Home Health Care Groups Push Back Against Competitive Bidding

Published May 31, 2016

Medicare’s new competitive bidding program could drive many companies out of the marketplace entirely according to home health care groups, who maintain the process is fundamentally flawed.

Providers may be forced to go out of business in a climate where firms have the ability to lowball bids and gain excessive market share, thereby driving out their competition without having to deliver a quality product—or any product at all.

No state is more affected by the competitive bidding law, which went into effect in January, than the state of Florida, says Sean Schwinghammer, executive director of Florida Alliance of Home Care Service. With a population of 18.5 million, 17.2 percent of whom are over age 65, he maintains Florida is ground zero for what’s going to happen to the nation’s home health care in an aging population.

“The Center for Medicare and Medicaid Services (CMS) indicates that if you’re not willing to bid 30 percent to 50 percent below the current price, don’t bother calling in with a bid,” says Schwinghammer. “We’ve now got providers that win the bid even though they didn’t place the winning bid, because the actual winner decided they couldn’t cover the cost of the contract. CMS just goes down the line contacting providers until someone finally accepts, then they award them the contract. Most economists agree that’s a terrible way to do things.”


Patients Reporting Problems

Schwinghammer says patients are already reporting problems receiving home medical equipment and services prescribed by their physicians.

“The patients are the ones that will really pay, since they will no longer have their choice of provider and their service might no longer be available in that area. Hospital referral agents are going to have a harder time getting people out of the hospital and into home care, because they won’t be able to find a provider—this keeps the patient in the hospital longer, costing everyone more money,” says Schwinghammer.

Schwinghammer says that the new bidding program is to blame for a rash of disruption in patient care.

“My office is being overrun with complaints,” he says. “Older patients complain because they can’t get their oxygen or wheelchair anymore, or they don’t like the people—often untrained—who come to their home to deliver or service their equipment. They just want their old provider back, one that they chose and trust, but because of the new competitive bidding law, they’re not allowed to have [them] because the provider is too small and didn’t win the bid.”


‘Dramatic Impact on Patients’

Patients are being harmed by the new approach, says Rose Schafhauser, executive director of Midwest Association for Medical Equipment Services (MAMES), an association of home medical equipment providers in seven states including Kansas and Missouri.

“This law is having a dramatic impact on patients. Some of the patients I talk to are very old or in a chronic care situation and are unaware or confused about the new law,” says Schafhauser.

The bidding process prevents patients from easily obtaining the products they want, said Schafhauser.

“I talked with one patient that has a continuous positive air pressure (CPAP) machine for his sleep apnea. He is a longtime user of this machine, and he gets his supplies from a local home health care business. One day his mask ripped, so he needed to buy a new one. He drove to the store and was told that they did not win the bid and he would instead have to drive 60 miles away to another town to purchase it from a supplier there,” says Schafhauser.


‘Massive Cosolidation, Monopoly Creation’

The problem is not easily solved, Schwinghammer says.

“There’s no way to fix this. The goals were to reduce the number of providers and reduce costs,” Schwinghammer said. “Ten years ago, there were about 4,000 providers of oxygen in Miami-Dade County. When the state introduced registration and accreditation, it reduced the number to 440. Now we’re down to just 150 providers. We’ve seen an over-50 percent reduction in the number of providers, so the first goal has obviously been met. But what about the second?”

Schwinghammer says no region will be spared from the attrition caused by the new competitive bidding process.

“The home health care field has changed tremendously in the ten years since CMS decided to pursue this course, and it continues to change. But CMS’s goal now is massive consolidation—which is effectively monopoly creation,” Schwinghammer says.


‘Process Designed to Fail’

Schafhauser cites a recent letter by 166 economists pointing out the flaws in the bidding process.

“What we’re seeing is the consolidation of the industry in a bidding process designed to fail. Once the low bid is accepted, many smaller companies will not be able to renew the contract because the economics are not sustainable,” says Schafhauser. “They’ll go out of business, get bought out, or when the contract is renewed, there will be price increases. CMS says it will help you design a sustainable business, but we’ve yet to see any economic study or documentation that proves this bidding process works.

“We’re a service industry, and we can never stop looking out for the needs of our patients. Unfortunately, the competitive bidding regulation impedes, rather than helps that goal,” added Schafhauser.


Kenneth Artz ([email protected]) writes from Dallas, Texas.

Internet Info:


Letter from economists to HHS Sec. Kathleen Sebelius and CMS Administrator Donald Berwick: http://www.cramton.umd.edu/papers2010-2014/25-oct-2010-congressman-braley-letter-on-medicare-bidding.pdf