014, down from 4.1 percent between 2006 and 2009.
“The new competitive bidding practices mandated by the Medicare Modernization Act of 2003 for certain durable medical equipment, prosthetics, orthotics and supplies are beginning to impact prices,” said Bruce Carlson, publisher of Kalorama Information. “These encompass several large market segments covered in Kalorama’s report, including walkers, home care beds, wheelchairs and scooters, enteral nutritional products, oxygen equipment and diabetic supplies.”
The small increase, the report says, is despite several factors that would normally lead to strong growth, including the aging population and ongoing efforts to move chronic care patients from expensive institutional care to less costly home care. In 2009, an estimated 18 million people received home healthcare from either professional or unpaid caregivers, and most of them also used associated home care products.
The program was piloted in nine of the largest metro areas of the United States, with implementation of prices and contracts occurring in January 2011 after a re-bid. CMS estimates the new reimbursement rates will result in an average 32 percent reduction in payments.
The report indicates that a round-one bid for a standard power wheelchair is $2,554, about 30 percent below the current Medicare allowable rate. The wheelchair segment will contract by 2.4 percent per year as a result of competitive bid pricing pressure, the report says, inhibiting greater total market growth as wheelchairs comprise the largest home care product segment.
The segments affected by competitive bidding represented more than $3.9 billion in sales in 2009 or more than 42 percent of the home care market.
Round two of the competitive bidding program will add another 69 of the largest metro areas, with supplier registration and bidding in 2011 and three-year contracts beginning in January 2013.
The program requires that equipment suppliers submit sealed bids with the lowest reimbursement rates they will accept with selected Competitive Bidding Areas (CBAs). CMS then selects suppliers based upon these prices as well as other product and supplier information. The final reimbursement amount is derived from the median of all winning bids for an item. Suppliers who have not been selected will not receive reimbursement from Medicare if they furnish items to Medicare beneficiaries.