[House Hearing, 111 Congress]
[From the U.S. Government Publishing Office]




 
                       SUBCOMMITTEE HEARING ON
                   THE IMPACT OF COMPETITIVE BIDDING
                       ON SMALL BUSINESSES IN THE
                  DURABLE MEDICAL EQUIPMENT COMMUNITY

=======================================================================

                                HEARING

                               before the


                      COMMITTEE ON SMALL BUSINESS
                             UNITED STATES
                        HOUSE OF REPRESENTATIVES

                     ONE HUNDRED ELEVENTH CONGRESS

                             FIRST SESSION

                               __________

                              HEARING HELD
                           FEBRUARY 11, 2009

                               __________

                               [GRAPHIC] [TIFF OMITTED] TONGRESS.#13
                               

            Small Business Committee Document Number 111-004
Available via the GPO Website: http://www.access.gpo.gov/congress/house


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                   HOUSE COMMITTEE ON SMALL BUSINESS

                NYDIA M. VELAZQUEZ, New York, Chairwoman

                          DENNIS MOORE, Kansas

                      HEATH SHULER, North Carolina

                     KATHY DAHLKEMPER, Pennsylvania

                         KURT SCHRADER, Oregon

                        ANN KIRKPATRICK, Arizona

                          GLENN NYE, Virginia

                         MICHAEL MICHAUD, Maine

                         MELISSA BEAN, Illinois

                         DAN LIPINSKI, Illinois

                      JASON ALTMIRE, Pennsylvania

                        YVETTE CLARKE, New York

                        BRAD ELLSWORTH, Indiana

                        JOE SESTAK, Pennsylvania

                         BOBBY BRIGHT, Alabama

                        PARKER GRIFFITH, Alabama

                      DEBORAH HALVORSON, Illinois

                  SAM GRAVES, Missouri, Ranking Member

                      ROSCOE G. BARTLETT, Maryland

                         W. TODD AKIN, Missouri

                            STEVE KING, Iowa

                     LYNN A. WESTMORELAND, Georgia

                          LOUIE GOHMERT, Texas

                         MARY FALLIN, Oklahoma

                         VERN BUCHANAN, Florida

                      BLAINE LUETKEMEYER, Missouri

                         AARON SCHOCK, Illinois

                      GLENN THOMPSON, Pennsylvania

                         MIKE COFFMAN, Colorado

                  Michael Day, Majority Staff Director

                 Adam Minehardt, Deputy Staff Director

                      Tim Slattery, Chief Counsel

                  Karen Haas, Minority Staff Director

        .........................................................

                                  (ii)

  
?

     Subcommittee on Rural Development, Entrepreneurship and Trade

                  HEATH SHULER, Pennsylvania, Chairman


MICHAEL MICHAUD, Maine               BLAINE LUETKEMEYER, Missouri, 
BOBBY BRIGHT, Alabama                Ranking
KATHY DAHLKEMPER, Pennsylvania       STEVE KING, Iowa
ANN KIRKPATRICK, Arizona             AARON SCHOCK, Illinois
YVETTE CLARKE, New York              GLENN THOMPSON, Pennsylvania

                                 (iii)

  
?



                            C O N T E N T S

                               __________

                           OPENING STATEMENTS

                                                                   Page

Velazquez, Hon. Nydia M..........................................     1
Graves, Hon. Sam.................................................     2

                               WITNESSES

Wilson, Mr. Laurence D., Director, Chronic Care Policy Group, 
  Center For Medicare Management, Centers For Medicare & Medicaid 
  Services.......................................................     3
Blackburn, Ms. Georgetta, Blackburn's, Tarentum, PA, On Behalf Of 
  AAHomecare.....................................................    14
Brant, Mr. Robert E., President, Accredited Medical Equipment 
  Providers Of America, Inc., Davie, FL..........................    16
Routman, M.D., Mr. Alan, Fort Lauderdale, FL, On Behalf Of 
  American Association Of Orthopaedic Surgeons...................    19
Stanfield, Mr. Wayne E., President, CEO, National Association Of 
  Independent Medical Equipment Suppliers........................    21
Griffin, Mr. William H., President, CEO, Griffin Home Health 
  Care, Inc., Charlotte, NC, On Behalf Of North Carolina 
  Association For Medical Equipment Services.....................    23
Sloan, Mr. Gerald, CEO, Progressive Medical Equipment, Lenexa, KS    25

                                APPENDIX


Prepared Statements:
Wilson, Mr. Laurence D., Director, Chronic Care Policy Group, 
  Center For Medicare Management, Centers For Medicare & Medicaid 
  Services.......................................................    39
Blackburn, Ms. Georgetta, Blackburn's, Tarentum, PA, On Behalf Of 
  AAHomecare.....................................................    53
Brant, Mr. Robert E., President, Accredited Medical Equipment 
  Providers Of America, Inc., Davie, FL..........................    62
Stanfield, Mr. Wayne E., President, CEO, National Association Of 
  Independent Medical Equipment Suppliers........................    77
Griffin, Mr. William H., President, CEO, Griffin Home Health 
  Care, Inc., Charlotte, NC, On Behalf Of North Carolina 
  Association For Medical Equipment Services.....................    83
Sloan, Mr. Gerald, CEO, Progressive Medical Equipment, Lenexa, KS   108
Routman, M.D., Mr. Alan, Fort Lauderdale, FL, On Behalf Of 
  American Association Of Orthopaedic Surgeons...................   112

Statements for the Record:
 O'Roark, PhD, Mr. Brian and Foreman, PhD, JD, MPA, Mr. Stephen: 
  The Impact of Competitive Bidding on the Market for DME........   123
Health Industry Distributors Association.........................   149
Medi-Source Equipment & Supply, Inc..............................   151
National Association of Chain Drug Stores........................   159
National Community Pharmacitsts Association......................   165

                                  (v)

  


                   SUBCOMMITTEE ON RURAL DEVELOPMENT,
                       ENTREPRENEURSHIP AND TRADE
                              HEARING ON:
                   THE IMPACT OF COMPETITIVE BIDDING
                       ON SMALL BUSINESSES IN THE
                  DURABLE MEDICAL EQUIPMENT COMMUNITY

                      Wednesday, February 11, 2009

                     U.S. House of Representatives,
                               Committee on Small Business,
                                                    Washington, DC.
    The Subcommittee met, pursuant to call, at 10:00 a.m., in 
Room 2360 Rayburn House Office Building, Hon. Heath Shuler 
[chairman of the Subcommittee] presiding.
    Present: Representatives Shuler, Luetkemeyer, and Thompson.
    Also Present: Representatives Altmire and Klein.
    Chairman Shuler. I call this hearing to order. Good policy 
is defined by basic philosophy that governs good medicine. 
First, do no harm. That principle seems simple. And, yet, there 
are incidents in which well-meaning legislation has unintended 
and sometimes devastating consequences.
    This was the case in 2007 when the CMS established 
competitive bidding for durable medical equipment. When it was 
first launched, competitive bidding was expected to save up to 
one billion dollars in taxpayer money.
    The idea was that it would drive down the prices by 
increasing competition and creating more choices, but this was 
not the case. Instead, it devastated small suppliers of rural 
communities.
    Although Congress intervened and stopped the competitive 
bidding, CMS used the last days of the Bush administration to 
push it through. Fortunately, the new administration has put a 
hold on that eleventh hour rule.
    In the next two months, the administration will review and 
hopefully eliminate the competitive bidding program altogether. 
This morning I will explore the efforts of competitive bidding 
on small healthcare providers and discuss the importance of 
ending the program entirely.
    The vast majority of the durable medical equipment 
providers are small businesses. Most of them deliver highly 
specialized products, which require a depth of industry 
knowledge. But competitive bidding allows many of the small 
suppliers to be outbid by larger, less knowledgeable firms.
    By nature, this process gives the upper hand to larger 
suppliers, who can churn out several medical devices and span 
an entire bidding area.
    In the last year, the Committee has held hearings to review 
the effects of competitive bidding on entrepreneurs. Time and 
again our witnesses have said the exact same thing. The program 
hurts small businesses and cripples rural communities.
    Because Medicare payments total a large percentage of the 
revenues for small suppliers, the effects of the program were 
devastating for those that failed to win contracts. This was 
particularly true for durable medical equipment suppliers in 
rural areas.
    If those firms are forced to shut their doors, the entire 
community will suffer, both economically and in terms of access 
to care. Although the name would suggest otherwise, competitive 
bidding did nothing to encourage competition. If anything, it 
worked to suppress it.
    In the long run, the program would have caused choices to 
dwindle and prices to go up. We need to continue to work to 
ensure that small businesses are able to compete in the market.
    I look forward to today's testimony. And I thank the 
witnesses for their participation. Before I turn it over to the 
Ranking Member, I also want to thank the staff in such short 
notice and right out of the gate for holding a hearing so early 
in the 111th Congress. They did an outstanding job. To Michael 
Day and to the entire staff and for all that you guys have 
continued to do, I appreciate all of your hard work and what 
you provide for all of the members, both the majority and the 
minority and to both sides, what great work you do.
    At this time I would like to yield to my Ranking Member, 
Mr. Luetkemeyer, for his opening statement.
    Mr. Luetkemeyer. Thank you, Mr. Chairman. I would also like 
to echo my thanks to the staff. I know they were in my office 
yesterday afternoon late and still managed to get me a briefing 
book with everything in it, the testimony, their initiative, 
and their abilities.
    Thank you, Mr. Chairman, for holding another hearing on the 
important topic of ensuring that our senior citizens have 
access to the best available durable medical equipment supplies 
and services, as offered by small businesses.
    The House Small Business Committee and this subcommittee 
recognize that small business is critical to the economic 
health of this country. The competition provided by small 
businesses ensures lower prices, greater supplies, higher 
quality, and increased innovation.
    Rural America presents unique issues with respect to 
providing healthcare services to residents. Distances are vast. 
Population density is low. And healthcare providers are few.
    More importantly, small businesses play an important, 
irreplaceable role in providing healthcare services in rural 
areas. Without a robust small business sector, the ability of 
other business to provide quality healthcare to the employees 
would falter. The result would be a diminishing of the economic 
well-being of rural areas because employees will not locate in 
areas where they cannot get adequate healthcare.
    Policies must ensure that all Americans, wherever they 
live, have access to the highest quality of healthcare, whether 
that is a service of surgeons or suppliers of slings for 
patients.
    In 2003, Congress mandated that the Centers for Medicare & 
Medicaid Services, or CMS, institute competitive bidding for 
the provision of durable medical equipment supplies.
    The implementation of this program has raised significant 
concerns with small businesses. In fact, the concerns were so 
serious that Congress acted to delay implementation of the 
bidding program that was to go into effect on July 1, 2008. On 
January 16th, 2009, in response to the actions of the 110th 
Congress, CMS issued some new rules on the implementation of 
competitive bidding.
    I am very interested in hearing from the suppliers 
represented here today whether concerns that led the Congress 
to action last July have been ameliorated by subsequent 
administrative decisions by CMS.
    If those concerns have not been allayed, then I am 
interested in hearing what potential problems will exist for 
the small businesses that are involved in providing durable 
medical equipment supplies and equipment to America's senior 
citizens.
    Finally, I am interested in hearing what improvements can 
be made to the competitive bidding that reduce any adverse 
consequences on small business. I think it is important that 
Congress have the information necessary to act if CMS adopts a 
procedure that forecloses numerous small businesses from 
participating in the competitive bidding process.
    Without small business, the competitive bidding program 
will not lead to lower prices, greater supply, and increased 
innovative in the durable medical equipment marketplace.
    With that, I yield back, Mr. Chairman.
    Chairman Shuler. Thank you, sir.
    Our first panel, obviously we have Mr. Laurence Wilson. Mr. 
Wilson is currently the Director of the Chronic Care Policy 
Group in the CMS' Center for Medicare Management. As the 
director, he is responsible for Medicare policy on a broad 
range of fee for service healthcare benefits. He is also 
responsible for administrating the agency's process for the 
coding of drugs, devices, and other items and services. Mr. 
Wilson has worked for CMS since 1988.
    Mr. Wilson, thank you for being here today. And we look 
forward to hearing your testimony.
    Mr. Wilson. Thank you, Mr. Chairman.

                  STATEMENT OF LAWRENCE WILSON

    Mr. Wilson. Good morning, Chairman Shuler, Ranking Member 
Luetkemeyer. I am pleased to be here today to discuss the 
durable medical equipment, prosthetics, orthotics, and supplies 
competitive bidding program.
    This important initiative, required under the Medicare 
Modernization Act of 2003, has three key components: quality 
standards and accreditation, financial standards, and 
competitive bidding. Together these will help reduce 
beneficiary out-of-pocket costs, improve the accuracy of 
Medicare's payments, help combat fraud, and ensure beneficiary 
access to high-quality items and services.
    The Centers for Medicare & Medicaid Services, or CMS, 
implemented the program on July 1, 2008 in 10 metropolitan 
areas around the country. After two weeks of operation, the 
program was delayed by the Medicare Improvements for Patients 
and Providers Act of 2008, or MIPPA.
    CMS is now preparing to move forward with that program in 
2009, as the law requires. And we look forward to incorporating 
the improvements mandated by MIPPA as well as others being 
planned by CMS to ensure a smooth transition to the new program 
for both beneficiaries and suppliers.
    As the 2008 implementation showed, the accreditation 
program and use of financial standards provides important 
safeguards for beneficiaries and the Medicare program. These 
safeguards support good quality and customer service, act to 
weed out illegitimate suppliers, and ensure a level playing 
field for suppliers competing for contracts under the program.
    I would note that with the support of suppliers, CMS will 
be implementing the quality standards and accreditation process 
on a national basis this year.
    CMS conducted a wide variety of activities to involve 
stakeholders in the development of these standards. Some, such 
as special focus groups, were targeted specifically to small 
suppliers.
    CMS has also adopted a number of approaches to ensure small 
suppliers have the opportunity to be considered for 
participation in the competitive bidding program. First, CMS 
worked in collaboration with the Small Business Administration 
to develop new, more representative definition of small 
suppliers. CMS then designed policies linked to this definition 
to help small suppliers.
    For example, our final regulations allow small suppliers to 
band together in networks in order to meet certain program 
requirements. The regulation also employs a formula to ensure 
that multiple contract suppliers are selected for each product 
category in an area. More importantly, the regulation 
establishes a special 30 percent target for small suppliers in 
the program.
    CMS was pleased that of the 335 contract suppliers selected 
in 2008, 64 percent met this definition of small supplier. Our 
2008 experience demonstrated that competitive bidding has the 
potential to bring value to Medicare beneficiaries and 
taxpayers. In fact, average savings across the ten metropolitan 
areas was 26 percent.
    As a specific example, in Pittsburgh, the price of a 
standard wheelchair dropped 32 percent under this program. That 
savings would have gone directly to Medicare, the taxpayers, 
and to beneficiaries in terms of lower co-insurance.
    While this program offers real benefits, we do understand 
that it will be difficult for some suppliers because the law 
requires that there be both winning and losing bidders and the 
new system represents a significant change in how suppliers 
operate under Medicare.
    We will continue to work closely with suppliers, 
manufacturers, beneficiaries, and others to make improvements 
in the program as we move forward. For example, MIPPA requires 
a number of important changes to the program.
    Just a few of these include: a document review process to 
assist providers or suppliers in completing their bids; an 
exemption to the competitive bidding program for certain items 
provided by hospitals; exemption from the program for rural 
areas and for small metropolitan areas in future rounds of 
bidding that is beyond this next first round; establishment of 
a competitive bidding program ombudsman to address supplier and 
beneficiary concerns.
    Last month, CMS issued an interim final rule with comment 
period to implement these and other provisions of MIPPA. 
Yesterday, CMS issued a notice seeking comment on a 
contemplated 60-day delay in the effective date of that rule.
    CMS, itself, is also considering additional improvements to 
the program. These include an improved online bidding system, 
streamlined financial documentation requirements, earlier 
education for suppliers on the bidding process, and many other 
features that we intend to improve.
    We have also established new membership of our program 
advisory and oversight committee to advise CMS as it implements 
the program. This group is equipped to advise CMS on a broad 
range of issues and has experience with on-the-ground 
operational issues, including the critical interaction between 
beneficiaries and suppliers.
    In conclusion, beneficiaries deserve quality items and 
services at a lower price from reliable suppliers. CMS is 
committed to the secuessful implementation of this program in 
order to deliver that.
    Once decisions are made about the timing of implementation, 
CMS will notify the public and begin to educate suppliers and 
beneficiaries about the program.
    I very much appreciate your time and the invitation to 
testify before you today and would be very happy to take 
questions. Thank you.
    [The statement of Mr. Wilson is included in the appendix in 
page 39.]
    Chairman Shuler. Thank you, Mr. Wilson. The Ranking Member 
and I will have several questions. We may ping-pong back and 
forth on these. Thank you for your time again.
    You know, the latest ruling didn't reflect any significant 
changes as we reviewed. CMS has until the end of 2009 to fix 
its problems. Wouldn't it be better to just start over and 
start with a much better process?
    I mean, we have seen from numerous newspaper articles. We 
have seen from numerous suppliers and providers that the 
programs that go into effect are going to have this disastrous 
impact on small business.
    Isn't there a way that we can delay this until the end of 
2009, instead of just, you know, as most times when bad policy 
goes here in Washington, we try to cram it down all the small 
businesses and all the suppliers? And ultimately it is going to 
end up hurting and having a negative impact. And the quality of 
care will obviously go down.
    I mean, isn't there a way that we can just halt and assist 
this until the end of 2009 so we can get good legislation put 
together?
    Mr. Wilson. I thank you, Mr. Chairman. Let me start by 
answering your question with respect to the rule. We did 
publish a rule at the end of last year or in January. The 
importance of that rule is to codify the specific changes that 
Congress asked us to make in our regulations that would put us 
in a position to implement the program, as the law requires, 
this year.
    Really, what the law requires this year is that we open the 
bid window, begin the competition in 2009. So we feel like we 
are merely codifying those changes to put ourselves in a 
position to implement the law.
    We do understand, of course, that suppliers have had 
concerns with this program and will continue to have concerns 
with this program. This is a program that has many benefits for 
beneficiaries in terms of lower co-insurance, benefits to 
taxpayers and Medicare in terms of reduced expenditures under 
the Medicare program.
    As we all know, sustainability of the Medicare program is a 
key issue, both for the administration, Congress, and others. 
So, we do feel that this does offer benefits that will help 
with sustainability of Medicare.
    In the end, we do believe that we can implement the program 
in a way that allows small suppliers to participate in the 
program that will result in a number of them being included in 
the program. In the 2008 process, 64 percent of the winning 
contract suppliers were small suppliers under our definition. 
And we think that was a good result but, again, do understand 
the concerns, sir.
    Chairman Shuler. Why wouldn't we have a proposed rule, 
instead of a final rule? Why wouldn't we have a proposed rule? 
We could get more of the people who are actually involved in 
this process actually having a voice, as opposed to, to be 
quite frank, just some of the past administration?
    Mr. Wilson. Well, I think for a couple of reasons. One, we 
did go through a notice and comment rulemaking on this 
provision. We did have numerous public forums. We had 
approximately eight advisory committee meetings. They were 
public. We took public testimony. We took comments on the 
quality standards, had over 5,000 comments, made important 
changes in the quality standards, made important changes in the 
rule.
    I think we have been very transparent with respect to the 
rules through our Web sites, listserv announcements, all of the 
different phone calls we have had, whether they are bidder 
conferences, access to staff in terms of meetings, briefings 
that we have held.
    I think that at the end of the day, we have a set of 
policies that allow us to implement this program consistent 
with the law. I think that the law in MIPPA asked us to make 
some specific changes in that and move forward in 2009. That is 
what we are trying to do right now.
    I am not sure that revisiting issues that we have dealt 
with in the past will necessarily change a lot, particularly in 
round one, given that we have tried to address those issues in 
a transparent way.
    Chairman Shuler. Give me one example of those changes, 
significant changes, that have been made that would impact 
someone who lives, oh, let's say in Murphy, North Carolina, who 
are two and a half hours from Atlanta, two and a half hours 
from Knoxville, two and a half hours from Asheville, North 
Carolina. So, I mean, they are really, you know, in a very 
rural area.
    Mr. Wilson. Well, one thing I could say, sir, is that under 
the provisions in MIPPA, rural areas are excluded from 
competitive bidding and metropolitan areas that have 
populations of less than 250,000 people. So competitive bidding 
has not occurred in those areas, will not under round one of 
competitive bidding, the round one rebidding required by MIPPA, 
and will never apply there in the future.
    I think that is a significant change. Under the Medicare 
Modernization Act, we did have the authority to apply 
competitive bidding there. And we don't--
    Chairman Shuler. So there is really no use saying that 
there is a round two. Is that what you are alluding to?
    Mr. Wilson. Well, there will be a round two of competitive 
bidding. The law requires that there be a round two. And there 
may very well be future rounds. They will never occur in a 
rural area because the law prohibits us from doing that.
    Chairman Shuler. What about these providers that are 
eligible in, let's say, Texas but they can actually go across 
states and that they have no business in, say, North Carolina? 
How can they? Especially at this point in time and the way the 
economy is, for providers from other states to come into my 
home state and take business away from the people, the hard-
working people, that have had a relationship--and I think that 
is the most important thing to remember is a relationship with 
these patients. Why is that possible? I mean, that doesn't make 
good business sense in these economic times.
    Mr. Wilson. Sure. What I would say is that in the Medicare 
program now, competitive bidding aside and for the last, you 
know, 40, almost 50 years of existence of the program, we have 
not had restrictions on businesses going into new areas and 
expanding.
    Many businesses do that all of the time, whether there is a 
competitive bidding program or not. They expand, go into new 
areas, and try to provide services to customers. So we do see 
that as something that has naturally occurred.
    That said, we understand that that was a concern in the 
first round of bidding last year. We did hear that quite a bit 
and hear some concerns about suppliers that were either new to 
an area, had no experience in an area, or new to a particular 
product category. Maybe they never provided oxygen before, let 
alone provided oxygen in Chattanooga.
    Chairman Shuler. And that is probably one of the biggest 
problems that we would have, is providers coming in who are not 
even educated in the field.
    Mr. Wilson. Right. And so I think a few things that the 
program does now--
    Chairman Shuler. So that change has been addressed?
    Mr. Wilson. Well, I will say that it has been addressed in 
some ways. And let me just say that we do have accreditation 
requirements. There are higher-level accreditation requirements 
and quality requirements on oxygen suppliers. So they do have 
to meet a set of standards.
    We do ensure that all suppliers that participate in the 
competitive bidding program meet financial standards as well so 
they have the wherewithal to provide services on a consistent 
basis to beneficiaries, but we do not at this time have 
restrictions on movement. We want to make sure that they have 
licenses in the appropriate states and in the appropriate areas 
to provide those services.
    We will do that. But, at this time, we don't have a policy 
that prevents that type of natural business expansion into a 
new area or a new product category.
    Chairman Shuler. I think that gets back to my point. You 
know, when you look at the financial wherewithal, that starts 
to really make it more difficult on small businesses, what I 
would consider the mom and pop shops that have been so helpful 
in our communities.
    I mean, I have a close friend of mine that provides 
services that go far and beyond what he gets paid for. It is 
just because of his relationship with his patients that they 
have had and conducted. And he feels a moral obligation to be 
able to provide for these people.
    And so it is going to be very difficult for small 
businesses to engage if they don't have the financial 
wherewithal, especially during struggling times and more 
difficult.
    Obviously I know that we have to make sure that the 
businesses are structured properly and they do have the 
financial wherewithal so they stay in business so they can 
provide a service.
    Can you educate me on what financial wherewithal would be? 
Is it a million-dollar net worth? Is it half a million dollars 
net worth in company value?
    Mr. Wilson. We rely on a set of financial standards that 
look at things like credit reports, look at past tax records, 
make sure that they have appropriate cash flow and resources in 
order to maintain/sustain a business.
    I think you raised some very good points, sir. One of the 
things I would say, you know, about local businesses is that we 
did see a number of businesses that won bids in new areas.
    One of the things they did to provide those services was 
subcontract with local suppliers. So maybe those local 
suppliers didn't win under competitive bidding, but they were 
allowed to participate in the program through subcontracting 
arrangements. So I think that is a good thing.
    The other thing that we saw is that many suppliers and many 
patients made use of a provision in the law which allows 
certain suppliers to grandfather. So maybe you are a patient in 
a certain area and you have a relationship with a supplier. If 
that supplier did not win under competitive bidding, you can 
choose to maintain that relationship for a service like oxygen, 
for example, regardless of whether or not that supplier won.
    So we did see those types of things occur, which sort of 
allowed the transition to the new program to be seamless and 
allowed suppliers to sort of maintain that local relationship 
with a patient.
    Chairman Shuler. I think that is going to be the extreme. I 
think, you know, when someone wins a bid, they are going to 
walk in and say, ``I am your new provider. They are going to 
walk the walk, and they are going to talk the talk about how 
well they are doing in their business. And now I am going to be 
your new provider.''
    I doubt, very frankly, that the patients are going to know 
that this grandfathered clause is actually in effect. There are 
not enough marketing dollars that are being spent to know that 
you can be grandfathered in.
    When that happens, you know, it would be great because I 
think a lot of our small businesses obviously would stay in 
business. But if you are only grandfathering in 20 percent of 
your overall business, you are probably not going to stay in 
business.
    Mr. Wilson. In response, sir, what I would say is that when 
we implemented the program in 2008, as you said, we did see a 
lot of the new suppliers, the winning suppliers, were 
aggressive in terms of trying to get patients, trying to get 
business. That is why they bid. That is why they bid and tried 
to win.
    We also did see--and we checked because one of the key 
things that we wanted to do as part of our monitoring program 
was to make sure that oxygen patients continued to get oxygen 
because it is not like a hospital bed, where if a patient needs 
a hospital, maybe they can wait a day or an hour. Oxygen you 
need every few seconds.
    We did check. Many did grandfather because they did want to 
keep that relationship with the patients, at least for a while. 
And I think that was important for patients and important for 
their suppliers.
    But I do understand the issue and the concern. Thank you.
    Chairman Shuler. I would like to yield to the Ranking 
Member now for his questions.
    Mr. Luetkemeyer. Thank you, Mr. Chairman.
    Who is driving this bidding process issue?
    Mr. Wilson. The law is driving the bidding process. The law 
requires that this competitive bidding process is in place.
    Mr. Luetkemeyer. Who drove the law initially? What group? 
Was there a group of people, a part of the industry? Was there 
an issue, a problem? Any time you have a change, do something 
like this, something or somebody or some group is driving it. 
Who was driving it?
    Mr. Wilson. Yes. I am not sure of the group. I sort of 
doubt it was the industry.
    [Laughter.]
    Mr. Luetkemeyer. I kind of doubt that, too. This is an 
awfully large group here this morning. We had a meeting the 
other day on some stimulus package stuff, and we didn't have 
this many people in here for that. I think that probably is an 
overriding issue over this, but this is something that 
obviously has gotten some folks stirred up.
    Mr. Wilson. Well, I can tell you this, sir. I don't know 
what particular group drove this or where this came about in 
terms of negotiations over the managed Medicare Modernization 
Act. I mean, I wasn't involved in those discussions. I am a 
career person, as I think you know.
    The thing that I will say is that there has been interest 
from CMS and formerly HCFA before that, the GAO, the OIG, and 
others on trying to get better pricing in this area of the 
program. There has been a lot of work done that shows that the 
pricing is excessive and that there may be a better way to get 
prices through the competitive bidding program.
    In earlier legislation; that is, prior to the Medicare 
Modernization Act, there was a demonstration that did test this 
in two areas: Polk County and San Antonio, Polk County, Florida 
and San Antonio, Texas. So there was work done on this prior to 
the national program.
    I think the interest was in better pricing because better 
pricing results in not just lower expenditures for Medicare. It 
results in lower expenditures for beneficiaries. Beneficiaries 
paid 20 percent coinsurance.
    So, under my example, from Pittsburgh, a 32 percent savings 
on a standard power wheelchair equates to about $279 in 
savings. That is important for beneficiaries, particularly in 
times now where beneficiaries have been hit pretty hard in the 
pocketbook in terms of their 401(k)'s and in terms of their 
retirement plans.
    And so I think there has been interest from the beneficiary 
area and the consumer groups, certainly interest from those 
around town here, like the GAO, Office of Inspector General, 
and CMS, that are interested in having fair prices.
    I know that is a long-winded answer, but I think that--
    Mr. Luetkemeyer. That is normal for Washington.
    [Laughter.]
    Mr. Luetkemeyer. I am just curious. I know that you made a 
comment a minute ago about the service portion of this. To me, 
it would seem that service is a big part of the, or should be a 
big part of the bid here. How do you factor that in? I think I 
have some information, but I want to be sure that it is a part 
of your thought process when you accept the bid.
    Mr. Wilson. It absolutely is. And when you look at 
Medicare's quality standards--and, of course, all suppliers in 
order to compete under competitive bidding must meet the 
quality standards. And, indeed, later this year every supplier 
in the country will have to meet the quality standards and be 
accredited.
    They talk about not just the equipment but delivering the 
equipment, setting up the equipment, educating the beneficiary 
on its use, and being there to provide customer service.
    So that it is very much factored in as part of the covered 
benefit. And the issue is, I think, what is the price for that 
and the equipment.
    Mr. Luetkemeyer. During your answer to one of the 
Chairman's questions, you made a couple of comments with 
regards to grandfathering in some of the providers. How long 
can you extend that to those folks to continue to be 
grandfathered in the program or are they grandfathered forever 
or just for a few months, a year or two, or where do we go with 
that?
    Mr. Wilson. Well, if the supplier and if the patient agree 
to maintain their relationship for a service like oxygen, then 
they can continue that relationship for as long as the patient 
and the supplier want it.
    For new patients, that grandfathering does not come into 
play. It is just for existing patients. So it would extend 
forever, although most patients are on oxygen for, I think the 
average is, about ten months under Medicare.
    Mr. Luetkemeyer. Okay. Obviously there are some concerns 
about what we are doing here. You are in the middle of this. 
What would you see or what would you like to see or what would 
you prefer done to alleviate the problem or get to the goal of 
containing costs, yet allowing competition or allowing great 
service? If you were in our position here to try and find a 
balance here, what would you suggest be done?
    Mr. Wilson. Yes. Difficult to answer that. Difficult to 
answer that question. You know, I am looking at--right now I 
work within sort of the boundaries of existing law and think 
about proposals for changes to the extent that there are 
changes being considered.
    You know, I think there are certain elements in Medicare 
that are pretty important. You know, you want to maintain 
quality and access and you want to pay well. When you don't pay 
accurately, you incentivize fraud. You incentivize bad 
behavior. And you bring in bad actors.
    And so I think we need to try to get to a way to pay 
accurately for these services. And we need a set of quality 
standards that we have today that ensures that people coming 
into the program and acting as suppliers are those that are 
prepared and able to provide quality services and deliver 
quality items.
    I was very pleased to see that part of AAHomecare's 
initiative on fraud was to try to boost the quality standards. 
We have quality standards for this area of the program. Their 
thought was to make them more rigid.
    So we are very interested in hearing those ideas because I 
think when you elevate quality in these kinds of programs, 
provide accurate pricing, you get pretty good results.
    Mr. Luetkemeyer. Okay. Thank you. Thank you, Mr. Chairman.
    Chairman Shuler. I just have a couple of more questions. 
Talk to me about the companies that were involved in the 
original demonstration. Talk to me. How successful have they 
been? I mean, have they made a pretty good business structure 
since the original demonstration? Polk County I think you said. 
San Antonio?
    Mr. Wilson. San Antonio, sir.
    Chairman Shuler. How are those companies doing?
    Mr. Wilson. I would have to get back to you on that. I do 
not recall which particular companies were involved in the 
demonstration. So I would not be able to tell you where they 
are now.
    The thing that I can tell you about the demonstration is 
that our findings were that we saved about, in the neighborhood 
of, 20 percent. I think it was a little less than that in terms 
of program savings. And that was savings for Medicare and 
beneficiaries in terms of reduced coinsurance and that we 
didn't see any impact on quality.
    Those were the findings of the demonstration. And, again, I 
am not sure where those companies are now and what their 
history has been. I would be happy to check, though.
    Chairman Shuler. Yes because I guess it was our 
understanding that a few of those companies aren't doing very 
well at all.
    We talked about the cost savings. And, obviously, being a 
blue dog member of that caucus, I am very much for cost 
savings. You talked about the 20 percent now. What increase, if 
any, of quality of care did you find out in this survey 
research?
    Mr. Wilson. In the demonstration?
    Chairman Shuler. Yes.
    Mr. Wilson. The finding that I recall from the evaluation 
report on that demonstration was that quality was not 
negatively impacted. That is what I recall.
    So I don't know that quality increased as a result of the 
demonstration. The thing that I would say is there were not 
quality standards in place and an accreditation process in 
place at the time. There was also not a set of financial 
standards, as the law requires us to have now, and a number of 
other programmatic requirements.
    Chairman Shuler. Obviously we can cut savings in a lot of 
different areas. I mean, obviously we have a budget that is 
coming up that I think probably no one is going to be happy 
with. I mean, there are going to be probably broad cuts across 
the board. But in these financial times, we obviously have to 
cut costs. But we always have to be very mindful of the quality 
of care.
    I have a grandmother who is on oxygen. And I know her 
quality of life actually increased once the doctor recommended 
her to be on oxygen. Now, obviously this is for another 
discussion. That is no different than insulin medication for 
patients. I personally feel that it is a prescription. And as 
long as the person is alive and needs oxygen, then it needs to 
be provided for them, just as insulin is.
    My grandmother was not a smoker. I mean, it is just 
happenstance. That is how God made her.
    I guess help me to understand. If a patient is distraught 
with the service that they were getting provided by the company 
that has been awarded the contract, what can they do about 
changing to get another provider? How would that process work?
    Mr. Wilson. Under the competitive bidding program, sir?
    Chairman Shuler. Yes.
    Mr. Wilson. Well, I think one of the things that we found--
and I will just go back to our 2008 experience. And let me just 
first preface this by saying that the program was only active 
for two weeks. We call it 14 days in July. So we don't have a 
lot of experience or a lot of records on everything.
    Chairman Shuler. Obviously some research has been done 
before. I mean, like most laws, surely, we think this process 
through before we throw it into law.
    Mr. Wilson. Absolutely. And I think one of the things 
that--I think there are a lot of things, as I mentioned in my 
testimony, that we want to try to improve in this program for 
next time.
    But one of the things that I think we did a pretty good job 
on was getting in touch with beneficiaries, talking to them 
about the program, making sure that Medicare 1-(800) knew what 
to do, having an infrastructure in place, caseworkers, 
ombudsmen staff at our contractors to be able to address 
concerns that came up from beneficiaries.
    So I think we did that pretty well. And so what would 
happen if someone had a concern with their supplier or maybe 
there was confusion about grandfathering and we didn't see a 
lot of this, but when we did, we were able to get a caseworker 
on these issues and usually resolve it within 24 hours.
    Typically what would happen, most of the calls that we got 
did involve ``I need a supplier for this, and I don't know 
where to go because the supplier that I used to go to no longer 
is part of the competitive bidding program.''
    We were able to direct them to new suppliers. And in most 
cases, there were multiple suppliers. Actually, in all cases, 
there were multiple suppliers in each area to provide choice to 
beneficiaries.
    We had, you know, 42-44 oxygen suppliers in Miami. Most 
places have 15 or 20 suppliers for a product category. Puerto 
Rico had fewer. That is not part of the program. Next time 
Congress excluded Puerto Rico.
    So I think that was a process that worked for us and worked 
pretty well.
    Chairman Shuler. Well, Mr. Wilson, just in closing, I would 
like to suggest if there is any way possible for CMS to scrap 
the program and start all over, I would highly suggest that.
    And I would like to obviously work with my colleagues on 
Small Business and obviously with the other committees to try 
to work with getting through some better quality standards.
    Obviously we need standards. We obviously need to cut 
costs. We need that, especially in the economic times that we 
are having. But to put our small businesses out is very 
difficult. We need to create jobs, not cut jobs and put people 
out of business.
    You know, some of them, I'm sure there are a lot of people 
who are attending here today that probably have their mortgages 
attached to their businesses. I mean, there is a way that, as 
with most people, the biggest asset that they have is their 
home.
    And so when you don't compete in the competitive bidding 
process--and I am sure if you look at the financial side of it, 
that that probably would be a negative toward a business if 
that is their source of the liability that they have. They 
don't have their house paid for. And that is where they put all 
of their debt of their company based upon an equity or have a 
line of credit for their company based upon their home equity 
loan.
    So I think we obviously need to take a much better look at 
this and possibly start all over or take some of the 
information obviously that has been provided.
    I mean, there are some things that can be done. I think 
there is a compromise at some point. And I want us to all 
compromise and work together. I mean, the reason why so many 
people showed up today that it is true and dear to their 
families and their livelihoods.
    Big business pushes over the small business in a lot of 
areas. And I just don't think that it is going to help lower 
costs. It may in the short term, but I think in the overall 
long term, we are going to see more problems and issues when it 
comes to the large companies coming in and taking control of 
the smaller ones and putting these people out of business.
    So I thank you for your comments, your testimony. Do you 
have any other questions?
    [No response.]
    Chairman Shuler. And we will try to very quickly change out 
and have our next panel. Mr. Wilson, thank you so much for your 
attendance. And thank you. Thanks for all of your hard work.
    If the folks who are on the next panel would go ahead and 
grab a seat?
    What a distinguished panel we have here. I would like to 
thank the panel for coming and spending their time here in 
Washington and giving their testimony.
    Each of you will have five minutes to present your 
testimony. And there will be a little light. It goes green. And 
then yellow means that you have a minute left. And then it goes 
to red.
    And then hopefully just try to finish up within the five-
minute allotment time. We obviously have a very large panel 
here. We would like to get through all of the testimony and 
certainly the members be able to ask questions because I think 
it is so important that we may be preaching to the choir here, 
but I think as members, it is a great education for us. And 
that is why we hold these hearings for the members to educate 
them on the policy that may sound good and look good on paper, 
but examine the impact to our small businesses and to our 
people.
    At this time I would like to yield to my good friend Mr. 
Altmire to introduce our first witness.
    Mr. Altmire. I thank the Chairman.
    I do have the high honor of introducing not just a 
constituent but a very good friend, Georgie Blackburn, who is 
Vice President of Government Relations and Legislative Affairs 
for Blackburn's, a privately held home medical equipment and 
supplies provider in Tarentum, Pennsylvania.
    She also serves as treasurer and board director for the 
American Association of Homecare. AAHomecare represents 
homecare providers, equipment manufacturers, and other 
organizations, operating in approximately 3,000 locations 
across all 50 states.
    I would say, Mr. Chairman, that Ms. Blackburn and her 
business are good corporate citizens. They provide the highest-
quality care. And they are exactly the model for what we are 
talking about here today with the impact small businesses can 
have on their local communities and why we need to keep them.
    Thank you, Mr. Chairman.
    Chairman Shuler. Thank you, sir.
    Ms. Blackburn, you will be recognized for five minutes.

                STATEMENT OF GEORGETTA BLACKBURN

    Ms. Blackburn. Good morning, Mr. Chairman and distinguished 
members of the Subcommittee. I am pleased to be here today on 
behalf of the American Association for Homecare and should say 
that our members provide products in all 50 states. Members 
include providers and manufacturers of home medical equipment 
and services, prosthetics, orthotics, and medical supplies to 
Medicare beneficiaries in their homes.
    I urge you to permanently suspend the bidding program. It 
will force the closure of thousands of small providers and 
reduce access to quality care for millions of Medicare 
beneficiaries.
    Since the last hearing on this topic before this 
Subcommittee in May of 2008, Congress delayed the competitive 
bidding program for a period of 18 to 24 months and directed 
the Centers for Medicare and Medicaid Services to address the 
disastrous results from the first round of bidding. This was 
part of the Medicare Improvements for Patients and Providers 
Act of 2008.
    CMS has made as few changes as possible under the law in 
order to issue a rule on the last day of the previous 
administration with no structural changes to a flawed program.
    The interim rule is slated to go into effect on February 
17th, 2009. The CMS deadline on the reissued final rule to 
solicit comments on a delay is tomorrow, February 12th, giving 
only six days to respond. And there has been no opportunity for 
any public comment or any evaluation of the problems that 
plagued round one throughout 2008.
    Last year CMS disbanded the Medicare Program Advisory and 
Oversight Committee, which Congress mandated to advise CMS on 
the bidding program. Congress should exercise oversight of CMS, 
examine the process by which CMS issued the final rule, and 
urge the administration to rescind the rule.
    HHS has the authority to suspend and review pending federal 
rules as detailed in the White House Chief of Staff memorandum 
of January 20th, 2009. We hope the Subcommittee will allow for 
more public scrutiny of this program.
    Providers compete but we compete on quality and service. 
Medicare sets reimbursement rates. However, the CMS-designed 
bidding program is anti-competitive and fatally flawed. By 
selectively contracting with a small number of the homecare 
universe, it reduces competition because it eliminates 90 
percent of the competitors.
    This government-mandated consolidation of the marketplace 
will lead to significant job losses. It will force small 
providers out of business, often family businesses serving 
their communities for decades.
    For the typical home medical equipment company, Medicare 
beneficiaries represent 40 to 50 percent of their customer 
base. Being shut out of Medicare for a three-year contract 
period will be a death knell for small providers.
    CMS expects fewer than 400 companies to be contracted to 
provide services in the initial 9 bidding areas if rebid. 
Currently 4,127 companies serve those same 9 areas.
    This program, whose primary selection criterion is lowest 
price, represents a race to the bottom. CMS frequently cited 
that the program was an anti-fraud mechanism. This is 
incorrect. The bid program is simply a payment mechanism.
    Our association has zero tolerance for fraud. We have 
developed an aggressive 13-point plan to stop fraud and abuse 
within our sector. We are tired of reading about criminals who 
have easily acquired provider numbers and syphoned millions of 
dollars from the benefit.
    CMS must press the national supplier clearinghouse, who 
grants Medicare billing numbers privileges, to stop fraud by 
identifying the bad players before they start to bill. And CMS 
must ensure that the national supplier clearinghouse fulfills 
this mandate.
    Ending fraud makes more sense than the endless rounds of 
cuts to the home medical equipment sector, which only serves to 
punish good providers.
    Round one of the bidding program produced disastrous 
results for patients and providers in all MSAs. Patient 
services were disrupted. The availability of fewer providers 
delayed hospital discharges. That resulted in longer hospital 
stays, increasing costs to Medicare.
    Many accredited providers that submitted bids were 
disqualified based on erroneous errors. Providers with no 
history of servicing a region or with no business operations in 
a bidding area were awarded contracts. Structural flaws in the 
bidding program caused small providers to submit bids for fear 
of losing their businesses.
    I am from Pittsburgh. It is not a rural area. But let me 
tell you what happened in Pittsburgh. Out of 289 providers, 
roughly 60 unique companies were awarded contracts. Of over 
265,000 eligible Medicare beneficiaries, 18,000-plus relied on 
oxygen therapy and only 22 companies were contracted to provide 
it.
    Over 30,000 residents that required tube feeding to stay 
alive were forced to switch to one of only 10 providers. And 80 
percent of longstanding experienced, accredited providers were 
totally excluded.
    Homecare is the most cost-effective setting for health 
care. It is the slowest-growing and one of the smallest sectors 
of Medicare, representing about 1.6 percent of Medicare 
dollars. In 2007, spending increased by less than one percent.
    At this time of economic hardship, it is imperative that 
small medical equipment providers remain in business. Congress 
must ensure that local economies will not suffer and that 
patient access to care remains intact.
    Congress must permanently suspend the Medicare competitive 
bidding program for home medical equipment or there will be 
catastrophic effects to small business providers, their 
employees, and certainly the patients they serve.
    Thank you.
    [The statement of Ms. Blackburn is included in the appendix 
in page 53.]
    Chairman Shuler. Ms. Blackburn, thank you so much for your 
testimony.
    Our next witness is Robert Brant. Mr. Brant is the 
President of Accredited Medical Equipment Providers of America 
in Davie, Florida. I want to tell you that Debbie Wasserman 
Schultz, who obviously represents your area, has done a 
fabulous job. I spoke to her on the House floor and she has 
been very supportive of our small businesses, certainly in the 
State of Florida and around our country. So, Mr. Brant, you are 
very well-represented there.
    Mr. Brant, you will be recognized for five minutes.
    Mr. Brant. Thank you, Mr. Congressman.

                   STATEMENT OF ROBERT BRANT

    Mr. Brant. Chairman and Committee, thank you for allowing 
me to discuss Medicare's competitive bidding program and the 
negative effects it has for patients and equipment providers.
    My name is Robert Brant. I am co-owner of City Medical 
Services in North Miami Beach, Florida. We are a 12-year-old 
company. We have been Joint Commission-accredited since 2000. 
We have seven full-time employees, and most have been with me 
for over five years. And they do enjoy a healthcare benefit.
    I am currently President of the Accredited Medical 
Equipment Providers of America. We were formed shortly after 
the bid results came out, mostly from bid winners and bid 
losers from Miami, Orlando, and Dallas MSAs, all opposed to the 
competitive bidding program.
    The goals of the competitive bidding program were to reduce 
Medicare reimbursement and to responsibly minimize the number 
of providers for CMS to manage without limiting patients' 
access to care.
    The fact is, in the last ten years, with the passage of new 
rules and regulations, all of the goals that once justified 
competitive bidding have already been achieved. The industry 
has negotiated a 9.5 percent cut to providers, and CMS withheld 
a 5 percent CPI increase, which both began on January 1st.
    Despite that good news, Medicare released interim final 
rules on January 16th of this year in order to restart the 
program, using the same methodologies and techniques to award 
contracts without any financial accountability, allowing 
unlicensed, out-of-state, out-of-area bid winners, with no 
history of providing bid equipment throughout the first nine 
MSAs.
    In fact, it was in a similar Small Business Committee 
hearing to this that Congressmen Altmire and Gohmert said that 
it did not meet Regulatory Flexibility Act requirements six 
months before bid winners were announced.
    This program was based on a flawed demonstration project, 
with only a few categories that most winners viewed as 
acceptable loss leaders. Half the bid winners from round one of 
the project found the loss unacceptable as they did not 
participate in the second round.
    Medicare noted key findings in an evaluation report of the 
demonstration project: one, a non-demonstration supplier 
acquired two demonstration suppliers; and, two, the parent 
companies of one demonstration supplier filed for bankruptcy. 
And another demonstration supplier also filed for bankruptcy 
protection.
    Regarding the first ten MSAs, the ability to purchase bid 
winners has led to part of the disaster that followed. In 
Orlando, 14 of the 39 bid winners were over 100 miles outside 
of the area, without any means to service oxygen patients.
    For any companies out of the area, it is a no-lose 
situation. Out-of-area providers place any low bid. And if they 
win, they think they may have a commodity that someone else may 
willing to buy, like in the demonstration project.
    The interim final rule does not require a provider to even 
provide a bond to cover the bid. You don't even have to have a 
subcontract agreement in place to cover a 12-county area as 
large as the Dallas MSA before you bid. Then if you win the bid 
and cannot fulfill the contract, you can walk away without 
penalty. However, the low price is locked in for everyone else.
    The Florida Department of Health certified that 9 of the 44 
bid winners for oxygen were unlicensed. Our association was 
informed of this discrepancy when providers contacted 
manufacturer representatives of oxygen asking, ``How do you get 
an oxygen license?''
    This begs the question, how can a company place an accurate 
bid if they have never provided the service before? How can 
legitimate providers compete when bidders do not base bids on 
reality of providing service or equipment?
    I made a decision years ago to compete in the industry by 
providing more costly systems, like liquid oxygen. In order to 
bid on oxygen, I had to submit the number of liquid patients I 
have taken care of. This is another determining factor that was 
ignored. Manufacturer representatives told us that some oxygen 
suppliers after winning the bid inquired about how to purchase 
liquid oxygen as well.
    A liquid oxygen system is five times the cost of a standard 
oxygen system, but it is paid at the same reimbursement rate. 
It also has to be refilled every month. And that refill cost is 
in there as well. We had to buy a truck with a lift gate to 
carry the 110-pound reservoir every month to the patient. All 
of these factors would be in the company's ability to place a 
bid that they could honor without going out of business.
    When the program was briefly implemented in the two weeks 
of July, physicians and hospital case managers pleaded with us 
to continue to accept payments. Discharge planners went through 
the published lists of bid winners, could not find a company 
that could provide liquid oxygen or respiratory therapists to 
set up their patients that they were accustomed to. They were 
accustomed to patient training and setup within a few hours, 
not within a few days.
    This problem was exacerbated by providers refusing to 
address issues unless their orders were in addition to more 
expensive reimbursable items.
    The reduction in companies that currently provide service 
is astounding. In the Miami MSA, which covers the 3 largest 
counties, 402 power mobility device providers were reduced to 
18. More tragically is in the Miami MSA, 501 providers were 
reduced to only 44. In Hurricane Wilma, my company was without 
power for seven days.
    In areas of Dallas, where they had 285 providers reduced 
to--I'm sorry. In the Dallas MSA's 12 counties, there were 4 
counties that did not have a bid winner for oxygen in them. One 
of the counties, Rockwall County, does not even have a hospital 
in it.
    President Obama said that he does not want to keep 
government programs that do not work and intends to expand on 
programs that do. At less than ten percent of Medicare's 
budget, durable medical equipment is the most cost effective 
program in healthcare. Our services keep patients out of 
hospitals and rehab centers so they can live independently in 
their homes.
    During this economic crisis we do not want to needlessly 
close companies, causing more bankruptcies; burden the system 
with additional unemployment, which will end healthcare 
benefits; ruin an important community resource called upon 
during natural disasters; and, most importantly, limit a 
patient's access to care.
    Thank you very much.
    [The statement of Mr. Brant is included in the appendix in 
page 62.]
    Chairman Shuler. Thank you, Mr. Brant.
    At this time I would like to yield to the gentleman from 
Florida, Mr. Klein, to introduce our next witness.
    Mr. Klein. Thank you, Mr. Chairman and Ranking Member 
Luetkemeyer. I appreciate the opportunity to be with you. And 
thank you for holding this hearing. This is an issue that 
affects our patients in Florida and all over the country.
    I know most of us are concerned, as you are for calling 
this, and the balance of making sure that the program is cost-
effective, but we also have the quality and delivery of the 
product to the consumer in the most effective way. And that 
certainly was a failure of the CMS procedure that went forward 
a number of months ago.
    Mr. Chairman, I have the distinct privilege of introducing 
a good friend and tireless medical advocate in our community on 
behalf of his profession and on behalf of the patients in our 
area.
    Dr. Alan Routman is a practicing orthopedic surgeon in Fort 
Lauderdale, Florida. He has a very distinguished academic 
career. After establishing a practice in South Florida, he 
became one of the most respected voices in healthcare in our 
community, served as past president of the Florida Orthopaedic 
Society and the Broward County Medical Association, and earned 
the reputation of being a pragmatic and judicious expert on a 
variety of healthcare issues.
    He is testifying today on behalf of the American 
Association of Orthopaedic Surgeons. The association provides 
education and practice management services for surgeons and 
allied health professionals.
    Mr. Chairman, it is truly a pleasure and honor to introduce 
Dr. Routman to present before the Committee today.
    Chairman Shuler. Thank you, Dr. Routman, for being here 
today. You have five minutes for your opening testimony.

                   STATEMENT OF ALAN ROUTMAN

    Dr. Routman. Thank you, Chairman Shuler, Mr. Luetkemeyer, 
Representative Klein,--thank you very much for that 
introduction--and members of the Subcommittee.
    As Representative Klein mentioned, I am a practicing 
orthopaedic surgeon in Fort Lauderdale. I represent the 
American Association of Orthopaedic Surgeons, which represents 
17,000 board-certified surgeons across the country.
    I appreciate the opportunity to present our concerns today 
with the many changes being implemented by law and regulation 
concerning DMEPOS. We share Congress' aims of increasing the 
quality of patient care, eliminating fraud and abuse in the 
federal healthcare programs, and reducing the costs of 
delivering care to our beneficiaries: our patients. It is our 
pleasure to appear here today to continue our work toward those 
goals.
    With that said, I would like to highlight what we believe 
to be unintended consequences of applying rules meant for 
retail DMEPOS suppliers to physicians in small practices across 
the country who provide certain DMEPOS as part of providing our 
high-quality care to our patients. This includes orthopaedic 
surgeons, who treat fractures and apply braces and splits to 
patients' arms and legs and take care of patients with 
ambulatory problems, requiring crutches and canes and walkers.
    It is important to note that we are talking about doctors 
who supply these materials to our own patients, not to the 
public. Because we provide these materials as small businesses 
and sometimes in rural areas, we are the only suppliers of 
these materials that we stock in our offices for the care of 
our patients.
    Our concerns that we have regarding some of these new and 
revised rules pertain not specifically to the competitive 
bidding process, which I know we are here to talk about today, 
but I would like to address primarily the accreditation issues 
as it applies to doctors because we have been lumped in with 
these businesses requiring this accreditation process.
    CMS has signaled, even today, that it might implement what 
we feel are unnecessary requirements that physicians be 
accredited like these other businesses to provide DMEPOS to our 
patients. This threatens to interfere with our continuity of 
care and our patient relationship.
    I would tell you that the rules were changed in May of 
2008. I would like to thank Committee Chair Velazquez and Chair 
Shuler for helping to change those rules. That released the 
doctors from the competitive bidding process and the 
accreditation requirements temporarily, but we're looking for a 
more permanent fix because we are getting signals from CMS that 
accreditation is down the road for physicians.
    We believe that the Secretary of HHS should exercise the 
authority granted in MIPPA to permanently exempt physicians and 
licensed healthcare professional from the quality standards and 
accreditation requirements, considering the licensing, 
training, and accreditation requirements that we already go 
through in our states and our societies to practice our craft.
    We acknowledge and share your interest in ensuring Medicare 
beneficiaries receive high quality supplies and quality 
service. We are equally committed to ensuring that patients 
have access to the care and supplies they need in a safe, 
efficient, and timely manner. We believe as orthopaedic 
surgeons, this can best be provided by us at the point of 
service.
    When I treat a patient with an ankle fracture and they're 
in my office, I need to make sure that fracture is stable. I 
can put them in a cast or a brace. But to enable them to get 
home and to become ambulatory, I need to be able to give them 
crutches or walkers or canes at that point of service. I can't 
discharge those patients from my office with an unstable 
fracture, write a prescription, and say, ``Go get this 
somewhere in the community.''
    I stock these materials in my office. I submit my invoice 
to Medicare for my reimbursement. And I am paid a small 
pittance, perhaps ten percent over my invoice cost. I simply 
want to provide this to my patients as a service, not for 
profit.
    In order to go through the accreditation process, this 
would cost doctors $3,000 every 2 years. My total billing for 
durable medical equipment in the last year was less than that. 
So to submit me to a $3,000 accreditation process would totally 
take this out of my office and not allow me to provide this 
service to my patient.
    In addition, I would like to tell you my personal 
experience. CMS has withdrawn my supplier number. They have 
made me jump through many hurdles over the last year. I have 
been providing these materials to my patients over the past 
year of my own personal cost because of bureaucratic hurdles, 
the fact that the accreditation process was originally required 
and then changed.
    And I believe that doctors like me are subject to a very 
large net thrown over the South Florida area, in particular, 
looking for fraud and abuse. And we have been caught in that 
net and been subjected to unfair and inappropriate scrutiny 
when what we are doing, really, is providing what we feel is 
quality and medically appropriate care to our patients.
    I would like to thank you, Chairman Shuler and Mr. 
Luetkemeyer, for allowing me to be here today and tell my 
story. Please allow me and my colleagues to continue to provide 
high-quality health service to our patients and facilitate 
their recovery and their ability to health from their 
musculoskeletal injuries.
    [The statement of Dr. Routman is included in the appendix 
in page 112.]
    Chairman Shuler. Thank you, Dr. Routman, great testimony.
    Mr. Stanfield is our next witness. Wayne Stanfield is the 
President and CEO of the National Association of Independent 
Medical Equipment Suppliers.
    Mr. Stanfield, you will have five minutes to give your 
testimony.

                  STATEMENT OF WAYNE STANFIELD

    Mr. Stanfield. Thank you, Chairman Shuler and Ranking 
Member Luetkemeyer, members of the Committee.
    As said, my name is Wayne Stanfield, and I am President and 
CEO of the National Association of Independent Medical 
Equipment Suppliers, or NAIMES.
    Working in medical equipment is a second career for me. I 
am retired Air Force and spent 20 years in the air traffic 
control business.
    NAIMES is a trade association representing and supporting 
independent DME suppliers. I also am a partner in an 
independent DME supply company, Carolina Med-Plus, in the 
Concord area in round one Charlotte CBA. We participated in the 
bid but did not win a contract because we bid above the pivotal 
bid.
    NAIMES commends this Subcommittee for examining the impact 
of CMS' competitive bidding program for DME on small suppliers, 
which will be profound.
    Competitive bidding for DME was a part of the MMA '03. And 
while the stated purpose was to save Medicare money, that 
contention gave no consideration to the service to patients and 
the impact on small businesses, communities, and employment.
    CMS contends that DME competitive bidding represents 
market-based efficiency. I respectfully submit that this 
program does not represent anything close to healthy market 
economics. I also note that CMS has ample authority to lower 
fees without applying competitive bidding.
    Competitive bidding makes perfect sense for a multimillion-
dollar aerial tanker to replace the aging KC-135, but it makes 
no sense for an $89 walker or for oxygen services to a senior 
citizen. Competitive bidding has no place in healthcare and 
will result in higher costs to Medicare, lower quality, and 
less access to needed services.
    Competitive bidding in itself is an exclusionary process. 
It is important to understand the gravity of this assault on 
small business. Since the vast majority of HME providers are 
small, independently owned businesses, it stands to reason that 
they will bear the brunt of the effects of competitive bidding.
    According to CMS figures in 2007, there were 110,272 
supplier numbers billing Medicare. And of those, 103,227 bill 
Medicare less than $300,000 per year. That is 94 percent of the 
total supplier community.
    It also is important to note that, despite new start-up 
businesses in the DME industry, there was a decrease of more 
than 4,000 suppliers from 2006 to 2007. Also notable is that 
the canceled first round winning bids in the 10 MSAs 
represented less than 10 percent of the total active suppliers, 
meaning 90 percent were excluded from the market.
    These small businesses are a major part of the engine of 
the American free enterprise system. They employ more than one 
and a half million people while serving over 50 million 
Medicare, Medicaid, and private insurance beneficiaries. These 
businesses help keep patients out of institutional settings and 
at home, where they prefer to be, but it is also the least 
expensive alternative.
    The DME segment of Medicare is historically less than two 
percent of the total Medicare budget. And, in spite of the 
growth in the Medicare population, this has been virtually flat 
in growth in expenditures for decades. Yet, this smallest 
segment of Medicare expenditures is repeatedly singled out for 
fee cuts, competitive bidding, and other measures, such as the 
surety bond, all of which are forcing businesses to close and 
to stop serving Medicare patients.
    Homecare and DME should be growing since the cost of this 
care is infinitely less expensive than a hospital or nursing 
home. According to a recent market survey by the Freedonia 
Group, the need for medical equipment will grow by 5.5 percent 
through 2012, primarily due to the increasing number of older 
Americans. A program that reduces suppliers at a time when 
demand is increasing simply defies logic.
    This government-sponsored program will eliminate 
competition by dismantling a national network of suppliers that 
have reliably serviced the home health needs of Medicare 
patients for decades. While CMS has developed this program and 
has released the final rules for its implementation, it is 
Congress that authorized CMS to pursue this unworkable program.
    It is inconceivable that our government would promote a 
scheme to concentrate market share and eliminate competition at 
such a crucial time in our economy as we are at this present 
time. This is a formula for higher prices over time and is bad 
public policy that must be ended.
    NAIMES strongly opposes the reimplementation of this flawed 
program and recommends that Congress repeal the applicable 
portions of the MMA '03. Much of the anticipated savings have 
already been realized through previous cuts, such as the FEHBP 
cuts in 2007, the elimination of the CPI for the DME industry 
for more than 5 years, and the devastating 9 and a half percent 
cut to fees that went into effect on January 1st.
    I urge this Subcommittee to support the repeal of 
competitive bidding and return the free enterprise system to 
the small independently owned DME providers and allow them to 
meet the needs of America's aging population.
    Thank you, Chairman Shuler.
    [The statement of Mr. Stanfield is included in the appendix 
in page 77.]
    Chairman Shuler. Thank you, sir.
    Our next witness is Bill Griffin. Mr. Griffin is the 
founder and President and CEO of Griffin Home Health Care. He 
his testifying on behalf of the North Carolina Association for 
Medical Equipment Services.
    Mr. Griffin, you are recognized for five minutes.
    Mr. Griffin. Thank you, Mr. Chairman.

                  STATEMENT OF WILLIAM GRIFFIN

    Mr. Griffin. It is an honor to be here. And, distinguished 
members of the Subcommittee, thank you very much.
    With my background in funeral service and retail pharmacy, 
I certainly have a very strong compassion for my fellow man, 
which is the very reason that I got into this business 26 years 
ago. I have a passion for the industry and for the clients.
    The DME providers of North Carolina were the first in the 
nation to push for licensure in our industry. CMS reports now 
that there are 38 states requiring oxygen providers to be 
licensed.
    The DME industry provides a vital part of care for the 
individuals in our healthcare system. It is very important to 
understand that the DME Medicare benefits are less than two 
percent of the total Medicare budget. Obviously much of this a 
result of small business.
    There is no debate that our healthcare system is broken and 
needs major overhaul. Competition in its purest is very, very 
healthy. Competition keeps businesses honest, service-oriented, 
and ultimately keeps prices competitive. My impression is that 
CMS wants to eliminate competition by eliminating DME 
providers.
    My company was in the first round of the competitive 
bidding process. The process in itself was antiquated and very 
cumbersome, to say the least. We bid for five out of the ten 
product categories. Fortunately or unfortunately, we did not 
win a single product category.
    The information I received from the bid contractor was that 
our bid prices were too high. Why? Because I looked at my 
overhead. I schooled myself very carefully before committing to 
prices that would create substandard service, poor quality 
products, and ultimately drive us out of business.
    There are many troubling issues surrounding the fact that 
as a stellar organization with a local presence for over 25 
years, serving patients, we would now be unable to continue to 
serve those patients.
    The fact that we were told that our prices were too high is 
a clear indication that many suppliers bid to win, rather than 
bid to fulfill the commitment of the bid contract.
    The DME industry is a Service Industry. It is not a 
commodity. It is virtually impossible to place a price or a bid 
on the value-added services for providing and delivering a 
hospital bed, setting up oxygen or a sleep apnea machine.
    I would like to share a couple of the troubling issues. 
Many of the bid winners had no physical presence in the local 
communities in Charlotte. CMS awarded these bids to providers 
that were not even licensed in the State of North Carolina. 
Inexperienced and undercapitalized companies were awarded 
winning bids.
    Several of the winners are less than two to four years old. 
They had never done business in the product categories they had 
won, nor were they licensed and accredited in these winning 
categories.
    Many businesses will close their doors. One industry expert 
calculated that only nine percent are going to win the bid. We 
have heard that already. 91 percent of the businesses will go 
out of business. Obviously this will do away with thousands of 
jobs in our country.
    In Charlotte, one product category that equals up to 1,200 
jobs, you can multiply that times 10 product categories and 10 
MSAs just in the first round alone.
    To narrow down the results of the competitive bid program 
for my company, we have eliminated 30 percent of our staffing. 
That is painful as a business owner.
    Full-service DME suppliers can traditionally provide all 
the DME needs of the patient. Items such as wheelchairs, 
hospital beds, oxygen, enteral nutrients, and walkers may be 
provided by as many as five different suppliers under this 
plan.
    How confusing will this be Medicare beneficiaries, 
caregivers, and those who facilitate the discharge planning for 
patients leaving the hospital? Access will certainly be an 
issue.
    Case managers have told us they know they can depend on our 
business because of our service component. Under the Medicare 
competitive bidding program proposed scheme, the small number 
of providers will provide substandard service because they will 
be spread so thin. Patients will suffer. And ultimately there 
will be a cost shift from paying DME providers to paying for 
extended hospital stays. Home DME saves the government money.
    The reality is that my company lost the bid, but truly I 
have to believe that we were the winner. I am totally convinced 
that the number of bid winners are unable to fulfill the 
commitment. And I feel very strongly that many of the bid 
winners will not be able to provide the level of care to the 
Medicare beneficiary.
    The poor service will cost our healthcare system additional 
dollars. It will create hospital admissions and ultimately cost 
the Medicare program higher prices due to the lack of 
competition. The DME industry is highly regulated, nationally 
and locally. And obviously we have already heard CMS requires 
the companies be accredited by a certified accrediting agency.
    In closing, the competitive bidding process is bad policy. 
It is bad for consumers. It is bad for suppliers. It provides 
no significant savings to the government. It is inefficient and 
will ultimately create higher prices.
    We ask that the Medicare competitive bid implementation be 
eliminated. At the very least, let's work with the industry 
insiders to seek alternatives to preserve the program's 
integrity, maintain beneficiary freedom of choice in the 
selection of their provider, and ultimately maintain a 
competitive marketplace that will drive value-added services 
with competitive pricing.
    Thank you.
    [The statement of Mr. Griffin is included in the appendix 
in page 83.]
    Chairman Shuler. Thank you, Mr. Griffin, for your 
testimony.
    Our next witness is Gerald Sloan. Mr. Sloan is founder and 
CEO of Progressive Medical Equipment in Lenexa, Kansas.
    Mr. Sloan, you are recognized for five minutes.

                   STATEMENT OF GERALD SLOAN

    Mr. Sloan. Thank you, Chairman, thank you, Congressman 
Luetkemeyer, for the opportunity to come and share my story and 
our industry's small business concerns.
    As stated, my name is Gerald Sloan. I am the founder and 
owner of Progressive Medical Equipment in Kansas City. My 
company is defined as a small business by the SBA but barely so 
as defined by CMS.
    We will be celebrating our tenth year of doing business 
this April. And although we specialize in servicing mobility 
needs, we are a full-line DME company that provides, among many 
things, standard items, such as oxygen supplies, hospital beds, 
and bath accessories. This allows us to be a single point of 
contact for most of our referral sources.
    I come before you today to tell the story of competitive 
bidding from a small provider point of view. Like many small 
DMEs, across the United States, we began the competitive 
bidding process with much trepidation and uncertainty.
    Although CMS had promised to install safeguards into the 
system, such as requiring a target of 30 percent small provider 
participation to protect us, we realized that this actually 
meant thousands of us would be excluded from the program. 
Additionally, because the program had no transparency in 
determining winning bids, we felt and many actually realized 
that they could be excluded from the program without any 
refutable cause.
    We eventually were selected to participate in four of the 
five categories that we bid: complex rehab, consumer power 
wheelchairs, walkers and related accessories, and hospital 
beds. Although we won our bids, I still feel strongly that CMS 
did not do enough to protect small providers and ultimately 
favored large national companies. Evidence of this can found 
directly from the booklet received by Medicare beneficiaries 
prior to July 1, 2008 announcing the program and winning 
providers.
    My company, Progressive Medical Equipment, was one of the 
two local providers to win in the complex rehab category. The 
other two winners, Scooter Store and ATG Designing Mobility, 
had never participated in this category in our MSA. To the best 
of my knowledge, neither is currently doing so.
    Also, one would find that the Scooter Store, a national 
provider for consumer power wheelchairs, is listed three times 
as a provider to call in our MSA. Everyone else is listed only 
once.
    As for the hospital beds and related supplies category, 
which features 49 listings, Apria, a national company, is 
listed 14 times; Lincare, another national company, 14 times; 
and the Scooter Store 3, times. In other words, 31 of 49 
listings, or 63 percent of the listings, were divided among 
these 3 national providers. No small provider was given more 
than one reference in this category.
    I would also like to point out that the Scooter Store won 
in every category in our MSA. CMS has been adamant about the 
quality of service not being compromised in this acquisition 
program. But one must ask, how did a company that has never 
provided oxygen supplies, hospitals, et cetera, let alone be in 
our MSA, be selected to do so?
    Perhaps the greatest and longest-term ramification of the 
competitive acquisition program for my company rests in our 
oxygen services. As you may be aware, Congress passed a 36-
month cap payment for oxygen concentrator reimbursement. The 
first of the capped rentals was scheduled to occur in January 
of 2009.
    When we were submitting bids for oxygen, we were still 
waiting on a final rule of what would happen after the 36-month 
cap. Questions such as ``Who would own the equipment?'' and 
``What kind of service calls would be reimbursed?'' were left 
unanswered by CMS.
    Without this knowledge, I felt that as a small provider 
with very limited numbers of oxygen referrals a month, it would 
be unwise for me to gamble that the terms of the cap would be 
financially feasible for us. Therefore, our bid was higher than 
the accepted bid amount, and we lost the bid.
    In anticipation of losing the oxygen category, we began 
reducing our marketing in this area right after we submitted 
our bids. By July 1st, 2008, we were down to one to two 
referrals a month, down from six to ten referrals a month. Just 
a few years ago, we averaged 75 to 100 oxygen clients. Our 
number currently stands at 27, 24 of whom are capped out with 
no reimbursement for our service.
    So in short, our oxygen service is dead because of 
competitive bidding. Not only do we lose, but so does our 
community, who depends on us for very personalized and 
committed service.
    Another major concern with the competitive acquisition 
program was the inability to adjust bids because of economic 
factors. We made bids in the Summer of 2007, long before the 
price of gas began its well-known spike.
    By the time the program started in July of 2008, the price 
of gas had doubled. The effect of the rise was not only felt in 
our fleet but in the price of our products as well.
    Every supplier we used began adding fuel surcharges to our 
shipments. Some started requiring minimum orders before they 
would ship. This had a devastating effect on our ability to 
maintain the margins necessary to remain profitable. 
Thankfully, the program only lasted two weeks, but one has to 
wonder how long could we have lasted in a three-year contract?
    In conclusion, I would like to say that the DME industry 
has been attacked by CMS and Congress for too long for problems 
we did not create. Fraud has been the ballyhooed cry to justify 
this persecution. I am before you today to testify that the 
guilty party is not our industry but CMS.
    CMS is charged with maintaining program integrity. Yet, 
they continue to allow unscrupulous and nefarious criminals 
access to medicare provider numbers. They have proven time and 
again that they are poorly managed and cannot deliver program 
integrity. Yet we are to believe that they have small business 
interests in mind, that, despite no transparency in the 
process, we are to trust them with decisions that affect 
thousands of companies and tens of thousands of employees.
    I come before you to ask the Small Business Committee to 
find a way to strike down this program before it hurts anyone 
else. Thank you.
    [The statement of Mr. Sloan is included in the appendix in 
page 108.]
    Chairman Shuler. Thank you, Mr. Sloan.
    At this time I would like to open it up for questions. Mrs. 
Blackburn, if a competitive bidding process goes through and a 
large provider that is from outside the state gets a winning 
bid and they haven't been actively engaged in, say, oxygen, for 
an example, that requires, obviously, a lot more technical 
expertize than maybe some of the other equipment does, what is 
the process for the learning curve? And to what extent? 
Obviously give me the Reader's Digest version.
    [Laughter.]
    Chairman Shuler. And to what extent from the patient side, 
you know, from the health standpoint and quality of care is a 
problem if someone who doesn't have the expertise that maybe 
your company would?
    Ms. Blackburn. Well, first of all, Mr. Chairman, our 
company is 70 years old. It is independent. But we only entered 
oxygen probably about eight years ago.
    The learning curve has been seven for us. It is an 
exceptional amount of information that you must know. You must 
comprise an exceptional staff that is skilled in order to 
deliver oxygen.
    If you go as far as providing liquid oxygen, that is 
another step that you add to the process. The loss would 
certainly be to the patient. If you are being provided any type 
of medical equipment, let alone oxygen, by someone who doesn't 
understand the etiology of diagnosis, that doesn't understand 
what happens if they do not provide service immediately, the 
patient is going to suffer. And the ultimate result would be a 
hospitalization or at least a visit to the emergency room, 
which causes an increase to the CMS budget.
    Chairman Shuler. Thank you.
    This is for Mr. Griffin and Mr. Stanfield. If the 
competitive bidding process would continue, what would it 
actually do to your businesses? Mr. Stanfield?
    Mr. Stanfield. My personal business in the Concord market, 
we would bid again based on our ability to serve. And we would 
bid a fair market price. It is unlikely that we would win that 
bid. We would simply exit those categories and try and survive 
with the rest of the business.
    Chairman Shuler. So you would have layoffs?
    Mr. Stanfield. It is impossible to subcontract. If you look 
at the contract price, which averaged 26 percent below current 
fees, what is the contract supplier going to pay me?
    It is already 26 percent below previous fees. And the 
offers that we had were 20 percent below the contract fee. 
Suppliers simply cannot subcontract under this process. So it 
would essentially take us out of the Medicare market for the 
product categories that we did not win a bid.
    Chairman Shuler. Mr. Griffin?
    Mr. Griffin. Very similar. I concur with Mr. Stanfield. We 
have already taken a little different approach, trying to work 
towards some categories, some product categories, that are not 
included into the bid.
    In other words, we have gotten into the baby apnea 
monitoring business, a totally different field. We have gotten 
into diabetic shoes, totally apart from the Medicare 
competitive bidding process, not one of the product categories. 
A good portion of our business is retail.
    Once again, we have laid off 30 percent of our staff. We 
have exited that number of our staff, just pure and simply, 
because of that decline in business that we are foreseeing. We 
will bid again.
    Chairman Shuler. Mr. Brant, how about you?
    Mr. Brant. Unfortunately, we would probably be forced to 
close because it affects 91 percent of the items that we do. 
Even though they stated earlier that some items would be 
grandfathered in, enteral feeding supplies, diabetic supplies 
would not be grandfathered in. And most of our patients would 
cap within a few months the majority of the business that we 
put out. So we could not rely on that.
    And when you don't win the bid, you can't pick up new 
equipment. You can't pick up new patients. So, really, we would 
just be forced to close.
    Chairman Shuler. And Mr. Sloan.
    Mr. Brant. Eighty percent of our business is Medicare.
    Chairman Shuler. Mr. Sloan?
    Mr. Sloan. I think it is a bit of a difficult question. 
Naturally, as a small business owner, my first concerns would 
be taking care of those who have committed to me to work for 
me. So I would say I wouldn't want to say flippantly that I 
would just close the door.
    I think the net result that we were to lose in certain 
categories would severely impact our business. And as a 
business owner, I would have to find other ways of adjusting 
for that revenue lost.
    Would that result in us closing? It is very possible.
    Chairman Shuler. Dr. Routman, obviously in your testimony, 
you said you just started paying it out of your own pocket. I 
mean, that's quite alarming, but that says a lot about you as a 
person, that you go far and beyond the call of just being a 
doctor to the quality of care of the patient. So I commend you 
for that.
    Dr. Routman. Well, thank you, sir. I still have hope that I 
will get my DMEPOS supplier number. I have been told that they 
have 40 or 50 more days to answer my last application. I have 
probably applied six times in the last year.
    But if I don't get the supplier number, I will have to stop 
providing that service to Medicare patients. And then patients 
who need those devices will be on their own once they leave my 
office to try to find those devices, either in the marketplace 
or struggle to find them somehow.
    And my concern is they will find the wrong equipment or 
they won't be able to find what they need. There will be delays 
that might cause delays in their healing or untoward 
complications.
    Chairman Shuler. Not to get off on a completely different 
subject, but the cap, how much did it play in your bidding 
process?
    Mr. Brant. Which cap, the oxygen cap?
    Chairman Shuler. Yes, the oxygen cap. What role did it play 
in your bidding process? I mean, did you take that into 
consideration?
    Mr. Stanfield. We did. We took it into consideration 
considering that we knew that January 1st, there was going to 
be a change in reimbursement. It did not make sense to bid at a 
lower rate knowing that we were already going to take a 
significant cut on the 1st of January.
    If I might add, there is another piece of this. One of the 
things that occurred in our market was Mr. Wilson talked about 
assuring the service continued for oxygen patients. And it was 
perhaps more important than a hospital bed.
    Yet, there were cases where hospital beds, in fact, kept 
people in the hospital for extra days at a very high cost to 
Medicare because under the bid, there was no one available that 
could deliver a hospital bed within a short period of time to 
facilitate a discharge.
    Mr. Brant. If I may, one of the things in the Polk County 
demonstration project is that it was before the legislation of 
the cap. So people bid in Polk County knowing that oxygen would 
continue to be paid. But here it began. We knew that we would 
be capped out six months after the program started. So it 
definitely had an effect on how we bid.
    Chairman Shuler. Well, thank you.
    At this time I would like to yield to the Ranking Member 
for his questions.
    Mr. Luetkemeyer. Thank you, Mr. Chairman.
    Mrs. Blackburn, you made a comment during your testimony, 
something to the effect that CMS disbanded the Oversight 
Committee. Can you elaborate on it just a little bit?
    Ms. Blackburn. Yes. The PAOC, or the Oversight Committee, 
the Program Advisory and Oversight Committee, was directly put 
together, CMS was mandated to put this committee together, so 
they could have direct input from the industry leaders and 
other stakeholders.
    They had very few meetings and, in anticipation to this 
change, just totally ignored the fact that there was a 
committee there that could feed information to them and 
possibly educate them on how some of these aspects that would 
be detrimental to the patients as well as to providers.
    And I might add that they just announced their new 
committee just recently, within the last month.
    Mr. Luetkemeyer. Okay. Also, during your testimony and 
because you represent an association, I am curious. Have you 
done any research with regards to the effect on the quality of 
care as a result of the lack or the bidding process that is in 
place right now? Has it caused a deterioration of the quality 
of care of the people? Have you done an assessment of that?
    Ms. Blackburn. I personally have not done one. And I don't 
know that we have an assessment on paper that we can give you, 
but we can tell you that we have dedicated information, the two 
weeks that we had competitive bidding in play.
    And within those two weeks, we had numerous examples of 
patients having to go to the hospital because the contracted 
provider could not deliver their oxygen within the two to four 
hours that usually our referral sources are accustomed to 
receiving. They were told that they would be there within 12 to 
24 hours and in some cases 48 hours.
    Now, oxygen is a life-sustaining drug. So we found that 
totally unacceptable. That is just one instance.
    Mr. Luetkemeyer. During your testimony also, in your 
written testimony, you have here that the current bid program 
as it is constituted would eliminate 90 percent of your home 
providers in the marketplace. Is that your correct assessment?
    Ms. Blackburn. Ninety percent, yes, of providers. I used 
the illustration of the fact that CMS has put on paper that 
they anticipate contracting with less than 400 providers if 
this new process goes through. And in those nine MSAs, where 
they would contract with 400 providers, we have 4,127. The math 
is very simple to do.
    Mr. Luetkemeyer. With this constriction of the number of 
suppliers, have you done any research to see what kind of 
increased cost down the road this would be for Medicare?
    Ms. Blackburn. I don't think I can answer that right off 
the top of my head. I would say this, that we did take--one of 
the other gentlemen did mention that we took a 9.5 percent cut 
when the delay went through with MIPPA.
    It is my understanding, although I am not an expert, that 
the goal was to save one billion dollars a year. The 9.5 
percent cut is estimated to save one billion dollars. So, in 
effect, we possibly have paid for the substitution of 
competitive bidding already by accepting that cut.
    Mr. Luetkemeyer. Okay. Well, my question is, though, 
because of the lack of competition down the road, have you done 
any sort of analysis to see what because of the lack of 
competition that is going to do to pricing?
    Ms. Blackburn. Oh, we think definitely pricing will go up. 
It stands to reason. It stands to reason that the competitive 
bidding process, which will occur every three years, you must 
work on the given allowable at that point.
    So each time that a provider would bid on a product and 
they eliminate competition, they have the ability to garner the 
market. We feel that the cost to CMS will go up because that 
will be relegated to fewer providers bidding if there's proof 
on--I am sorry. I don't have that.
    Mr. Luetkemeyer. But you haven't done any survey or 
research to quantify that? In other words, saying that within 
two years because the number of competitors is going to 
decrease, suddenly now you can probably anticipate a 10, 20, 30 
percent increase in the cost of doing business because there 
are fewer competitors in the marketplace?
    Ms. Blackburn. I am from the Pittsburgh MSA. And my state 
associate executor director just reminded me of something that 
was very important. Robert Morris University is in Pittsburgh.
    Mr. Luetkemeyer. Okay.
    Ms. Blackburn. Our state association got a free market 
analysis, and the Robert Morris' study determined that this was 
going to create oligopolies all across the nation, that there 
would absolutely be increased costs.
    And we can provide you, sir, with that study.
    Mr. Luetkemeyer. Yes. I am sure the Chairman and I would 
love to see some sort of documentation that shows what kind of 
increased cost we can anticipate because, you know, while the 
program is well-intentioned to try and decease costs, if it 
does just the opposite, that is exactly what we are looking 
for, is where this is going to lead to.
    Ms. Blackburn. We can absolutely get that to you. 
Congressman Altmire already has that.
    Mr. Luetkemeyer. I appreciate that. Thank you very much.
    Ms. Blackburn. Sure.
    Mr. Luetkemeyer. Mr. Brant, you had something with regards 
to--you talked about bonding folks who did bids. Can you 
explain that to me?
    Mr. Brant. Yes. Actually, I was saying there is no bond. 
You could place a bid--
    Mr. Luetkemeyer. Right.
    Mr. Brant. --without any financial accountability.
    Mr. Luetkemeyer. Is it normal in your business to place a 
bond on a bid?
    Mr. Brant. No. We have never had this before, you know, 
even in the demonstration project.
    Mr. Luetkemeyer. It is required in this? Are you required 
to do it now, then?
    Mr. Brant. There is no bond. Well, just to bond your 
company will start in the Fall of 2009, $50,000 bond. But this 
competitive bidding project, even in the demonstration areas, 
you could just bid without a bond. And, actually, after you 
submit your price and you are awarded, if it doesn't work out, 
you could just walk away. But the artificially low bid you 
created is stuck there for everyone else.
    There has never even a bond. You didn't have to post a bond 
for your bid, and you still don't have to--
    Mr. Luetkemeyer. Have you looked in the bonding process, 
whether it is going to cost you extra to be able to be bonded 
to participate down the road?
    Mr. Brant. Well, again, for the bonding for the company at 
the end of the year is the $50,000. No, I can't answer that at 
this time. I think we're still waiting for final rules on that 
bond that is required.
    Mr. Luetkemeyer. That, of course, would increase your bid.
    Mr. Brant. Yes. But, again, the competitive bidding it 
won't. But yes, for sure, it would add additional cost--
    Mr. Luetkemeyer. Well, even with the--
    Mr. Brant. --to operate.
    Mr. Luetkemeyer. --competitive bidding, it is going to 
increase your bid because you have got to include that somehow 
unless you're just really nice about it and are going to throw 
it in there.
    Mr. Brant. Yes. Again, what I am trying to say is I don't 
think it is understood compared to other competitive bid 
programs in government. For building a building or, as Mr. 
Stanfield say, building an airplane, those companies have to be 
bonded. There was never a statement that your bid had to be 
bonded. Your bid still does not have to be bonded.
    Mr. Luetkemeyer. What is the average bid that you or one of 
your folks would have to a supplier or to a purchaser? What 
would the average--you know, what would you throw out for your 
local--whoever you are going to sell something to tomorrow? 
What would your average bid be?
    Mr. Brant. That is hard to say.
    Mr. Luetkemeyer. A thousand?
    Mr. Brant. It depends on which item.
    Mr. Luetkemeyer. Ten thousand? A hundred thousand.
    Mr. Brant. Well, I mean, on each individual item, I mean, 
there were hundreds of items that we bid on different 
categories. But considering my company only made a three 
percent profit over average the last few years, we couldn't 
really come up with a price that was more--we pretty much knew 
when we put in our bid what would be just a few dollars below 
what the current Medicare reimbursement was because we couldn't 
live with it.
    Mr. Luetkemeyer. Well, what I am getting at, if you are 
going to be bonded, I am trying to figure out what the size of 
a normal contract would be.
    So, in other words, if you have a $30 million business and 
you have 1,000 customers, that would be a certain amount of 
money per bid, trying to get to an idea to see if this bonding 
is even worthwhile. That is where I am going with it.
    Mr. Stanfield, can you answer that?
    Mr. Stanfield. The bonding from my perspective as a 
representative of the independent suppliers is not a sensible 
process. It is simply going to eliminate another whole core of 
small businesses that cannot afford. As in the case of the 
physician here to have a surety bond would make it impossible 
for a company that only does a few thousand dollars a year to 
be able to afford that because the bond would exceed the 
return, much as accreditation would exceed it.
    We feel that the surety bond requirement has been far 
outweighed by the accreditation requirement, which is now 
mandatory and everybody agreed that that is an important part 
of reducing fraud and abuse.
    Mr. Brant. I would say that with the amount of equipment 
that we would put out in an annual year with Medicare would be 
like $800,000. So to have a bond to be $800,000, I have 
checked. I think it was somewhere about $10,000 a year 
additional operating cost for that type of bond.
    Mr. Luetkemeyer. Normally I would think that a bond would 
be more beneficial in the area of services versus area of 
product. To me, if you're going to give 100,000 of the product, 
you're either going to deliver it or you're not. A hundred 
thousand worth of services is a different situation. That is a 
situation where you may need to be bonded.
    But, I mean, Mr. Stanfield, with your association, what is 
the average sale of merchandise to an entity?
    Mr. Stanfield. Well, it is an interesting anomaly because 
of the figures I gave you. I think it was about 103,000 of the 
total supplier numbers out there billed Medicare less than 
300,000 a year.
    When you look at those raw numbers, many of those provide 
even smaller, more than 50 percent of those, supply Medicare 
probably less than 15 or 20,000 a year because they are 
pharmacy-based suppliers.
    Mr. Luetkemeyer. So, basically, what you are saying is the 
accreditation of the individual or the company that is 
providing the services, then, or selling this equipment is much 
more important versus the bond?
    Mr. Stanfield. Absolutely, much more.
    Ms. Blackburn. Absolutely.
    Mr. Luetkemeyer. We got a lot of nods on that one.
    Mr. Stanfield. It just took a while to get there.
    [Laughter.]
    Mr. Luetkemeyer. Oh, well. This is Washington. It takes a 
long time to get anywhere around here.
    Mr. Stanfield, also I asked the same question of Ms. 
Blackburn a minute ago. Do you have any information with 
regards to the overall increase that you would see in the cost 
of delivering your goods and services if you--
    Mr. Stanfield. Again, it is very clear.
    Mr. Luetkemeyer. It is in there? Okay.
    Mr. Stanfield. It is very clear from the Robert Morris 
University study. Dr. O'Roark and Dr. Foreman prepared this 
[This study is included in appendix in page 123].
    Mr. Luetkemeyer. Okay.
    Mr. Stanfield. And I do have a copy here that you are 
welcome to take today if you would like.
    Mr. Luetkemeyer. Are you willing to put that into the 
record as part of your statement?
    Mr. Stanfield. I believe it already is. John, is that not a 
part of the record from last year?
    Mr. Luetkemeyer. I think this is a--
    Mr. Stanfield. It was last year, but we can submit it 
again.
    Mr. Griffin. From May, I believe it was, Mr. Chairman.
    Mr. Luetkemeyer. Thank you. I appreciate that.
    Mr. Griffin. And also there is another study, an 
independent study, by Dr. Katzman that you have from the May 
hearing.
    Mr. Luetkemeyer. Okay. Mr. Griffin, during the course of 
your comments, something came up to me. If we had scheduled 
rates, is there anything that could be done if somebody wanted 
to negotiate a different rate?
    In other words, if you are going to sell a piece of 
equipment or you are going to sell the services and it's going 
to be scheduled by CMS versus a bid, if it went to a schedule, 
for instance, I mean, hypothetically here? Is there anything? 
Could you not negotiate with someone a different rate on that 
or is that once the schedule is set, it is set?
    Mr. Griffin. Let me answer your question and then probably 
ask you a question, please, sir. Some years ago when I was 
president of our state association, I worked with the State of 
North Carolina and our Department of Facility Services, DFS, 
with Health and Human Services. We actually went down the fee 
schedule for Medicaid because the management of Medicare, of 
North Carolina Medicare, wanted to move towards competitive 
bidding.
    The DME providers, including myself, and people with Health 
and Human Services got together. And we went through the entire 
Medicare fee schedule item by item by item. There was give, and 
there was take from industry and from Medicare on each 
individual item to decide what was appropriate. Medicare knew 
what we were paying for items. They also looked at and 
respected the cost that we had for delivering certain items.
    At that time, when we went through that Medicare fee 
schedule in the State of North Carolina, they came back to us 
to say that there would be a $10 million savings just on that 
one exercise.
    I have talked to a member of the PAOC a few minutes ago. 
And we could very easily do that with Medicare. We could sit 
down with industry insiders. We could sit down with CMS. We 
could review the entire fee schedule. We would have to do it in 
product categories.
    It would have to be very methodical, very analytical. We 
can do this. And there would be some give and take.
    Mr. Luetkemeyer. Would you suggest this be done on a state-
by-state basis or at the federal level?
    Mr. Griffin. Possibly regional. We have got the four MACs. 
We have got the four CMS MACs.
    Mr. Luetkemeyer. Okay.
    Mr. Griffin. It could potentially be done regional.
    Mr. Luetkemeyer. Okay. Very good.
    Mr. Sloan, you made a comment or I think somewhere I was 
reading here that 80 percent of the suppliers are small 
business folks. Is that pretty much correct?
    Mr. Sloan. That wasn't my comment, but I--
    Mr. Luetkemeyer. I think it is--
    Mr. Sloan. Was it about 90 percent?
    Mr. Luetkemeyer. Ninety percent?
    Mr. Sloan. Ninety percent.
    Mr. Griffin. I think it is in excess of 90 percent.
    Mr. Luetkemeyer. Okay. And this, the competitive bidding 
portion of this, says we only have to have a minimum of 30 
percent be small business owners. In other words, we are 
protecting 10 percent and exposing, getting rid of 60 percent 
of the people, just at least not allowing 60 percent of the 
small business people to bid here. Is that where we're headed 
with this?
    Mr. Sloan. I believe that they say a minimum of 30 percent. 
I don't think it has to be 30 percent, then they cut off the 
small providers. But yes, 30 percent is the maximum.
    Mr. Luetkemeyer. What I am trying to get to, though, is, in 
other words, if we would have something in there that says 90 
percent, that 90 percent of the group or 80 percent or 75 
percent of the group needs to be small business owners versus 
there is only 10 percent are large producers or large 
suppliers. I mean, we have got this kind of balance, do we not?
    Mr. Sloan. I believe so, yes.
    Mr. Luetkemeyer. I am just curious. You are part of the 
research here, I assume, the study that will show us what kind 
of impact it would have?
    Mr. Sloan. I am familiar with it, although I was not 
involved with it.
    Mr. Luetkemeyer. Right. Okay. Very good. And you made a 
comment about provider numbers need be more, that CMS need be 
more scrupulous on how they provide provider numbers so there 
is less fraud. Is that a problem right now for me to be 
concerned about I need to look into?
    Mr. Sloan. I believe it is an ongoing problem.
    Mr. Luetkemeyer. They are not screening these correctly or 
are allowing them--they are not accrediting the people 
correctly or--
    Mr. Sloan. I believe we are not making site visits. CMS is 
required to make sure there is an operation in business that is 
applying for a Medicare provider number. These are not just 
taking place currently.
    I heard stories that through competitive bidding, it did 
not take place. So how can we trust them to maintain the 
integrity of the program, any program, for that matter if we're 
not investigating the people who are applying for the provider 
numbers?
    Mr. Luetkemeyer. Right.
    Mr. Sloan. Accreditation, which is part of the solution, I 
believe, is the first part of that.
    Mr. Griffin. Mr. Luetkemeyer, I think Ms. Blackburn can 
tell you that our national association has put together a list, 
I believe, of 13--
    Ms. Blackburn. Yes.
    Mr. Griffin. --different qualities aside from licensure, 
aside from accreditation that would insist that the provider 
and that CMS do certain things to continue to work with and 
provide Medicare services.
    Mr. Luetkemeyer. Fantastic.
    Mr. Stanfield. Mr. Luetkemeyer?
    Mr. Luetkemeyer. Yes?
    Mr. Stanfield. If I might make a comment as well regarding 
the site inspections? It is an interesting process. CMS 
contracts with the National Supplier Clearinghouse, which is an 
independent company. They subcontract with another company to 
oversee certain aspects of compliance. And they subcontract 
with someone else, who subcontracts with individual people to 
do the inspection on the sites.
    The site inspector that came to my company was a boiler 
inspector. He had never been to a DME company in his life.
    Mr. Luetkemeyer. Was a what kind of an inspector?
    Mr. Stanfield. He was a boiler inspector. We have had 
elevator inspectors, boiler inspectors, building site safety 
inspectors, auditors of this type that come to our companies--
    Mr. Luetkemeyer. He is an expert in medical equipment?
    Mr. Stanfield. He came into the building and said, ``I see 
medical equipment'' and checked that off. And that was sort of 
the process that went through. That has been repeated numerous 
times across the country.
    Mr. Luetkemeyer. Thank you.
    Ms. Blackburn. Mr. Luetkemeyer?
    Mr. Luetkemeyer. Yes?
    Ms. Blackburn. If I could add one thing, it is that the 
NSC, who is contracted by CMS, the National Supplier 
Clearinghouse, is the entity that has the charge to make sure 
that any provider number that is given to a provider is 
legitimate.
    There is inventory. There is a store there. There is the 
ability to service a client. And not to what you read, we all 
read, in the newspapers, the national newspapers, the Wall 
Street, the New York Times. If you do your homework and you go 
back, you see that company should not have had a number in the 
beginning. It was not a company. It was a front.
    And so we consistently go back to, how did they get the 
provider number? This is hurting our industry. And we have to 
make CMS accountable for the oversight that they are to be 
giving this contract.
    Mr. Luetkemeyer. I am finished. I want to thank each of you 
personally for coming today. And I want to work with the 
Chairman here. We have some ideas on things that we want to do 
and certainly look forward to working with each of you. Again, 
I would be more than willing to have you contact my office to 
be able to give us further information or any kinds of 
questions you may have about it.
    Mr. Chairman, with that, I will yield back.
    Chairman Shuler. Yes, sir. Thank you.
    At this time I would like to yield five minutes to the 
gentleman from Pennsylvania, Mr. Thompson.
    Mr. Thompson. Thank you, Mr. Chairman. I want to thank the 
Chairman and Ranking Member for going down this road. To me 
this is an important area.
    I am a fresh face around here, just six weeks. And I come 
from, a nonprofit community health care background, working 
with a lot of older adults, rehabilitation, and as a licensed 
nursing home administrator. So this is an extremely important 
issue. I have a couple of obvious concerns I am looking forward 
to expressing today.
    Thank you to the panel, too, for your testimony and all of 
your information. It is very much appreciated.
    My concerns looking at this whole topic really have to do 
with two things, probably a lot of things but primarily cost, 
what it does to cost, and what it does to complexity, cost in 
terms of ultimately concern with what this will do as we reduce 
competition over time and drive cost up in terms of access and 
affordability and complexity in terms of the consumer is older 
adults. And these are folks who, with medical complexities will 
have a real hard time dealing with distant suppliers, multiple 
suppliers, and ownership over equipment they need to use but 
they don't understand how it works; some real issues.
    Now, I guess my first question I would like to throw out to 
the panel, just some general reaction, to see what your 
reaction is to those folks, like myself, who have this concern 
that because of what is proposed and what we are looking at can 
really take some of the most at-risk adults who are aging with 
dignity in their homes and would actually drive them back into 
institutional settings because of issues related to cost and 
the complexity.
    Any thoughts in terms of what risk we run in that 
situation?
    Ms. Blackburn. I would like to start the conversation, if I 
may. I think part of the basis of competitive bidding came from 
the demonstration projects in Polk County and San Antonio.
    What is a fallacy is that there was a true savings there 
because anything that might have caused a patient to go to the 
emergency room, go to a hospital because he wasn't receiving 
care would be charged to the Medicare part A budget. And there 
was absolutely no cross-referencing of spikes in Medicare part 
A, as opposed to any losses in Medicare part B. So that is the 
first issue.
    I think one thing that we all can say is that when patients 
don't get care--and many of them depend on our agencies, they 
don't have family members, they don't have spouses to care for 
them, they go to the hospital. They go to the emergency room.
    And, again, that is a cost to the Medicare budget, but it's 
in part A. And there has never been an analysis of how that 
cross-references.
    Mr. Thompson. All right.
    Ms. Blackburn. And we would expect that to happen over and 
over again.
    Mr. Brant. I would say that one problem we had in Miami MSA 
is patients received these booklets from Medicare. And I 
actually had a patient that I had for some time that the 
patient called me up and said, ``Well, I don't see you on this 
list. So I think I need to get my equipment picked up and try 
to find another supplier'' that was listed in their city. And 
there was no one in their immediate city. And it was very 
confusing for the patient.
    We actually had a company that was a bid winner but they 
didn't have the d/b/a name of the company listed--was sent out 
to the patients. And they told them, ``Well, I need to change 
my supplier.''
    It became very frustrating for the bid winner, who had to 
try to explain to the patient, and the patient, saying, ``Well, 
I'm sorry. I have got to work with my doctor and try to get one 
of these other companies to provide me the service that I 
need.''
    And that was a real problem, a lot of confusion for the 
patients. And, actually, it is still going on from the cleanup 
that happened in July.
    Mr. Griffin. Mr. Thompson, last week in Charlotte we had a 
very small little snow shower, but it resulted in ice. Mr. 
Shuler can probably tell you that in North Carolina, just a 
little bit of snow will shut local communities down.
    The very fact that we went in the Charlotte CBA from 
approximately 130 oxygen providers down to 11 oxygen providers 
under this current competitive bidding scheme should be 
evidence enough that those 11 providers cannot provide the 
oxygen support and services. If their power had gone out, if 
there had been ice on the power lines and their power had gone 
out, you can't deliver oxygen services in that broad of an area 
by 11 suppliers.
    I was delivering oxygen during Hurricane Hugo. For about 11 
days I delivered oxygen tanks. And I know some of my colleagues 
here have delivered oxygen in Florida and different places. You 
can't do it with the smaller numbers of suppliers.
    So, yes, the Medicare beneficiary is going to the hospital.
    Mr. Thompson. Thank you.
    Mr. Sloan. If I could add to that, you know, I don't think 
we can underestimate the value of what the service is provided 
by the small provider. For many of us in our communities, these 
are our neighbors, our relatives, our friends. These are not 
people who are Medicare members or beneficiaries. They are very 
important to us as people.
    I am sure I speak to many people in this room when I say 
when certain clients come into our office, everybody knows and 
smiles and says, ``It is Mrs. Smith again,'' but we rush out 
and we take care of Mrs. Smith. That is what we do. That is how 
we have built our business.
    Under a program like this, where price becomes the issue 
and our product is made more to look like a commodity, our 
service is ignored completely I think is missing the whole 
point of healthcare, which is what we are: healthcare 
providers.
    Dr. Routman. I would echo that sentiment, sir. I believe 
service is what we provide to our patients. As a physician, the 
outcome of my patient is important to me. I am outcome-driven. 
I want everyone to get a good result. That makes it important 
for me to make sure they get the right device, that it fits 
them properly, that I am sure that is going to take care of 
their problem.
    Medicare doesn't reimburse me for that. That is okay. I 
want the best outcome for my patient. Medicare is busy 
crunching numbers and worried about bidding and cost. We are 
worried about our patients and to service our patients, which 
they really haven't quantified and haven't addressed.
    Mr. Thompson. That is certainly an inherent value I have 
seen in mom and pop providers. They care about the people. They 
do much that goes above and beyond what they are paid for.
    Mr. Chairman, it looks like my time has expired. Thank you.
    Chairman Shuler. Thank you, Mr. Thompson.
    I want to thank all of the witnesses for their testimony 
today. And I look forward to working with the members of the 
Subcommittee and the Small Business Committee as a whole to 
work through some of these issues in this legislation.
    I ask unanimous consent that the record be open for five 
days for members to submit their statements. Hearing no 
objection, so ordered.
    This hearing is adjourned.
    [Whereupon, at 12:06 p.m., the subcommittee was adjourned.]

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