2,200 hospitals face Medicare pay penalty for readmissions

The rate reduction for too many repeat patient stays fails to account for socioeconomic factors and leaves poorer communities at a disadvantage, facilities say.

By CHARLES FIEGL, amednews staff. Posted Aug. 27, 2012.

Washington Medicare soon will begin penalizing hospitals for excess readmissions, which critics argue in some cases can stem from factors outside a facility’s or doctor’s control.

The health system reform law required Medicare to adopt a program to reduce 30-day readmission rates in hospitals. An Aug. 1 Centers for Medicare & Medicaid Services regulation codified the details of the program, revealing that Medicare will reduce payments by up to 1% for more than 2,200 hospitals, which comprise about two-thirds of U.S. facilities.


CMS developed a formula to assign each hospital a benchmark for excess readmissions in three categories — heart attack, heart failure and pneumonia. Those hospitals that exceed the readmissions ratio will lose a total of $300 million during the 2013 program year that begins Oct. 1. For hospitals that don’t improve, penalties will grow to a maximum of 2% for the 2014 program year and 3% for 2015.

A 2007 Medicare Payment Advisory Commission report concluded that more than 17% of hospital patients were readmitted within 30 days in 2005. A 2006 Commonwealth Fund Report projected that the Medicare program could save $1.9 billion a year if the national readmission rate were lowered to levels achieved by the best-performing facilities. Median 30-day hospital readmission rates for heart attack patients is 19.9%, 24.8% for those with heart failures and 18.4% for cases of pneumonia, CMS stated in the rule.

About two-thirds of U.S. hospitals stand to be penalized for excess readmissions starting Oct. 1, 2012.

Hospitals had argued that penalties should be assessed only for aspects they can control. The American Hospital Assn. and the Assn. of American Medical Colleges had asked CMS to consider socioeconomic factors that can lead to patients being readmitted. Facilities had suggested that rates be adjusted to account for numbers of Medicaid beneficiaries as well as for planned or unrelated readmissions. Other factors that need to be considered include patient access to follow-up health care services, such as availability of primary care physicians and ability to afford prescribed medicines, said Nancy Foster, AHA’s vice president of quality and patient safety policy.

“Hospitals will lose a substantial amount of money and find it more difficult to help those communities,” Foster said.

Poorer communities with hospitals facing the maximum penalties will be hurt by the new program, said Gregory Maynard, MD, senior vice president for the Society of Hospital Medicine’s Center for Hospital Innovation & Improvement. Some areas of the country where hospitals have low readmission rates, such as Utah and Idaho, will be spared.

In the final rule, CMS said it needs to examine the role that socioeconomic factors play in readmissions. The Medicare agency also says it wants to avoid adjustment factors that would create differing standards of quality for different patients. But hospitals will not receive the additional time they requested to lower readmissions before penalties are assessed starting in October.

“Since we believe that all hospitals should be working towards the goal of reducing readmissions on an ongoing basis, regardless of population, we believe that we do not need to postpone the implementation of the readmission payment adjustments in order to provide time to hospitals to implement readmission reduction programs,” CMS said.

SSM Health Care, based in St. Louis, operates 17 hospitals in Illinois, Missouri, Oklahoma and Wisconsin. More than half of SSM Health Care facilities will be penalized.

The hospital system has been working to reduce rates by improving care transitions, said Gaurov Dayal, MD, SSM Health Care’s chief medical officer. For instance, hospitals will arrange for a home health professional to visit chronically ill patients released after a stay for congestive heart failure. The health professional would work to ensure discharge instructions are being followed to help prevent a readmission.

Several factors can lead to readmissions, and no one solution will reduce readmissions to zero, he said. That is a fact he said the entire health care community must understand.

“It isn’t something that only a hospital can solve,” Dr. Dayal said. “We have a fragmented delivery care model that we’re trying to improve.”



How big will the Medicare readmissions penalty be?

The Centers for Medicare & Medicaid Services estimates that more than 2,200 hospitals will have their base Medicare payments reduced in 2013 by a new adjustment for excess readmissions. Total hospital pay will be decreased by 0.3%. A CMS analysis showed that urban hospitals in the mid-Atlantic and rural hospitals in the East South Central and West South Central regions will see the highest decreases.





Up to 0.09%


0.10% to 0.19%


0.20% to 0.29%


0.30% to 0.39%


0.40% to 0.49%


0.50% to 0.59%


0.60% to 0.69%


0.70% to 0.79%


0.80% to 0.89%


0.90% to 0.99%





Source: Final rule on Medicare hospital readmission payment policy, Centers for Medicare & Medicaid Services, Aug. 1 (ofr.gov/ofrupload/ofrdata/2012-19079_pi.pdf)

Breaking News – ICD-10 Ruling

Healthcare Business News

BREAKING: One-year delay on ICD-10 to October 2014 finalized

By Maureen McKinney

Posted: August 24, 2012 – 12:45 pm ET


The federal government has finalized a one-year delay in the compliance deadline for the nationwide conversion to ICD-10 code sets. The delay, first proposed in April, will move the compliance deadline to Oct. 1, 2014.

HHS said the extra time would allow healthcare organizations—small organizations in particular—adequate time to get ready for the changeover.

“By delaying the compliance date of ICD-10 from October 1, 2013 to October 1, 2014, we are allowing more time for covered entities to prepare for the transition to ICD-10 and to conduct thorough testing,” HHS said in the rule. “By allowing more time to prepare, covered entities may be able to avoid costly obstacles that would otherwise emerge while in production.”

HHS included the change in a 208-page final rule (PDF) establishing a unique health plan identifier for all insurers. In a news release on the CMS’ websiteannouncing the rule, HHS said the identifier—along with other administrative simplification regulations included in the healthcare reform law—will save the healthcare system an estimated $6 billion over the next decade.


“These new standards are a part of our efforts to help providers and health plans spend less time filling out paperwork and more time seeing their patients,” HHS Secretary Kathleen Sebelius said in the release.

Read more: BREAKING: One-year delay on ICD-10 to October 2014 finalized | Healthcare business news and research | Modern Healthcare http://www.modernhealthcare.com/article/20120824/NEWS/308249960#ixzz24UCWZZev

States May Drop Medicaid Expansion, CMS Says


Cheryl Clark, for HealthLeaders Media , August 9, 2012

The federal announcement this week that states may choose to expand their Medicaid programs to 138% of the federal poverty level for some period of time, and then later drop out, could provoke some states deeply opposed or on the fence to reconsider.

But the news doesn’t answer many of the big questions that remain, says Matt Salo, executive director of the National Association of Medicaid Directors.

Earlier this week, Cindy Mann, director of the Centers for Medicare & Medicaid Services’ Center for Medicaid and the Children’s Health Insurance Program (CHIP) spoke in Chicago at the National Conference of State Legislatures in an effort to clarify the issue.

“A state can decide when to come in, if to come in and also, if a state does adopt the expansion and determines at a later time, for whatever reason, that it does not want to maintain the expansion, it could also decide, because it’s a voluntary program, to drop the expansion,” Mann told the American Hospital Association, which included the statement in a news briefing late Tuesday.

“The ability to opt out is certainly better than no option,” Salo says, adding that “some states have been reluctant because “they had felt trapped by the permanency of it. But I don’t think that in and of itself is enough to say that states will feel better about adopting the Medicaid expansion.”

Too many other questions about how the Medicaid expansion would work need to be answered soon, says Salo, whose organization last month sent a list of 47 questions about the protocols for the expansion programs to CMS. 

Questions about the Medicaid expansion provisions of the Affordable Care Act emerged June 28 after the U.S. Supreme Court ruled on a provision of the law that said if states did not expand their Medicaid programs to 138% of the federal poverty level, the point at which subsidies for the federal exchanges would kick in, would not lose all their federal Medicaid funding match, which ranges around 50%.  The court declared that invalid, saying that states could opt out of the expansion to 138% without losing all their funding.

Some 30 states, including many that challenged the constitutionality of the Patient Protection and Affordable Care Act, such as Texas and Florida, have said they don’t intend to expand, while others are await further clarifications before announcing their decisions.

The issue is a hot button one for hospitals, whose leaders worry that in states that don’t expand their Medicaid programs, millions of patients will remain uninsured, as if the PPACA had never existed. That would require hospitals to shoulder the costs of care when patients need it emergently.

Meanwhile, these hospitals are shouldering billions in reimbursement cuts and reduction in disproportionate share funds that they agreed to in anticipation that all states would expand their Medicaid programs.

Joy Wilson, health policy director at the National Conference of State Legislatures, the group holding the meeting where Mann spoke, said lawmakers in attendance seemed interested in the new option. “There was some comfort in that if they were if their states decided to do the expansion, and for whatever reason it didn’t work out fiscally, they would have an option to reverse that course,” she says. “There was some feeling that was a good thing.”

Wilson adds that many states “just don’t know what they’re going to do yet because they don’t have all their facts in front of them.”

One particular sticking point remains in what Salo and others call “the moving parts.”

States may now have a patchwork of programs to deal with the welfare or healthcare needs of the uninsured, provided they have no other source of coverage.  If a state expands its Medicaid program, the need for those patchwork programs—providing food, medicines, housing—would go away,  or at least be greatly reduced, and much harder to start up again. It could mean saying no to other sources of federal or state or philanthropic funds that the states could never get back.

Compounding the problem is that while federal funds pledge to pay for 100% of the Medicaid expansion for the first three years, after that the funding begins to drop to 90%, forcing states to pick up the tab for a large number of patients it didn’t have to pay for before.

Salo says that while he’s glad CMS has clarified this issue, there are dozens of remaining questions about how the expansion programs will work.  “The question that remains unanswered, which is still the most important one, is whether states can expand to a federal poverty level to a partial level below 138%?” he asks.

Take a hypothetical state that covers citizens with Medicaid up to an income level of 70% of the federal poverty level.

“If a state says no, we’re not expanding, the exchange subsidies will kick in at 100% of the federal poverty level, but there will still be a gap for people who earn incomes below 100%, and they will have nothing,” he says. In this example, anyone earning between 71% and 99% of the federal poverty level will have no coverage and will not be eligible for health insurance exchange subsidies.

Cheryl Clark is a senior editor and California correspondent for HealthLeaders Media Online.

Minnesota Medicaid on Trial

On trial: Minnesota Medicaid

  • Article by: KEVIN DIAZ
  • Star Tribune
  • June 16, 2012 – 9:56 PM

WASHINGTON – It began with a $30 million “voluntary contribution” to Minnesota taxpayers from one of the state’s nonprofit Medicaid contractors, an unprecedented act of corporate generosity that raised eyebrows from St. Paul to Washington.

Skepticism about the payment focused first on DFL Gov. Mark Dayton, whose administration sought to keep the money in state coffers rather than share it with the federal government, which foots half the bill for Medicaid.

Then congressional investigators pounced, setting off on a trail of suspected overpayments to state Medicaid contractors that could potentially reach hundreds of millions of dollars and going back a decade to the administration of Republican Gov. Tim Pawlenty.

That search culminated on Tuesday, when House and Senate investigators in Washington spent three hours privately questioning Nancy Feldman, chief executive officer of UCare Minnesota, a managed-care contractor that made the $30 million payment last year. The investigators say that Feldman, who was accompanied by two lawyers, is not suspected of any criminal wrongdoing. Through a spokesman, Feldman said she was “happy to assist the staff, and was pleased by the tenor and outcome of the discussion.”

But the meeting on Capitol Hill deepened the federal probe into allegations that the state has been overbilling federal taxpayers for Medicaid payments to UCare and other state HMOs to offset their losses on other state-funded health programs. Whatever the outcome, a state that once prided itself on its expansive coverage for the disadvantaged is being branded in Congress as “Case Study No. 1” in what federal investigators say is a nationwide pattern of states claiming excessive federal dollars to plug their own budget gaps.

“Minnesota provides a stunning example of how states are failing to properly ensure the appropriate use of taxpayer dollars spent on Medicaid managed care,” wrote investigators for the U.S. House Oversight and Government Reform Committee, which has already taken testimony from Minnesota Department of Human Services (DHS) Commissioner Lucinda Jesson.

Smoking gun

If there’s a smoking gun, it was provided by Feldman in a March 2011 letter explaining the $30 million payment. She wrote that rates paid by the Minnesota Department of Human Services to HMOs for the state’s General Assistance Medical Care (GAMC) program “resulted in health plan losses which were offset by higher [Medicaid] payments.”

Moreover, Feldman noted, the higher Medicaid rates were not adjusted after the Pawlenty administration ended the state-funded GAMC program in 2010.

That has raised three questions for investigators in Washington: Were federal Medicaid dollars being used to underwrite Minnesota’s program? Why didn’t federal regulators catch it? And was the $30 million UCare payment, which the state called a “donation,” an attempt to return excess payments and lower the heat level?

“It looks like CMS was asleep at the switch,” said a congressional staffer close to the investigation. “I think it’s pretty obvious cross-subsidization was going on.”

Whether any of that amounted to fraud is now the focus of at least three federal probes, two by congressional Republicans and one by the Justice Department.

Officials in the Dayton and Pawlenty administrations say they have done nothing wrong. Industry executives likewise deny that the health plans are overpaid, noting that state business was unprofitable for them in 2006 and 2007, and less profitable than their private-sector business in other years.

The state is expected to address investigators’ question in a filing due on Monday.

At the same time, Republican lawmakers in Washington are raising broader questions about wasted money and lack of federal oversight in the nation’s $457 billion Medicaid program — a system that already covers nearly one in five Americans and is slated to expand dramatically under the federal health care overhaul signed by President Obama.

“Somebody’s getting the money, but it’s not going to the poor people this program was intended to help,” said Minnesota Republican Rep. Michele Bachmann, an outspoken critic of the Obama law.

In Minnesota, the criticism has been equally sharp on the other end of the political spectrum. “The trouble is, nobody’s minding the store,” said state Sen. John Marty, DFL-Roseville, a critic of the state’s experiment with outsourcing public health coverage to private managed-care companies. “It’s not the image people have of Minnesota.”

‘First indication’

State legislators in both parties have been asking questions for years about the rates paid to managed-care companies, a nexus of nonprofits that were paid a combined $3.3 billion in 2010 to care for some 524,000 Minnesotans on public medical assistance. State and congressional reports detail HMO operating margins that are often greater from their state business than from their commercial plans.

Much of the legislative interest has been stirred by St. Paul attorney David Feinwachs, who says he was fired by the Minnesota Hospital Association after accusing the health plans of over-charging the state. “What unites both left and right is, whether you’re a deficit reduction guy, or an access-to-health care guy, it’s clear that this thing is a giant rip-off,” he said.

Marty, Bachmann, and state Sen. Sean Nienow, R-Cambridge, have been calling for independent, third-party audits. Nienow notes that the questions go back at least to 2003, when the feds raised questions with the Pawlenty administration about HMO rates. “That was the first indication that something less than proper was going on,” Nienow said.

But the HMOs also have their defenders among Democrats and Republicans. State Sen. David Hann, an Eden Prairie Republican who chairs a health committee, says there is no shortage of audits and reports in the heavily regulated industry.

Hann’s beef is with the federal Medicaid system itself, which he calls “fundamentally flawed,” in part because it encourages states to leverage every last dollar they can get from Washington — exactly what Pawlenty and Dayton are accused of doing.

Hann supports a plan by congressional Republicans to turn Medicaid into a federal block grant program, which he says would eliminate the states’ incentives to game the system.

Competitive bidding

Some Democrats, including former Minnesota Attorney General Mike Hatch, suspect that whatever the merit of the GOP probes, their underlying agenda could be to weaken political support for the Medicaid program.

For their part, Dayton officials boast that they have moved to a new system of competitive bidding for Medicaid business and expect to reap some $600 million in savings over the next two years. In the meantime, they forged agreements with the state’s four Medicaid contractors — UCare, Medica, HealthPartners and Blue Cross and Blue Shield — to cap 2011 profits at 1 percent, a step that returned $73 million to taxpayers this year.

“We wanted to make sure there weren’t excessive profits being made,” said Assistant Human Services Commissioner Scott Leitz.

But UCare’s $30 million payment, touted as a windfall, clouded what might otherwise have been seen as one of the signal reforms of the Dayton administration. Noting that UCare was the only one of the four Medicaid HMOs to cough up the money, Hatch said: “No good deed goes unpunished.”

Kevin Diaz is a correspondent in the Star Tribune Washington Bureau.

© 2011 Star Tribune

Berwick on Analytics: Technology Is Ready, but Doctors Need Help

Scott Mace, for HealthLeaders Media , May 15, 2012

If Marcus Welby, MD, were practicing on TV today, would he be letting data drive his decision-making? I’m on a journey to find the answer to this and related questions. Last week this journey took me to Atlanta for a HealthLeaders Media Roundtable on business intelligence and predictive analytics, and then onward to North Carolina for a conference dedicated to healthcare analytics.

While in North Carolina, I got to sit down with Don Berwick, MD, former administrator at the Centers for Medicare & Medicaid Services, and prior to that, founding CEO of the Institute for Healthcare Improvement. We talked about data analytics, but our discussion ranged far and wide around healthcare IT. Here is a portion of our conversation.

HealthLeaders Media: How far along is healthcare with its adoption of analytics?
Berwick: I certainly see the potential. At CMS we did do some early trials with Oak Ridge National Laboratory, which has tremendous data capacity. [CMS] gave them access to privacy-protected Medicare information. They have tremendous analytic capacity, and it was stunning what they did. I remember visiting Oak Ridge, and they had modeled some uses of Medicare and Medicaid data, and they were coming up with insights right away, of geographic patterns of variation that I don’t think Health Services researchers knew about.

HealthLeaders Media: Why was Oak Ridge doing this? I don’t think of them usually in this space.

Berwick: Oak Ridge is not just a Department of Energy supplier. They work with other government agencies that want to contract with them to do essentially analytics and data mining. The one place I saw analytics working was in our early work on predictive analytics for fraud. The Affordable Care Act suite of efforts to reduce fraud involves the traditional what they call pay-and-chase, which is enforcement. You find something wrong and you prosecute. We were working with the Department of Justice and the FBI and local law enforcement to catch criminals. That’s traditional and effective. You need to do it. But it’s, after all, after the horse has left the barn.

So upstream from that, there’s prevention. Make sure that the people that want to offer home healthcare or durable medical equipment, that they’re qualified to do so, they don’t have a history that makes you suspicious, and since there’s a very high concentration of fraud in certain parts of Medicare payment, one’s able to target prequalification as an area. But I thought the most promising was predictive analytics, which was take the data and turn loose the ability to go through it looking for weird patterns. The technology was ready.

Along about this time, I took a vacation with my wife in Turkey. I got online to buy a ticket for an internal flight in Turkey from Istanbul to an interior village, and I’d say a minute or two later, my cell phone rang, and it was American Express saying, “Just checking—a purchase was made in Turkey. Is this you?” Well it’s the same thing, where we can get not just retrospective but almost real-time signals. I remember the first run of predictive analytics, the volume of insights and ideas and hot spots that were spotted, it was really something.

HealthLeaders Media: I was listening to a podcast with Dr. Lynn Vogel, CIO of MD Anderson Cancer Center, who told an interviewer that the number of facts going into physicians’ decisions on treatment is growing exponentially. What’s the healthcare system going to do about that?

Berwick: It is doing [things] about it. I don’t know what Dr. Vogel meant by that comment particularly, but there are at least two meanings. One is that the science base is expanding vastly. A few years ago, I did a Google search to see how many randomized clinical trials in the world are underway right now, and the number that came up in the search was 40,000. At any one time there are 40,000 randomized trials underway. The concept that an individual human mind could possibly search through that and find out what’s relevant to your needs when I see you in my office, that obviously is folly. There has to be some intermediation of the science so that someone, some technologically supported, trusted agent is digesting that and making it available. We’re quite a way along there. We’ve had wonderful work, professionally led by the American College of Physicians and the American College of Surgeons and the cardiologists to do exactly that: intermediate between the scientific wealth and direct application. So I think that’s going okay. I’m sure it could be better. There’s been some ambivalence in public policy around this. This is the big debate about clinical effectiveness research, which is this kind of confusing question as to should we use science in decision-making? We actually are asking that question. Hopefully we’ll get over that at some point.

On the [care] delivery side, the data stream is overwhelming now. Every beep on a monitor is a data point. There are some successes. For example, Intermountain Healthcare has for years had in the ICU real-time data collection, multiple facts about a patient that can help guide action in real time. You’ll see more and more of that. I don’t think that’s conventional. I think most docs are still bathing in that kind of data without much help.

HealthLeaders Media: In all the debate about Meaningful Use, it seems to me that the incentives don’t encourage knowledge transfer from the successful innovators, like Intermountain, to those who are following.

Berwick: We’re just barely in Phase 1. The concept of meaningful use is going to grow. What doctor in the end would not want access, if it were technically available, to the answer to the question, Who does the best at this, or What does Mayo think, or Where’s the best science? We’re just in an adolescent moment in terms of evolution of that kind of knowledge transfer. Right now, my daughter is a second-year resident in medicine at the Brigham hospital in Boston. When I was in training, the message was, put it all in your head. Get it in your head. Read it, memorize it, and then spout it out at Rounds. They carry their iPhones on Rounds. So a question comes up, and they’re using their iPhones and iPads right there to get the information. Why would they store it in their head if it’s in the world? That’s a basic human factors design idea. Knowledge in the world is more useful than knowledge in the head. Young doctors and nurses are coming from a totally different mindset about access to knowledge.


Dayton -Cincinnati area to be Medicare test ground

Pilot project aims to cut costs by training doctors to focus on prevention.

By Ben Sutherly, Staff Writer, Middletown Journal

Updated 10:06 AM Wednesday, April 18, 2012

DAYTON — The Dayton-Cincinnati area is one of seven regions nationwide chosen for a pilot project that will initially transform how doctors and other clinicians care for 330,750 U.S. Medicare and Medicaid enrollees. But it could have implications long-term for the nation’s entire health care system.

The project is part of a broader effort by the federal government to carve billions of dollars in costs out of the Medicare program in coming years to make it sustainable.

The cost of the project — called the Comprehensive Primary Care Initiative — wasn’t immediately available Tuesday. Modeled after private-sector approaches, it’s part of the federal health care overhaul and will transform how 75 of the region’s primary care practices are paid to care for patients. The project’s geographic reach will extend north to Springfield.

Participating practices will initially be paid an average of $20 per patient per month to better coordinate patient care.

Later, those practices will have the chance to share in a portion of any Medicare savings.

“This is probably the biggest change in the delivery of primary care since primary care was defined as a specialty,” said Evan Steffens, director of clinical and quality services for Premier HealthNet and Premier Health Specialists, which are part of Premier Health Partners.

“Prior to now, the practices managed the patient that presented at their door or called the office for a visit,” Steffens said. “In this (new) system, the practice reaches out to their patient community and manages everybody, whether they contact the office or not. It’s a very different way of looking at care.”

Through electronic health records, primary care practices taking part in the pilot program will focus not just on treating patients when they are ill, but will focus more on keeping them healthy, manage chronic health conditions such as diabetes, and head off the need for more expensive surgeries and other procedures. The practices also will work to intensively manage care for high-need patients, ensure access to care beyond regular business hours, provide more preventive care, and encourage patients to be more engaged in their care.

Ohio itself will spend $1 million in the next two years to train 50 practices to become “patient-centered medical homes,” which like the federal pilot program involves greater coordination of the care a patient receives. Dr. Ted Wymyslo, director of the Ohio Department of Health, advocated for the approach for years as a doctor practicing in Dayton. He said he will encourage southwest Ohio practices selected for the state’s pilot program to also apply for the federal pilot program.

As of March 1, Ohio had 118 practices that had been certified as patient-centered medical homes by the National Committee for Quality Assurance. The state and federal pilot programs will drive that number higher. “It’s going to drive huge practice change,” Wymyslo said of the Medicare pilot program. “It’s a movement. … My prediction is it won’t be long until you see this migrating to all four corners of the state.”

Southwest Ohio’s participation in the four-year federal program is significant, Wymyslo said. It demonstrates insurance companies are willing to embrace — and pay for — the new care concept.

Practices that make “meaningful use” of electronic health records — and that have a majority of patients covered by health plans willing to pay enhanced reimbursements — will likely have a leg up in vying to become one of the region’s 75 pilot practices in the Medicare pilot, Premier HealthNet’s Steffens said. Medicare will also likely want the 75 practices in southwest Ohio to be a diverse group, she said.

Jason Koma, spokesman for the Ohio State Medical Association, said physicians statewide are supportive of the patient-centered concept. “We’ve seen what happens when you pay just (based) on the volume of service. Ultimately, that model is not sustainable.”

Other regions taking part in the program are the Tulsa region of Oklahoma and Hudson Valley region of New York, as well as the entire states of Arkansas, Colorado, New Jersey and Oregon.


Competition cuts down Medicare fraud

AP NewsBreak: Competition cuts down Medicare fraud

By RICARDO ALONSO-ZALDIVAR, Associated Press – 2 minutes ago 

WASHINGTON (AP) — A yearlong experiment with competitive bidding for power wheelchairs, diabetic supplies and other personal medical equipment produced $200 million in savings for Medicare, and government officials said Wednesday they are expanding the pilot program in search of even greater dividends.

The nine-city crackdown targeting waste and fraud has drawn a strong protest from the medical supply industry, which is warning of shortages for people receiving Medicare benefits and economic hardship for small suppliers. But the shift to competitive bidding has led to few complaints from those in Medicare, according to a new government report.

The report found only 151 complaints from a total population of 2.3 million Medicare recipients in the nine metropolitan areas, including Miami, Cincinnati and Riverside, Calif.

As a result, the program is expanding to a total of 100 cities next year, along with a national mail order program for diabetes supplies such as blood sugar testing kits. Eventually the whole country will participate.

Medicare traditionally has struggled to manage medical equipment costs. Officials say the program often paid more than private insurers for comparable equipment and was vulnerable to fraud by unscrupulous suppliers ordering expensive but unneeded products for unwitting beneficiaries.

By shifting to competitive bidding with a limited number of approved suppliers in each area, Medicare will save nearly $26 billion from 2013-2022, the government estimates, and reduce costs for seniors without cutting benefits.

“What we see is that costs are lower and there is no impact on the health status of our beneficiaries,” said Jonathan Blum, deputy administrator for Medicare. “This gives us very strong confidence that we can expand the program. To us, this is a clear success.”

The home-care supply industry sharply questioned that conclusion.

“With respect to the number of complaints (the report’s) information is downright laughable,” said Walt Gorski, a senior lobbyist for the American Association for Homecare. “It defies logic.” The group represents suppliers of home health equipment, ranging from oxygen to hospital beds.

The industry says hundreds of economists at academic institutions around the country have concluded that Medicare’s competitive bidding model is flawed and could lead to shortages or force beneficiaries to use less desirable cut-rate equipment.

In its report, Medicare said it closely monitored the health of beneficiaries likely to use home equipment in the nine areas involved with the competitive bidding experiment. It then compared the results to data for beneficiaries in other similar areas where competitive bidding has not been instituted yet. Using yardsticks such as emergency room visits and nursing home admissions, it found no significant differences.

“We have not seen any change in health status or access to services once the program went into place,” said Blum.

The report said the Medicare consumer hotline received 127,466 calls from beneficiaries about the competitive bidding program during 2011, less than 1 percent of the total volume of calls received. Most involved routine matters, such as locating a supplier.

Medicare defined complaints as dissatisfaction that could not be resolved by a call center operator. It registered 151 complaints for the year, the vast majority in the first six months of the program. Only six complaints were logged in the last three months of the year.

Medicare also called a sample of beneficiaries in areas where there was a sharp drop the quantities of supplies ordered for diabetes testing and for sleep apnea machines. The report said “in virtually every case” the beneficiary reported having more than enough supplies on hand, often several months’ worth.

“This would suggest that beneficiaries received excessive replacement supplies before they became medically necessary,” according to the report

The nine metropolitan areas involved in the experiment were Charlotte-Gastonia-Concord (North Carolina and South Carolina); Cincinnati-Middletown (Ohio, Kentucky and Indiana); Cleveland-Elyria-Mentor (Ohio); Dallas-Fort Worth-Arlington (Texas); Kansas City (Missouri and Kansas); Miami-Fort Lauderdale-Pompano Beach and Orlando (Florida);, Pittsburgh; and Riverside-San Bernadino-Ontario (Calif.).

Nine categories of medical equipment are included in the program: oxygen supplies, standard power wheelchairs, complex power wheelchairs, mail-order diabetic supplies, tube-feeding supplies and equipment, sleep apnea machines and equipment, hospital beds, walkers, and certain types of mattresses.

The major components of the $200 million saved last year were $59 million from oxygen supplies and equipment, $51 million from mail-order diabetic supplies and nearly $40 million from power wheelchairs and similar devices.