Tracking the Storm: CMS, Commodities Prices, Competitive Bidding & the Impact on Power Chairs

Call it a perfect storm — or at least a potentially perfect one.

While competitive bidding is understandably getting most of the immediate attention in the mobility and rehab markets these days, the power chair niche has additional storm fronts to watch. Industry insiders questioned about power chair hot spots mentioned everything from endangered client access and documentation concerns to a an evolving global commodities market.

Here are their current and upcoming forecasts for power chairs, from lighter mobility through complex rehab.

Storm Warning: Competitive Bidding
Impact: Potentially Devastating Erosion of End-User Access

Competitive bidding still remains the largest immediate problem on the industry’s radar, not only for its possibly devastating effect on the entire HME market, but also due to the rocky beginning for the centers for Medicare & Medicaid Services (CMS) program. Plagued by problems with the computer system set up to receive the bids — and amidst rumors that far fewer dealers than anticipated were submitting bids — CMS issued two week-long extensions, then announced a 60-day extension that ends Sept. 25.

Symptomatic of this ongoing and intense storm is the fact that the 60-day extension was not wholeheartedly embraced by the dealer community. Chris Rice — a provider based in Riverside, Calif., one of the first competitive bidding areas — has been running the Web site for the past year and through the site, gives providers a chance to network and discuss the program.

“Most of the providers I talked to were dismayed at the extension,” Rice says. “The idea was, we took our time, we got everything done. (The extension is) really not doing anything else but letting other providers into it. And the comments were really along the lines of ‘Well, (CMS) must have had enough problems with the process that they needed this extension for some reason.’” Rice also surmises that the extension may have been brought about by recent competitive bidding questions aimed at Kerry Weems, the nominee chosen by the Bush administration earlier this year to head CMS following the departure of Mark McClellan.

Asked if he personally experienced any of the infamous computer system difficulties as he was entering his own bids, Rice says, “The bid sheet is where all my problems stemmed from. And the problem was when you got to the part where you had to enter the manufacturer, the model name and model number. It’s a process that is just ridiculously slow, and it took about a minute to a minute and a half per entry. So when you got to the power mobility category and the rehab category — I don’t know how many products there are, but it seemed like millions at the time — it just took forever. And I ran into a few times where the system had crashed midway, and I came back and I had no data. So I had to start at the beginning. It was a very poorly designed data-entry system. It could have been much simpler.”

Now that he’s done with his submissions — incidentally, before the CMS extensions were announced — Rice says, “I’m not going back to change anything — not unless some new information comes out of (CMS). Since they changed the date that they’re going to accept accreditation by, I think that might just spur on some more providers to enter (the competitive bidding process), but I don’t expect it to be a huge number.”

Meanwhile, the rehab contingent continues to press for a competitive bidding exemption for complex assistive technology. H.R. 2231, introduced to the House of Representatives in May, pushes to exclude high-end rehab products from competitive bidding to preserve access for people with severe disabilities. (Track the bill’s progress on

Proponents of the so-called rehab carve-out insist that the demand for complex assistive technology is so relatively low that including such equipment in competitive bidding will not result in significant Medicare savings.

“We don’t think the savings is there for Medicare,” says Tara Gentile, funding manager for Permobil. In addition, Gentile worries about access issues should high-end rehab end up in the competitive bidding program.

“Suppliers are going to be limited on what they can provide, because competitive bidding looks at the lowest bid,” she points out. “So the allowable is definitely going to drop, and there’s going to be more and more focus on lower-cost products.

“There’s a lot of service involved; it’s not just the cost of the equipment. It’s going to the home and doing several follow-up evaluations and doing deliveries and going back and doing adjustments. All of that is kind of bundled in with the cost of the equipment right now.”

Gentile says a Permobil-hosted Capitol visit to Tennessee legislators in June netted six co-sponsors for the carve-out. She emphasized the importance of persistence when trying to get the word out.

“I think they’re starting to,” she says, when asked if legislators understand how rehab differs from other types of mobility. “It’s really just being persistent and following up and driving your point. I’ve been to D.C. twice now. The first one was for the NCART (National Coalition for Assistive & Rehab Technology) fly-in, and the second one was for our Tennessee fly-in. We got one co-sponsor out of that first visit. And then it was just going back, reiterating our issue, showing pictures of end-users using the assistive technology. It started to sink in that it’s a very small population from the whole Medicare population or the whole power wheelchair industry, actually. If you can get consumers involved, that’s the best scenario. Otherwise, you could have case studies or have videos. We had a one-page flyer with three different individuals and highlighting what their diagnoses were and what assistive technology they are using.”

Competitive bidding, Gentile says, is the concern she hears about most often from Permobil providers. That’s why, she says, “we’re trying to stop it before it gets here.”

Storm Watch: Documentation Demands
Impact: Flooded In-Baskets, Rising Workloads

CMS’ stepped-up requirements for documentation to confirm medical necessity has increased workloads for providers, says Invacare Corp.’s Mark Sullivan.

“I think some providers have had to hire more people, because they have to chase the doctors to get adequate documentation,” Sullivan explains in the wake of CMS’ elimination of the certificate of medical necessity (CMN) requirement. “If what the doctor sends back is not adequate, providers have to go and try to get better documentation out of them. So, it’s a lot more paperwork they’re seeing. They’re uncertain, really, until they get a post-payment audit what they really need because it’s still not real clear. So that makes people a little bit nervous, and they also try to go that extra mile to get as much documentation as they can.”

In July, TriCenturion, the Program Safeguard Contractor for jurisdictions A and B, released an FAQ document that quoted the power mobility device local coverage determination and stated, “Physicians must document the face-to-face examination ‘in a detailed narrative note in their charts in the format that they use for other entries.’ Forms that are developed by other entities including but not limited to a supplier or professional association do not meet this requirement. Therefore, they are not sufficient by themselves to document that coverage criteria have been met.”

Medical necessity is not the only type of vague documentation that providers are battling, says Golden Technologies’ Bob Winder.

“I do get a lot of questions on what the difference between a group 1 and a group 2 power chair is,” he says. “When you look at it, there is no clinical difference actually listed. I know what most of the experts in the field are saying: It’s in the amount of use. But no one’s clearly identified that. And now, regions A and B are doing a widespread probe into that: Why are so many (claims) going that way?”

In June TriCenturion announced the widespread probe — covering K0823-coded power chairs (group 2 standard, 300-lb. weight capacity chairs with captain’s seats). Winder says he understands why claims for K0823 chairs are so prevalent.

“Group 3 and group 4 are so hard to get that people are afraid to do that,” he explains. “So everybody’s dropping them down to group 2. And nobody knows what group 1 is. That would make sense to me — yes, you’re going to get a lot of group 2s. So hopefully, that probe will come out, and (Dr. Paul Hughes, medical director for regions A and B) will have some better clarification for us.”

Storm Watch: The Cost of Commodities
Impact: Batteries Are the Leading Edge, But Other Components Could Follow

CMS is not at the center of this particular storm front, but as the industry’s big payor and trendsetter, the agency is still poised to make a big impact, if inadvertently.

The costs of commodities — the raw materials used to build power chairs — are rising rapidly, in some cases faster than mobility and rehab manufacturers can keep up.

“They’re going through the roof,” says Innovation In Motion’s Rick Michael about the prices of commodities. “A lot of the metals are, but lead is really going through the roof.”

And when lead prices rise, so can the prices of batteries. Leisure-Lift’s DuWayne Kramer says he started noticing the rising prices in early July, when over the course of a few weeks, the cost he was paying per battery jumped nearly 30 percent.

“We talked to (the battery suppliers), and they were saying within the next 60 days, we could see as much as a 30-percent increase,” Kramer says.

Kramer adds that he immediately thought about how rising battery costs could hurt suppliers currently in the midst of submitting competitive bids that they’ll be forced to honor for three years. Because battery costs only recently started to rise, he says suppliers may not yet fully be aware of the situation.

“I think the dealers are just starting to see it, I don’t think they realize it’s happening, and that’s why I’m concerned,” Kramer says.

So what’s behind the skyrocketing battery costs? “It’s a fairly easy explanation, because the batteries themselves are not changing — the process and the technology,” says Interstate Batteries’ Larry Meeks. “It’s the lead price — (it) has skyrocketed and continues to go up, and lead is the fundamental component of the type of batteries we’re talking about.”

Blame it on increased worldwide demand for commodities such as lead, along with the fact that increasing the supply of lead is not an easy task.

Says MK Battery’s Dennis Sharpe: “Four years ago, we were paying $450 a ton for lead, and the trading range for lead for about 10 years was $450 to $500. Basic commodities at some point in time should become stable, because when prices are really high, there’s incentive for people to open new mines or to restart mines. The problem with basic materials is the very expensive infrastructure to do mining. Just like it’s very expensive to put an oilrig someplace. People have to put out huge investments to go after these materials.

“This is why there’s a supply issue. We have a developing world. China now has cars that it not only produces to export, but they actually need cars themselves in China. When you have a telecommunications industry and you have cell phones and computer systems that need to be backed up — all of those enterprises use batteries as backup power and as part of their infrastructure. So here’s another demand for more and more raw materials that just takes it away from whatever surplus may have been in the metals market. It’s China, it’s India, it’s all of Southeast Asia, anywhere that’s developing. And we’ve got to anticipate that the same thing will happen in Africa. They’re going to have the same needs for these raw materials.”

Asked to predict battery prices in the next year, Interstate’s Meeks says, “I would love to have a crystal ball that told me that. We’re kind of amazed at the fact that it just keeps going up. It is a commodity, it seems to be in very short supply. We do not foresee what’s going to happen.”

That uncertainty could hurt suppliers whose winning competitive bids will be locked in, regardless of inflation, global financial activities or the rising costs of commodities. “We’re seeing the devaluation of the dollar, and the Chinese are dumping dollars, so it’s affecting the value of the dollar all over the place,” Leisure-Lift’s Kramer points out. “Not only are you going to see issues with batteries on your competitive bidding quotes, but down the road, it’s going to affect steel and motors and copper. All your commodities are going to be seeing big increases across the board.”

“Someday, there will be enough product to supply everybody, and prices will be stable,” MK’s Sharpe says. “Who knows what (prices) might come down to? But in the foreseeable future, we have some issues.”

Coming Next Issue: MM’s 2007 Reimbursement Special Issue, including more details on funding hot spots and repair/service issues.

This article originally appeared in the September 2007 issue of Mobility Management.

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