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Health Industry Distributors Association

February 10, 2011

The Health Industry Distributors Association (HIDA) is the professional trade association that represents the interests of over 600 medical-surgical products distributor companies operating throughout the United States.  Our members deliver life-saving healthcare products to more than 220,000 points of care including over 195,000 physician offices, 5,700 hospitals and 16,000 nursing home and extended care facilities in the nation and are committed to promoting safety and savings throughout the healthcare supply chain.

Medical products distributors offer the nation’s providers on-demand access to over 200,000 medical products essential for patient care.  Providers value this “one-stop shopping” resource, as it helps them manage supply costs and focus time and resources on patient care.  All products sold by a medical products distributor are sold to a healthcare provider.  As such, virtually every patient procedure is supported in some way by products supplied by a distributor.

The majority of distributors are small businesses. Over a quarter of the industry earns annual revenues under $1 million dollars. The healthcare distribution sector employs 65,000 people nationwide. Distributors’ average 1.3% annual profit margin is among the lowest in healthcare, requiring distributors to operate at extremely high levels of efficiency.

On behalf of HIDA, we applaud your efforts to ensure that Medicare beneficiaries continue to have uninterrupted access to life-saving medical products.  As such, we appreciate the opportunity to provide comments on provisions within the Patient Protection and Affordable Care Act (P.L. 111-148) and the Health Care and Education Reconciliation Act of 2010 (P.L. 111-152) that are poised to negatively impact the delivery of healthcare. Further implementation of the following provisions could hinder our members’ ability to continue delivering these critical services in a streamlined manner.  Specifically, HIDA would like to provide comments on the following provisions:

·         Section 6410 of P.L. 111-148, Adjustments to the Metropolitan Statistical Areas (MSAs) for Medicare Durable Medical Equipment, Prosthetics, Orthotics, and Supplies (DMEPOS) Competitive Acquisition Program; and

·         Section 9006 of P.L. 111-148, Expansion of Information Reporting Requirements.

Comments on Adjustments to the Metropolitan Statistical Areas for Medicare Durable Medical Equipment, Prosthetics, Orthotics, and Supplies Competitive Acquisition Program, Section 6410, Patient Protection and Affordable Care Act (P.L. 111-148)

HIDA supports competition in healthcare. As currently devised, Medicare’s “competitive bidding” system is anything but competitive. It empowers the federal government to choose “winners and losers”, reduces competition, limits patient and provider access to critical healthcare products, and adds layers of bureaucracy and cost to the system. Section 6410 further expands Round Two of Medicare’s competitive bidding program for DMEPOS to 91 MSAs from the current nine, a nine-fold increase. Expanding Round Two of the program by 91 MSAs prior to evaluating the impact of Round One on beneficiaries, providers and suppliers seems imprudent.  As such, HIDA has several suggestions for improving the program, these include:

·         Expanding the parameters of the current Government Accountability Office (GAO) program report mandate to include the impact of the competitive bidding program on Skilled Nursing Facilities, Nursing Facilities and Intermediate Care Facilities (Medical Place of Service Codes 31, 32, and 54) in each Round One MSA, and delaying further expansion of the DMEPOS competitive bidding program until the effects of Round One can be fully assessed; and

·         Exempting the enteral product category (e.g., intravenous nutrients) from competitive bidding or including an “any willing provider” provision to ensure that all licensed, accredited and bonded suppliers are able to participate

The competitive bidding program, in its current form, is positioned to reduce competition and patient choice, and eliminate jobs at a time when the federal government is trying to preserve and create them. Competitive bidding changes Medicare’s basic premise from beneficiaries having access to “any willing provider,” to a selection process that over time will significantly reduce the number of entities to which Medicare beneficiaries will have access. During the rebid of Round One, approximately 1,011 licensed, accredited and bonded suppliers submitted bids in hopes of participating in the new program. Of those 1,011 suppliers only 356 companies were offered contracts by the Centers for Medicare and Medicaid Services (CMS). Those not offered a bid are barred from participating in the program for three years (i.e., contracts are required to be rebid once every three years). Many of these smaller, regional supplier companies do not have the overhead to sustain their businesses without revenue from Medicare Part B. If a significant number of suppliers are eliminated, market competition will diminish, prices will increase, quality will erode, and patient choice will be limited.

Furthermore, Medicaid and many private insurance companies tend to replicate Medicare reimbursement policies, further intensifying the negative impact on small businesses. Similar proposals are already under consideration by state Medicaid programs (e.g., KS, CA, OH, TX) as a way to rein in costs.

In addition to the program’s negative impact on small businesses, competitive bidding is poised to jeopardize quality of care for millions of Medicare beneficiaries in skilled nursing facilities (SNFs). The competitive bidding program is designed for patients who live within their homes and the program does not account for the highly specialized, exacting care required of SNF patients. Patients in a SNF are among the population’s most ill and frail. They require 24/7 direct clinical coordination and care by their nurses, doctors, and other healthcare professionals. The acuity level of the SNF patient population is such that they require institutional care. In contrast, a typical homecare patient does not require this level of care.

Life-sustaining enteral nutrients, equipment and supplies – one of the nine product categories included in Round One are not well suited for the competitive bidding program. CMS indicated in its 2004 report to Congress on the demonstration programs in Polk County, Florida and San Antonio, Texas that most enteral nutrients are supplied to SNF residents. The report further states that enterals were not  compatible with the demonstration program specifically due to complex issues involving SNFs. HIDA understands first-hand the various complexities involved in the distribution of products into SNFs (e.g., the level of clinical management and services  required in institutionalized settings compared to that for non-institutionalized beneficiaries), as our members are uniquely impacted by the competitive program as suppliers of enteral nutrients, equipment and supplies.

Moving to a national competitive bidding program for DMEPOS raises many serious questions related to cost, access, beneficiary protections, and market-based competition. Taking these factors into consideration, HIDA feels that CMS should not move forward with further implementation of Round Two of program until the impact of Round One on Medicare beneficiaries within SNFs, suppliers and providers is fully evaluated and understood.

Comments on the Expansion of Information Reporting Requirements, Section 9006, Patient Protection and Affordable Care Act (P.L. 111-148)

The new IRS 1099 reporting requirements on businesses that purchase goods and services in the amount of $600 or more from corporations or individuals are quite onerous and will result in a considerable amount of additional paperwork for smaller, regional medical products distributors. HIDA supports the recent bipartisan calls for repeal of the new reporting requirements which will allow distributors to focus on growing their businesses, creating jobs and delivering life-saving medical products to healthcare providers.

Thank you for reviewing our concerns and considering our comments. We appreciate the opportunity to suggest important modifications to the healthcare reform legislation that should be implemented to ensure that patients and providers continue to have uninterrupted access to life-sustaining medical products.

Please contact HIDA’s Vice President of Government Affairs, Linda Rouse O’Neill at, or (703) 838-6125 with any questions.