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SUBCOMMITTEE HEARING ON COMPETITIVE

BIDDING FOR DURABLE MEDICAL EQUIPMENT:

WILL SMALL SUPPLIERS BE ABLE

TO COMPETE?

SUBCOMMITTEE ON INVESTIGATIONS 

AND OVERSIGHT 

COMMITTEE ON SMALL BUSINESS 

UNITED STATES HOUSE OF 

REPRESENTATIVES

ONE HUNDRED TENTH CONGRESS

FIRST SESSION

OCTOBER 31, 2007

Serial Number 110-56

Printed for the use of the Committee on Small Business

(

Available via the World Wide Web: http://www.access.gpo.gov/congress/house 

HOUSE COMMITTEE ON SMALL BUSINESS 

NYDIA M. VELA ́ ZQUEZ, New York, Chairwoman 

WILLIAM JEFFERSON, Louisiana 

HEATH SHULER, North Carolina 

CHARLIE GONZA ́ LEZ, Texas 

RICK LARSEN, Washington 

RAUL GRIJALVA, Arizona 

MICHAEL MICHAUD, Maine 

MELISSA BEAN, Illinois 

HENRY CUELLAR, Texas 

DAN LIPINSKI, Illinois 

GWEN MOORE, Wisconsin 

JASON ALTMIRE, Pennsylvania 

BRUCE BRALEY, Iowa 

YVETTE CLARKE, New York 

BRAD ELLSWORTH, Indiana 

HANK JOHNSON, Georgia 

JOE SESTAK, Pennsylvania 

BRIAN HIGGINS, New York 

MAZIE HIRONO, Hawaii 

STEVE CHABOT, Ohio, Ranking Member 

ROSCOE BARTLETT, Maryland 

SAM GRAVES, Missouri 

TODD AKIN, Missouri 

BILL SHUSTER, Pennsylvania 

MARILYN MUSGRAVE, Colorado 

STEVE KING, Iowa 

JEFF FORTENBERRY, Nebraska 

LYNN WESTMORELAND, Georgia 

LOUIE GOHMERT, Texas 

DEAN HELLER, Nevada 

DAVID DAVIS, Tennessee 

MARY FALLIN, Oklahoma 

VERN BUCHANAN, Florida 

JIM JORDAN, Ohio 

MICHAEL DAY, Majority Staff Director 

ADAM MINEHARDT, Deputy Staff Director 

TIM SLATTERY, Chief Counsel 

KEVIN FITZPATRICK, Minority Staff Director

SUBCOMMITTEE ON INVESTIGATIONS & OVERSIGHT

JASON ALTMIRE, PENNSYLVANIA, Chairman

CHARLIE GONZA ́ LEZ, Texas 

RAUL GRIJALVA, Arizona 

LOUIE GOHMERT, Texas, Ranking 

LYNN WESTMORELAND, Georgia

(II) 

C O N T E N T S 

OPENING STATEMENTS 

Page

Altmire, Hon. Jason ................................................................................................. 1

Gohmert, Hon. Louie ............................................................................................... 2

WITNESSES

PANEL I 

Wilson, Laurence, Centers for Medicare & Medicaid Services ............................ 4

PANEL II 

Taubman, Dr. Ross, American Podiatric Medical Association ............................. 13

Shirvinsky, John, Pennsylvania Association of Medical Suppliers ..................... 15

Gilligan, Carol, Health Aid of Ohio, Inc. ............................................................... 17

Blackburn, Georgetta, American Association of Homecare .................................. 20

Saxon, Richard, Advanced Medical Technology Association ................................ 22

Navarro, Jose F., RPh, National Association of Chain Drug Stores ................... 24

APPENDIX 

Prepared Statements: 

Altmire, Hon. Jason ................................................................................................. 35

Gohmert, Hon. Louie ............................................................................................... 37

Wilson, Laurence, Centers for Medicare & Medicaid Services ............................ 39

Taubman, Dr. Ross, American Podiatric Medical Association ............................. 54

Shirvinsky, John, Pennsylvania Association of Medical Suppliers and Attachment ...................................................................................................................... 96

Gilligan, Carol, Health Aid of Ohio, Inc. ............................................................... 106

Blackburn, Georgetta, American Association of Homecare .................................. 114

Saxon, Richard, Advanced Medical Technology Association ................................ 121

Navarro, Jose F., RPh, National Association of Chain Drug Stores ................... 126

Statements for the Record: 

Food Marketing Institute ........................................................................................ 132

National Association for the Support of Long Term Care (NASL) ...................... 137

Capitol Hill Advocates, Inc. .................................................................................... 142

The Orthotic and Prosthetic Alliance ..................................................................... 146

(III) 

(1)

SUBCOMMITTEE HEARING ON COMPETITIVE 

BIDDING FOR DURABLE MEDICAL 

EQUIPMENT: WILL SMALL SUPPLIERS BE 

ABLE TO COMPETE? 

Wednesday, October 31, 2007

U.S. HOUSE OF REPRESENTATIVES, 

COMMITTEE ON SMALL BUSINESS, 

SUBCOMMITTEE ON INVESTIGATIONS & OVERSIGHT

Washington, D.C. 

The Subcommittee met, pursuant to call, at 2:00 p.m., in Room 

2360, Rayburn House Office Building, Hon. Jason Altmire [chairman of the Subcommittee] Presiding. 

Present: Representatives Altmire, Gonza ́lez, and Gohmert. 

OPENING STATEMENT OF CHAIRMAN ALTMIRE 

ChairmanALTMIRE. This hearing on ′′Competitive Bidding for Durable Medical Equipment: Will Small Businesses Be Able to Compete?′′ is now called to order. 

As more baby boomers age into Medicare, few would disagree 

that reform is necessary. But change presents unique challenges 

for the program, its beneficiaries and the medical providers that 

support it. That is why changes to Medicare must be made carefully and with a great deal of thought and input. 

Today’s hearing will shed light on the importance of small durable and medical equipment suppliers to the Medicare program. It 

will allow the Subcommittee to fully understand the implications of 

the project that affects both small health care providers and patients’ access to care. Small firms are an essential part of Medicare 

and fill gaps larger businesses either cannot or will not fill. 

On April 2, the Centers for Medicare and Medicaid Services 

issued its final rule on competitive bidding for durable medical 

equipment. The program allows Medicare to award contracts for 

durable medical equipment to suppliers with the lowest bids. CMS 

maintains that the program will not only ensure beneficiary access 

to quality medical supplies and services, but will also reduce beneficiary out-of-pocket expenses and improve the effectiveness of payments. But the question remains, what will competitive bidding 

mean to the small business community? And do its benefits outweigh the costs? 

CMS has estimated that within 5 years of implementing the program, the savings to taxpayers will exceed over $1 billion annually. 

The potential for gain cannot be ignored, but these reforms could 

have enormous ramifications on small businesses. While the objecVerDate 0ct 09 2002 09:45 Dec 20, 2007 Jkt 033615 PO 00000 Frm 00005 Fmt 6633 Sfmt 6633 G:\CLERK SB\HEARINGS\TRANSCRIPTS\39377.TXT LEANN
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tive is to reduce costs, it is not clear that the new competitive bidding program will achieve this goal without unraveling the DME 

small business community. 

Small suppliers make up well over 90 percent of the Nation’s 

medical equipment providers. To its credit, CMS appears to acknowledge the value of small firms to the DME marketplace, and 

the program pays deference to this importance by putting in place 

rules that protect certain categories of small suppliers. It also encourages the formation of small supplier networks in its final rule. 

But these actions provide little relief to many small suppliers. By 

CMS’s own estimation, once the competitive bidding program has 

taken full effect, as little as 20 suppliers on average will be initial 

bid winners in each area. Even with small business protections in 

place, few small firms can expect to be actual bid winners. This 

may spell ruin for small business providers whose revenues are 

often less than $1 million per year. 

What seems clear about CMS’s competitive bidding program is 

that the only businesses certain to survive the agency’s payment 

reform will be the national suppliers. Small businesses may be the 

backbone of this country, but the manner in which the competitive 

bidding program is structured may challenge their very survival. 

The issue is of particular concern to me because western Pennsylvania is one of the first 10 areas to implement competitive bidding. I worry that CMS has not considered the unintended consequences that may result from the program, including the possibility that patients may lose the personal relationship they have 

developed with their local provider, in turn compromising their 

quality of care. 

Further, I have concerns that western Pennsylvania will be disproportionately impacted by competitive bidding and that it may 

force some local small businesses to close their doors and working 

families may lose their jobs. Congress must take a long look at the 

competitive bidding and impact that it will have on small suppliers. 

Though there is little doubt that Medicare must be reformed, in 

my view small businesses should not shoulder that burden. The 

panelists here today are well equipped to talk about reasonable 

ways to ensure this does not occur. 

I look forward to today’s testimony, and I thank all of our witnesses for their participation. I now yield to Mr. Gohmert for his 

opening statement. 

OPENING STATEMENT OF MR. GOHMERT 

Mr.GOHMERT. Thank you, Chairman. And good afternoon to everyone. And thank all of you for being here as we examine the Centers for Medicare and Medicaid Services’ competitive bidding program for certain durable medical equipment, prosthetics, orthotics 

and supplies. Boy, that is a mouthful, isn’t it? 

And I would like to say, Chairman, I really appreciate your having the hearing, and I appreciate your emphasis. I think you and 

I are of the same heart on this issue. But on December 8, 2003, 

President Bush signed into law the Medicare Prescription Drug Improvement Modernization Act of 2003. This legislation produced 

the largest overhaul of Medicare in the public health’s 38-year history. Among other things, the legislation required CMS to use comVerDate 0ct 09 2002 09:45 Dec 20, 2007 Jkt 033615 PO 00000 Frm 00006 Fmt 6633 Sfmt 6633 G:\CLERK SB\HEARINGS\TRANSCRIPTS\39377.TXT LEANN
3

petitive acquisition procedures when entering into contracts for durable medical equipment, prosthetics, orthotics and supplies under 

Medicare Part B. A single payment amount for each item derived 

under the new competitive acquisition project through competitive 

bidding will replace the current payment amounts. 

The new competitive acquisition project is the subject of today’s 

fact-finding hearing to acquire a better understanding of the CMS 

competitive acquisition project definition and impact on small business medical suppliers. In developing the competitive acquisition 

project procedures relating to competitive bidding and the awarding of contracts, this CMS is required by legislation to take appropriate steps to ensure the small business medical suppliers have an 

opportunity to be considered for participation. Because as we know, 

small business provides 70 percent of the jobs in the United States, 

legislation here does not require the demonstration be subject to 

Federal acquisition regulation. 

For our part, 19 implements Federal Government policy, provides 

maximum practicable opportunities in its acquisitions to small 

business, veteran-owned small business, service disabled veteranowned small business, HUBZone small business, small disadvantaged business, and women-owned business concerns. Such concerns must also add the maximum practicable opportunity to participate as subcontractors in the contracts awarded by any executive agency consistent with efficient contract performance. 

Competition is the foundation of capitalism. Competition stimulates innovation, encourages efficiency, drives down prices, saving 

taxpayer dollars. Small business has historically been the engine of 

innovation and a catalyst for competition. They also, as I say, they 

have most—70 percent of all new jobs provided. 

While I support competition and the outcomes it normally produces, I want to ensure that the competitive acquisition project’s 

design and methodology meets the intent of the Small Business Act 

by supplying small business medical suppliers the maximum practical opportunities to participate in the competition as both prime 

contractors and subcontractors. 

Additionally, it is imperative that we look at the big picture and 

make sure that folks who need these services are getting the best 

quality care they can. I think that is something that is oftentimes 

overlooked in Congress. We should not only get overly caught up 

only in the numbers but look to how the rules and regulations affect the folks back home in our districts. 

We have excellent witnesses here today to provide us with insight in the rationale behind the competitive acquisition project’s 

definition of small business medical suppliers, and how the 

project’s competition methodology ensures maximum practical opportunities for them. I look forward to their testimony. And thank 

you, Mr. Chairman, and yield back the balance of my time. 

ChairmanALTMIRE. Thank you, Mr. Gohmert. I see that we have 

been joined by Congressman Gonza ́lez. Did you have a statement? 

Mr.GONZA ́LEZ. No. 

ChairmanALTMIRE. Let me just say in starting, it is probable at 

some point during this hearing we are going to be called for a vote. 

And what we will do at that point is temporarily recess the hearVerDate 0ct 09 2002 09:45 Dec 20, 2007 Jkt 033615 PO 00000 Frm 00007 Fmt 6633 Sfmt 6633 G:\CLERK SB\HEARINGS\TRANSCRIPTS\39377.TXT LEANN
4

ing. We will walk over to vote. We will come back and we will pick 

up where we left off. 

We have two panels today. The first one is Laurence Wilson. And 

I know that you have testified before, but for the benefit of all of 

our panelists, the way the light system works that you have in 

front of you is when you see the green light, that means you have 

5 minutes from the time that light goes on. When that light turns 

yellow, you have one minute remaining. So please start to wrap up. 

And then when it turns red, your 5 minutes is up. So please summarize your remarks, and end your testimony at that time. 

So our first witness today in our first panel is Mr. Laurence Wilson. He is currently the Director of the Chronic Care Policy Group 

in the CMS Center for Medicare Management, where he has responsibility for Medicare policy on a broad range of fee-for-service 

health care benefits, including post-acute care, home health, durable medical equipment, dialysis and various hospital services. He 

is also responsible for administering the agency’s process for the 

coding of drugs, devices and other items and services. Mr. Wilson 

has worked at CMS since 1988. 

Welcome, Mr. Wilson. We look forward to your testimony. 

STATEMENT OF LAURENCE D. WILSON, DIRECTOR, CHRONIC 

CARE POLICY GROUP, CENTER FOR MEDICARE MANAGEMENT, CENTERS FOR MEDICARE AND MEDICAID SERVICES 

Mr.WILSON. Good afternoon, Chairman Altmire and distinguished members of the Committee. I am pleased to be here today 

on behalf of the Centers for Medicare and Medicaid Services to discuss the durable medical equipment prosthetics, orthotics and supplies competitive bidding program mandated by the Medicare Modernization Act of 2003. 

This initiative will 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. Each 

year suppliers provide critical items and services, such as power 

wheelchairs and oxygen equipment to address the care needs of 

over 10 million beneficiaries. 

Over the past decade, Medicare expenditures have more than 

doubled from approximately $5 billion in 1997 for this benefit to 

over $10 billion annually. Fraud and abuse has been a significant 

concern in this area of Medicare program with numerous instances 

documented by the Office of Inspector General, General Accounting 

Office and other law enforcement agencies. Broadened abuse has 

no doubt contributed to this dramatic growth in this area of Medicare. 

The three charts that I have provided in the written testimony 

and to my right provide examples of the dramatic growth and expenditures for certain items. Power wheelchairs, negative pressure 

wound therapy and oxygen. For example, this first chart shows the 

growth in Medicare expenditures for power wheelchairs from 1995 

to 2006. During this period, total allowed charges grew from $59 

million to $980 million, over or over 1,500 percent. More accurate 

prices under Medicare will reduce incentives to commit fraud by 

making it less lucrative, while overall, resulting in more appropriate level of expenditures for durable medical equipment. Lower 

5

prices will also provide value to beneficiaries who will now pay less 

in coinsurance. 

The Office of Inspector General issued a report yesterday showing that on average Medicare fee schedule amounts or current payments in the area of power wheelchairs were 45 percent higher 

than median Internet retail prices available to consumers in 2007. 

This study, along with the examples for other products included in 

CMS’s written testimony, shows the potential value that could result from our competitive prices. 

In addition, the application of quality standards under this program by independent accreditation organizations as well as application of financial standards will help ensure that patients receive 

quality items and good customer service and that Medicare contracts with viable suppliers will be there for the long term to meet 

patients’ care needs. 

In developing this program, CMS worked closely with suppliers, 

manufacturers, and beneficiaries through a transparent public 

process. This included public meetings and forums, the existence of 

an external advisory board. In addition, beneficiary and small business focus groups were convened in several cities across the country to bring special focus to their concerns. As a result, CMS’s policies and implementation plan pay close attention to the needs of 

beneficiaries and small suppliers. 

I would note that CMS very much appreciates the detailed comments from this Committee, which were very helpful in the formulation of our final regulation. In that rule, CMS adopted numerous 

approaches to ensure small suppliers have the opportunity to be 

considered for participation in the program. 

First, consistent with the recommendation of the Committee, 

CMS worked with the Small Business Administration to develop a 

more representative definition of a small supplier in contrast to the 

more general definition of a small business. CMS then designed 

specific policies linked to this new definition to help small suppliers. 

For example, the final regulation allows small suppliers to band 

together networks in order to meet the requirement to serve an entire competitive bidding area. The regulation also employs a formula to ensure that multiple suppliers will be selected for each of 

the 10 product categories in an area. In this way, the largest suppliers will be unable to dominate the bidding process. All winning 

suppliers will continue to compete based on quality and customer 

service, and each supplier’s share of the market will ultimately depend on patient choice. 

Most importantly, the regulation establishes a 30 percent target 

for small supplier participation in the program. If the winning 

group of suppliers is not composed of 30 percent small suppliers, 

CMS will add small suppliers to the list of winners to reach this 

target. 

The first round of competitive bidding is currently underway. 

Over 6,300 certified bids have been submitted by interested suppliers in the 10 metropolitan areas. We are very pleased with this 

result, and we are evaluating the bids currently. We recognize that 

some suppliers experience difficulty, and we are working on 

6

changes to the system to alleviate those concerns with a view towards round two when we will expand the bidding to 70 MSAs. 

In summary, the new competitive bidding program will bring 

value to Medicare and its beneficiaries. More accurate prices along 

with accreditation and financial standards will result in improved 

quality and customer service for patients and form an important 

part of the agency’s overall effort to eliminate fraudulent suppliers 

in Medicare and protect America’s seniors. 

I thank the Committee for inviting me here today, and I am 

pleased to answer any questions the chairman or other Members 

may have. Thank you. 

[The prepared statement of Mr. Wilson may be found in the Appendix on page 115.]

ChairmanALTMIRE. Thank you, Mr. Wilson. The bidding process 

ended on September 25 after the need for multiple extensions to 

allow bidders to submit those bids. Whenever CMS proposes to 

start the program in an MSA, whether it be the first phase of 10 

MSAs or the second phase of 90 MSAs or even nationwide, will you 

start with a new bidding process in each MSA? 

Mr.WILSON. We will, as we did in round one in 10 MSAs, publish 

a request for bid. We will indicate a timeline for suppliers to submit their bids and commence education for suppliers so that they 

can meet all the specific requirements associated with the bidding 

process and move forward much in the same way. 

We do have some changes that we plan for round two. In particular, I mentioned in my testimony an improved bidding system, 

online electronic bidding system. We recognized suppliers had problems there. We are going to fix that, make it better for suppliers, 

and we will move forward, giving suppliers additional information 

they need. 

ChairmanALTMIRE. Is it CMS’s position that each MSA is different, has unique circumstances surrounding each one and therefore should have a different bidding process, separate bidding process? 

Mr.WILSON. They do indeed have a separate bidding process. And 

we certainly agree that each MSA is different. They are geographically different. Some have—like Riverside, California, has some 

very low population density areas in the west—or in the eastern 

part of that county that borders Nevada. We excluded those because it didn’t make sense for beneficiaries or suppliers to have to 

cover that type of territory. So we will consider those types of 

unique circumstances when we go forward with the bidding process. 

ChairmanALTMIRE. Thanks. Now it is my understanding that 

CMS limited eligibility initially to small businesses with $3.5 million in annual revenue, but the SBA’s limit is $6 million in annual 

revenue. So could you please explain the rationale behind this inconsistency in the application of small businesses? 

Mr.WILSON. What we wanted to do in this area of the program 

was try to target small suppliers, truly small suppliers. The small 

business definition was fairly general and included almost—and I 

think one of the—Mr. Gohmert pointed this out—90 percent of the 

suppliers that we have participating in Medicare. We wanted to 

7

find out who were a subset of that and make sure that they would 

participate because we wanted to ensure that not just large suppliers would have an opportunity to participate but the ones that 

were truly small had special policies to help them out. And that is 

why we changed that definition. 

ChairmanALTMIRE. Okay. 

Mr.WILSON. And I would point out that the specific definition 

was recommended by small suppliers who commented on the rule. 

ChairmanALTMIRE. Thank you. I just want to get something 

clarified with you here. Based on the final rule for the competitive 

bidding program, the rule leaves unanswered the question of 

whether DME suppliers will be able to withdraw from offering to 

supply an item if it is below their submitted bid price. So just for 

the record, can you clarify CMS’s position on this issue? 

Mr.WILSON. Yes, sir. I certainly can. Suppliers will submit a bid. 

They may fall in the winning range. They may not fall in the winning range. We will let them know. We will provide them an answer to their bid, whether it is accepted or not. If it is accepted, 

they will have to sign a contract with us. They don’t have to sign 

that contract. So they can decide if they don’t like the price that 

we are offering and turn it down. Just because they submit a bid, 

we won’t force them to participate. 

ChairmanALTMIRE. Thank you. And my last question for this 

first panel, then we will turn it over to the ranking member. In 

2003, the Medicare Modernization Act added dentists, podiatrists, 

and optometrists to the definition of physicians who may contract 

with Medicare. Given this shift in policy, why has CMS chosen not 

to extend the limited exception to the DME competitive bidding requirements to podiatrists, dentists, and optometrists? 

Mr.WILSON. We did receive a number of comments from podiatrists. They asked us to include podiatry in the definition of the 

statute, and it is my understanding that we did do that. Now I 

think there was some additional concerns expressed by podiatry 

with respect to other exceptions we granted physicians and whether they were—whether the items that they supplied would be included there. We didn’t do that at this point, but we haven’t yet 

included those items in competitive bidding either. 

I would like to go back and provide you a written answer to that 

because I want to make sure that I am correct in what I am telling 

you with respect to what we did in the final rule. 

ChairmanALTMIRE. Okay. That will be fine. We will confirm 

through a letter. 

Mr.WILSON. Thank you. 

ChairmanALTMIRE. Thank you. I will turn it over to the ranking 

member, Mr. Gohmert. 

Mr.GOHMERT. Thank you, chairman. The difference in 2,200 of 

the suppliers that actually applied and the 15,000 that were anticipated still concerns me. But let me ask you what steps that seem—

that the Centers for Medicare and Medicaid had incorporated into 

the accreditation process to minimize cost and resource impact on 

small medical suppliers. What input did you actually have from 

them? 

Mr.WILSON. We had quite a bit of input, sir. We had focus groups 

with suppliers. In particular, we discussed the quality standards. 

8

They had concerns about the quality standards and accreditation, 

not with respect to the fee necessarily that was charged by accreditation organizations but with the cost of coming into compliance 

with the standards. 

Mr.GOHMERT. I guess a better question would be—and you mentioned the focus groups and all. I guess I should have gone straight 

to not how many did you hear from, but how much attention did 

you actually pay? I mean, we have got Members of Congress that 

they go home all the time, listen to their constituents and then 

come up here and do something completely different. But back 

home, they think they are listening because they do. But then they 

don’t put that into application. So how did you go about incorporating in the application process what they said, what you 

heard? 

Mr.WILSON. Well, I think we did a great deal. Let me just start 

with a pretty simple metric from my standpoint. What we proposed 

was 114—I am sorry—about 120 pages in requirements for the 

quality standards. The final document was 14 pages and just focused on the core standards. A lot of standards that they were concerned about that went to record keeping and documentation requirements, whether or not they had posted business hours versus 

we had an original requirement that said 40 hours of office hours 

they had to keep. We got rid of that and just said posted business 

hours. 

So we listened to a lot of different, very specific issues and eliminated a lot of requirements that were of particular concern to small 

businesses, and I would be happy to send you a list of some of 

those. 

Mr.GOHMERT. Okay. Well, let me also ask, the competitive bidding rule permits physical and occupational therapists to provide 

off-the-shelf orthotics without participating in the bidding process, 

but physicians are not allowed to do that. And you know, obviously 

physicians play an important role in the treatment process. So I 

am curious why physical therapists were carved out but not physicians. 

Mr.WILSON. Well—

Mr.GOHMERT. You figure they make enough money as it is? I am 

just curious. 

Mr.WILSON. Not the physicians that I talk to, but the—I guess 

what I would say was we did establish a limited exception for physicians that allowed them to really—we allowed them to remove 

themselves from competitive bidding as long as they were serving 

a specific core set of items to only their patients. So we did provide 

that physician exception to provide certain things to just their patients. They couldn’t act more broadly as a supplier in the community, but to the extent that they were treating their patients and 

their patient needed a walker, for example, to leave the office, we 

allowed them to do that without having to go through competitive 

bidding. 

Does that answer your question, sir? 

Mr.GOHMERT. Yes. Somewhat. Apparently you provided a limited 

carve-out for physicians. Is that the same extent to which physical 

or occupational therapists are allowed their carve-out? 

Mr.WILSON. I believe it is somewhat different. 

9

Mr.GOHMERT. Yeah. It sounds more restrictive. 

Mr.WILSON. It is more restrictive in those other areas, and—

Mr.GOHMERT. So the physical therapists would know more than 

the doctors would about what was needed, is that where we are 

going here? 

Mr.WILSON. Where we are going is that we only carved out a 

very, very limited set of items and services from competitive bidding provided by those practitioners. 

Mr.GOHMERT. And I understand there is always a balance there. 

I have always had concerns about, you know, if you allow a physician to prescribe medications and then fill those prescriptions, then 

obviously there could arise a conflict. But let me move on. 

It is my understanding that you didn’t include diabetes testing 

supplies sold at retail in the competitive bidding demonstration 

projects and also excluded diabetes supplies sold at retail from first 

round of competitive bidding. So what is CMS’s intention for the 

second round with respect to ensuring patient access to diabetes 

testing supplies? 

Mr.WILSON. Well, one of the reasons that we excluded from competitive bidding diabetes supplies sold at the retail pharmacy outlets or store fronts was because a lot of concerns were raised with 

respect to access and with respect to patients getting the information they might need from pharmacists and others with respect to 

how those glucose monitors or test strips or items would be used 

and how to interpret the results. So we did carve that out. Now 

with respect to round two, we have not yet announced the items 

that will, or product categories that will fall under round two or 

the areas. We are considering that now and expect to provide the 

answer that you need within the next couple of months. 

Mr.GOHMERT. So you don’t have an answer yet? 

Mr.WILSON. I do not. 

Mr.GOHMERT. Well, looks like we may need another hearing. 

Thank you. 

ChairmanALTMIRE. Mr. Gonza ́lez. 

Mr.GONZA ́LEZ. Thank you very much, Mr. Chairman. And welcome, Director Wilson. I want to start off by what I generally start 

off with, and that is the observation that this Committee kind of 

looks at things a little differently than most other Committees. You 

may have testified before other Committees, Ways and Means or 

Energy and Commerce, but we are more oriented about the impact 

of Federal policy on small businesses. 

The United States Government is the biggest purchaser of services and products than anyone else, any other entity in the world. 

So what we attempt to do is to make sure that small businesses 

are part of that whole equation, and we even tried to institute 

through policy and orders and even legislation that they somehow 

get to participate in this contracting. The biggest problem that we 

have had in the past with government services and products—and 

any small businessman or woman out there, they are going to love 

the word—it is bundling. The question that comes to my mind, do 

we have here the mother of all bundling? And that is going to be 

a real concern. 

I am not saying that you are the cause of this. I think we have 

given you a very difficult, difficult mission, and that is attempting 

10

to save as much money as possible, but it would appear—it is 

counterintuitive to us because you start off with the proposition of 

probably limiting the number of businesses that will be eligible to 

contract with the Federal Government for reimbursement for their 

service or their product. I think that is what we are really here to 

look at today. And you may be able to reconcile some of that. 

But I do want you—when I ask for your response after I finish 

this two-part question—to address that. Do you see that as a special challenge to you as you attempt to accomplish what the Medicare Modernization Act attempted to accomplish in mandating 

what you were doing? 

The other part of my question goes to your demonstration 

projects. I am from San Antonio. I represent half the city. That was 

one of the sites. The other was in Florida. I still don’t know that 

it is Polk County or Dade County. 

Mr.WILSON. Polk. 

Mr.GONZA ́LEZ. But I was just wondering, the second part of my 

question really goes to what you may have learned from that experience as being valid when you apply it to what you are attempting 

to accomplish by areas that are huge compared to what I would 

think would have been San Antonio or Florida. And I am talking 

about the competitive bidding areas, the CBAs based with MSAs 

combination and so on. Can you really rely on what you believe you 

learned in your demonstration projects and apply it to such a huge 

or larger—not just geographical but obviously a population that 

you are going to have now when you actually roll out what we have 

here today with CBAs? 

So the first question is, do you see any conflict here as going basically with the proposition that if you accomplish your goal, you 

probably have cut out small business? There may not be a role for 

small business in what CMS is attempting to do. And we have run 

into this problem with other agencies and departments in government. You wouldn’t be alone. And then secondly, the lessons that 

you believe and the savings that you believe you accomplished 

under the demonstration projects, do they really translate into the 

bigger and the more real picture that you presently find yourselves 

in? 

Mr.WILSON. Thank you, Congressman. With respect to the first 

question, I think we have done enough to ensure that small suppliers are included. I think the type of policies we put in, in particular a policy that requires us to add to the list of winners suppliers that meet our small supplier definition, will ensure that 

there will be small suppliers participating in this program. That is 

as close to a guarantee as you can get. I think at the end of the 

day there may be fewer suppliers operating in these areas because 

Medicare will now only be contracting with the ones that can offer 

the best value, ones that meet our quality requirements and ones 

that meet our quality and accreditation requirements and ones that 

meet our financial standards. But at the end of the day, I think we 

have done enough to ensure that they have a role and will be participating and there for the long term. 

But again we do recognize that some may not be. Some may go 

into other lines of business, some may go and provide items and 

products to different payers other than Medicare. Some may proVerDate 0ct 09 2002 09:45 Dec 20, 2007 Jkt 033615 PO 00000 Frm 00014 Fmt 6633 Sfmt 6633 G:\CLERK SB\HEARINGS\TRANSCRIPTS\39377.TXT LEANN
11

vide other items that don’t fall under competitive bidding. But I 

think there will be a role for these suppliers within this program 

based on the policies that we have created. 

With respect to the second issue, I mean I think we learned a 

lot during the demonstrations. You know we have learned some of 

the big things, like you can achieve savings through this type of 

program. We certainly know the VA and other types of programs, 

even private payers do this type of competitive acquisition process 

and have been successful at it. So we know their savings. We 

looked at quality very closely, and we were able to see that quality 

was maintained, access was not hindered. So we think those types 

of things, those sort of big things can be achieved. 

At the same time I think we learned a lot. We learned that suppliers need transparency, they need to understand the rules. This 

is complicated, and we need to help them. And I think that is 

something that we take very seriously as we move forward with 

the implementation of not just this current round but the upcoming 

round. I think it is achievable. 

Mr.GONZA ́LEZ. Thank you very much. Thank you, Mr. Chairman. 

ChairmanALTMIRE. I wanted to ask one more question, and then 

I will offer the same opportunity to each of the Committee members that are here if they wish. 

And that is, that trained and licensed medical practitioners are 

by and large knowledgeable and skilled in the use of DME for patient care. So why does CMS believe it is necessary for them to on 

top of that be accredited by a CMS-recognized organization? 

Mr.WILSON. Well, that is a very good question and one that we 

have heard a lot about from different practitioner organizations. 

Certainly the statute does require that all participating suppliers 

be accredited. And so we considered this very carefully. We looked 

at our authority. We looked at the comments. And what we felt 

was at the end of the day the type of service, the type of delivery, 

the type of beneficiary education on these particular products was 

unique enough that we wanted to have a standard requirement for 

everybody, a level playing field for everybody so that we could ensure not just quality but that everybody participating in the program had to meet a common set of requirements. 

ChairmanALTMIRE. Thank you. Mr. Ranking Member, do you 

have a question? 

Mr.GOHMERT. Yeah. But let me go ahead and ask specifically, 

why do you think instead of the 15,000 projected suppliers applying 

that we had 2,200? 

Mr.WILSON. 2,200 is not a number that CMS has used, sir. I am 

not sure where that came from. 

Mr.GOHMERT. Okay. What number are you using? 

Mr.WILSON. Well, the number that I shared with you today was 

that we received across the 10 product categories, across the 10 

metropolitan areas, 6,300 certified bids submitted. 

Mr.GOHMERT. Okay. So that is still less than half of what was 

expected, and those are from some pretty big areas. 

Mr.WILSON. Well, I think that is right. I think there is some confusion about what is talked about in the final rule versus reality. 

What is talked about in the final rule is the number of supplier 

sites that may fall under the bidding, the total potential supplier 

12

sites. In fact, when suppliers submit bids, suppliers under common 

ownership only submit one bid. So a big company—and I know a 

bunch of big companies bid as well as small suppliers—will submit 

one bid for 100 sites. So that is not factored into that number. 

So it is somewhat confusing. You have to read the language carefully in the rule. But I think the numbers are much closer together 

than folks may have been thinking when they looked at that large 

number. 

Mr.GOHMERT. Well, I am just concerned that it may be like the 

old story about ending on something in Chinese and saying, if you 

are a small business and you want to participate, you have to be 

able to read that. Can you read that? Yeah. It says, there are not 

going to be any small businesses participating. But I am hoping 

that won’t be the case. 

ChairmanALTMIRE. Mr. Gonza ́lez? 

Mr.GONZA ́LEZ. I will be brief. Thank you, Mr. Chairman. 

Director Wilson, you would agree though once we implement this 

plan, you will have fewer businesses eligible to conduct business in 

the supply of durable medical equipment? 

Mr.WILSON. I agree that is likely. I also know that once we learn 

a lot from this program, you know, we can offer prices based on 

what we have learned in competitive bidding to other market areas 

and use those prices for everybody. 

Mr.GONZA ́LEZ. And I understand that. And there is a learning 

curve on all this. But in the meantime, the businesses go under. 

The second part of the question is, because there will be fewer, 

less, whatever the appropriate term is, as far as choice, do you 

think that impacts the quality of care that will be available to patients, to beneficiaries as far as maybe picking the best product 

that is best suited for their condition? You will have less choice? 

Mr.WILSON. I don’t—I hope not. We have done a number of 

things to ensure that doesn’t happen. At the end of the day, we 

have a program that provides greater value. Suppliers will now be 

accredited to meet quality standards and meet financial standards 

so that they are there for the life of the contract to meet patients’ 

needs. So we will have a better, I think a better environment for 

providing that care, which will promote the quality. 

We also have specific policies to promote quality, an anti-discrimination clause which says if you are a supplier and you provide 

this brand to your private pay patients, well, you have to relay that 

to Medicare. We have a transparency policy where we will publish 

and update the list quarterly all information on models and brands 

provided by suppliers as the statute directed us to. We will have 

a physician authorization policy that allows physicians to pick a 

particular brand and have that provided if the patient needs that 

for medical reasons. 

So there are some protections in place for beneficiaries. Beneficiary protections and small supplier issues were the two key 

issues in this final rule. So we have tried to address those. 

Mr.GONZA ́LEZ. Thank you very much. Thank you, Mr. Chairman. 

ChairmanALTMIRE. Mr. Wilson, thank you for being here today. 

If we could get some clarification in writing on the couple of issues 

that we brought up. 

Mr.WILSON. Yes, sir. 

13

ChairmanALTMIRE. You are excused. But if you could allow at 

least one of your staff to remain here for the remainder of the hearing in case we have questions, that would be appreciated. 

Mr.WILSON. Thank you. 

ChairmanALTMIRE. I call to the table the second panel. We will 

begin. We will introduce each witness individually and then they 

will have the opportunity to offer their testimony and then we will 

introduce the next witness. So in that order for all six of you. 

We are going to have a vote called in approximately 10 to 15 

minutes. So at that point we will hear the remainder of the testimony for whoever happens to be speaking. We will recess for probably 20 minutes to a half-hour and we will return to finish the 

hearing. 

So at this point I want to introduce Dr. Ross Taubman. He is certified in foot and ankle surgery by the American Board of Podiatric 

Surgery and is the current President-Elect of the American 

Podiatric Medical Association, which is the Nation’s leading 

podiatric organization, representing approximately 80 percent of 

the podiatrists in this country. Dr. Taubman’s practice is located in 

Clarksville, Maryland, where he focuses on elective and reconstructive foot surgery and limb salvage for patients with diabetes. Welcome, Doctor, and we look forward to your testimony. 

STATEMENT OF DR. ROSS TAUBMAN, PRESIDENT ELECT OF 

THE AMERICAN PODIATRIC MEDICAL ASSOCIATION, AMERICAN PODIATRIC MEDICAL ASSOCIATION 

Dr.TAUBMAN. Thank you. Mr. Chairman Altmire, Ranking Member Gohmert and Mr. Gonza ́lez, I welcome the opportunity to testify before you today on behalf of the American Podiatric Medical 

Association. 

I am Dr. Ross Taubman, President-Elect of the APMA and a 

practicing doctor of podiatric medicine. We represent approximately 

80 percent of the podiatrists in the country, and our members provide the majority of foot care services to the Medicare population. 

Mr. Chairman, more than 60 percent of the podiatrists in this 

country practice in one or two-person groups and would be considered small businesses. We do not believe Congress intended to construct new barriers for small businesses in recent legislation, including the Medicare Prescription Drug Improvement and Modernization Act of 2003, or MMA, but the unintended consequences 

have been serious for podiatry practices. 

PPMs have been defined as physicians within their scope of practice under Title 18 of the Social Security Act since 1967. One of the 

provisions of the MMA that authorizes the competitive acquisition 

program cites a restrictive definition of physician that includes only 

medical doctors and doctors of osteopathy but not doctors of 

podiatric medicine. This restrictive definition could prevent patients from obtaining necessary DME as part of their care from 

their podiatrists. 

Because this exclusion of podiatrists appears in the law, CMS 

has stated that Congress must make a technical correction to the 

MMA to resolve this issue. APMA urges Congress to take such action this year as part of a broader Medicare package, ensuring that 

14

podiatric physicians can continue providing DME to our elderly and 

disabled patients. 

The competitive acquisition program presents specific challenges 

to small business medical practices. Physician suppliers dispense 

small amounts of DME as part of patient care. According to 2004 

CMS data, physicians and other practitioners were responsible for 

only 3.1 percent of DME-allowed charges. It is unclear what, if any, 

program improvement would be realized by imposing these requirements on physician suppliers. 

Consider this CAM walker used when treating foot or ankle fractures. If subject to competitive bidding, I would need to make a bid 

to Medicare and be selected as a winning bidder to be able to continue to supply these items to my patients at the point of care. This 

is a completely uneven playing field from a cost basis. Since I may 

stock only two or three of a given item at a time in my small office, 

there is no way I can take advantage of economies of scale compared to a large supply house that purchases thousands of these 

items at a time. 

Mr. Chairman, not only would this be unfair to me as a small 

businessman, but more importantly, it is certainly not good medical 

care. We shouldn’t be sending patients out of our offices to get 

these medically necessary products in acute care situations. 

Therefore, I urge Congress to exempt all physician suppliers that 

dispense DME as part of their patient care from the competitive 

bidding process. 

The Medicare program’s new accreditation requirements for 

DME suppliers are time consuming, expensive and heavy on paperwork, precisely the type of barrier which poses special difficulties 

for small businesses. 

Consider that podiatrists who supply DME receive an average of 

$7,000 per year from Medicare. Accreditation costs a minimum of 

$3,000 per office for up to a 3-year period. It is not difficult to understand why we find it impractical to seek accreditation. 

Furthermore, this accreditation requirement is unnecessary for 

physicians, given the comprehensive medical education and stringent licensure process to which we are already subject. Applying 

the same accreditation standards to physicians that are applied to 

large-scale suppliers is unnecessary, unfair, anti-competitive and 

costly duplication of existing rigorous processes. Therefore, physicians should be exempt from this supplier accreditation requirement. 

Another DME-related burden arose recently when CMS proposed 

to require all physician suppliers of DME to furnish CMS with a 

surety bond. Since podiatric physicians generate only an average of 

$7,000 per year in allowed annual charges, most are almost certain 

to stop providing DME products under Medicare if the surety bond 

requirement is implemented. 

Congress recognized that including physicians in surety bond requirements was bad policy. The Balanced Budget Act of 1997 states 

that such surety bonds requirements should be applied to suppliers, quote, other than physicians or other practitioners, end 

quote. Moreover, the report language states unambiguously that, 

quote, the conferees wish to clarify that these surety bonds requireVerDate 0ct 09 2002 09:45 Dec 20, 2007 Jkt 033615 PO 00000 Frm 00018 Fmt 6633 Sfmt 6633 G:\CLERK SB\HEARINGS\TRANSCRIPTS\39377.TXT LEANN
15

ments do not apply to physicians and other health care professionals, end quote. 

Given the clarity of that statutory report language, APMA does 

not understand why CMS proposed to include podiatrists and other 

physicians in the surety bond requirement. 

In conclusion, implementing rules whose predictable outcome is 

the exclusion of thousands of small businesses from supplying 

DME to Medicare beneficiaries is bad for physician practices and 

the patients whom we serve. Podiatric physicians must be permitted to continue to prescribe and supply DME products. Additionally, physicians should be allowed to provide essential durable 

medical equipment as part of patient care without the burdens of 

competitive bidding, additional accreditation or posting of surety 

bonds. 

Mr. Chairman and members of the Subcommittee, again thank 

you for providing me with the opportunity to speak today on behalf 

of the APMA. Attached to my written testimony are comments that 

we have submitted to CMS and other background documents. I respectfully submit these letters to the Subcommittee and ask that 

they be included in the record. I will be happy to answer any questions you may have. 

[The prepared statement of Dr. Taubman may be found in the 

Appendix on page 37.]

ChairmanALTMIRE. Without objection, they will appear in the 

record. 

We will go next to John Shirvinsky. He is the Executive Director 

of the Pennsylvania Association of Medical Suppliers, established 

in 1972. The Pennsylvania Association of Medical Suppliers is the 

oldest State association of its kind in the country dedicated to providers of home medical equipment and supplies and the patients 

they serve. Welcome, Mr. Shirvinsky. 

STATEMENT OF JOHN SHIRVINSKY, EXECUTIVE DIRECTOR, 

PENNSYLVANIA ASSOCIATION OF MEDICAL SUPPLIERS 

Mr.SHIRVINSKY. Thank you, Mr. Chairman, Mr. Gohmert. 

First, PAMS would like to commend and thank this Committee 

for taking the opportunity to examine the impact of CMS’s competitive bidding program for DME and for looking at the question, will 

small suppliers be able to compete? The question might as well be, 

will small suppliers be able to survive? 

One small supplier in Pittsburgh who does about 65 percent of 

his business with Medicare recently told me that this is a question 

that literally keeps him up at night. You see, competitive bidding 

is an exclusionary process. It is one that produces winners and losers and, of necessity, it produces far more losers than it does winners. Since the vast majority of HME suppliers are small and independently owned, it should stand to reason that small independently owned companies will bear the brunt of the burden. 

CMS did attempt to create some small provider-friendly provisions, such as small supplier networks for the purpose of submitting joint bids, but even that effort failed. To the best of my knowledge, no small providers were able to successfully form such a network in the Pittsburgh competitive bidding area. I am unaware of 

16

any small supplier networks that were able to be formed anywhere 

in the country. I can only vouch for Pittsburgh, none were formed 

there. 

Instead, what small providers in Pittsburgh did is they formed 

ad hoc subcontracting arrangements as a matter of survival. Each 

provider agreed that they would submit their own bids and secured 

letters of intent from one another to provide products and services 

throughout the CBA as subcontractors. Now that was a clever idea. 

But why should honest hard-working business people need to come 

up with clever ideas in order to survive in an otherwise healthy 

market? 

Competitive bidding has been a bad idea from the git-go. It was 

inserted into the Medicare Modernization Act of 2003 in the middle 

of the night just prior to final passage. It was not properly vetted, 

it was not properly thought through. It makes pretensions about its 

ability to save money, again on a very, very small portion of Medicare spending, that are simply unsupportable and unsustainable. It 

makes no account for its impact on businesses, communities, employment, product quality, quality of care or the potential for increased hospitalizations that may result. It is a program that promotes the concentration of market share, yet takes no notice of the 

inherent dangers in such concentration. 

The CMS competitive bidding process received failing grades 

from Pittsburgh-area providers of all types and sizes. From the 

many providers with whom I have spoken, it has been called 

flawed, ridiculous, unworkable, overwhelming, frustrating, crazy, 

uninformed, anti-private enterprise, absurd, disturbing and misdirected. I made up none of those, although I did clean up a few. 

CMS has contended that DME competitive bidding represents a 

market-based efficiency. It is at best dubious to suggest that this 

program represents anything close to healthy market economics. 

Competitive bidding is a tool that can be used to great effect by 

government so long as it is carefully targeted and promotes competition. Think highway and facility construction or, you know, 

even office supplies or local trash collection. The DME competitive 

bidding process is none of these things. It is complex, far reaching 

and burdensome. It is a government-sponsored scheme to eliminate 

competition by dismantling a national network of HME providers 

that has reliably serviced the home health needs of Medicare patients for decades. Medicare beneficiaries, CMS, and this Congress 

will live to regret the day that this network of independent DME 

providers was dismantled as a result of this ill-considered program. 

Medicare is the dominant insurer in the DME market. With this 

program, CMS is attempting to manipulate the market for purposes that will not result in meaningful savings, that will not ensure better service for people in need, that will result in layoffs, 

that will result in small business closings, and that will result in 

the loss of tax revenues to State and local governments. 

The Medicare population is growing larger and older with each 

passing year. For the HME industry, that means a growing market. Under free market economic theory, that should mean that 

more competitors should be entering this market, helping to drive 

down or stabilize pricing in the face of increasing demand. It is inconceivable that it would be the U.S. Government that would come 

17

forward with a scheme to concentrate market share and eliminate 

competition given such conditions. 

What CMS is doing is a formula for certain higher prices down 

the road. Competitive bidding for DME is not good business. It is 

bad news. The most responsible thing that this Congress can do on 

this count is to admit that a previous Congress made an error in 

approving a poorly considered provision. I urge this Subcommittee 

to support the repeal of competitive bidding and to set this Nation’s 

small and independently owned HME providers free to meet the 

needs of America’s aging population. 

I thank you for this opportunity to testify. 

[The prepared statement of Mr. Shirvinsky may be found in the 

Appendix on page 79.]

ChairmanALTMIRE. Thank you, Mr. Shirvinsky. And at this time 

we will recess the hearing until 3:15. 

[Recess.] 

ChairmanALTMIRE. Thanks, everybody, for waiting. That should 

be our last interruption for this hearing. 

We left off at Ms. Carol Gilligan. She is president and owner of 

Health Aid of Ohio. For 23 years her company has taken care of 

Cleveland’s elderly and disabled. 

Recognized nationally as one of the of the top three rehabilitation 

wheelchair companies for 3 years in a row, Health Aid has taken 

care of thousands of patients. They closely interact with patients 

at Metro Health, the Cleveland Clinic Melon Center, and the Children’s Rehab, to name just a few 

Just this month, Carol’s company received the industry’s reward 

as the number one rehabilitation provider in America. 

Welcome Ms. Gilligan. 

STATEMENT OF CAROL GILLIGAN, PRESIDENT, HEALTH AID 

OF OHIO, INC., CLEVELAND, OHIO 

Ms.GILLIGAN. Mr. Chairman and Members of the Subcommittee, 

thank you for the opportunity to talk to you today about the Medicare program and its implementation of competitive bid acquisition 

programs for durable medical equipment, prosthetics, orthotics and 

supplies, and its impact on my small business and the consumers 

I serve. 

A copy of my written statement has been provided to you for the 

record. My name is Carol Gilligan, and I am President of Health 

Aid of Ohio in Cleveland, Ohio. I started my small business in 1984 

to serve seniors and people with disabilities. My company primarily 

provides what we call complex rehab equipment and services to 

people with specialized needs. 

I started my company, small business, over 20 years ago after 

meeting a girl in my neighborhood who has a rare form of muscular dystrophy. I brought her mold today because that small girl 

is 26 years old right now, and that is her shape of her body and 

her custom seating. So Emily is with us today. 

My business was inspired by my desire to be able to really help 

people with special needs and mobility limitations. This year I was 

honored to be awarded the best rehab provider in the United 

States by HME News, an industry trade publication. 

18

I would like to explain the types of services my company provides 

to consumers and how the bidding program will impact my program and consumers. Provision of complex rehab technology is not 

a commodity. Complex rehab and assisting technology consists of 

highly individualized products and services that are prescribed by 

a physician and provided to individuals by specially trained and 

credentialed members of the rehab technology profession. 

It is different from traditional durable medical equipment products in that rehab products are evaluated, fitted, configured, adjusted or programmed to accommodate each individual’s specific 

and unique medical needs, taking into consideration the individual’s medical history, diagnosis, disease progression, functional 

needs, anatomical anomalies and requirements as well as the typical environments that individual encounters throughout the course 

of their daily activities. 

I am accompanied today by my friend David T. Williams of Ohio, 

and I invite you and members of the Committee to talk to Mr. Williams after the hearing. David is an excellent example of what goes 

on into the process, into providing complex rehab. 

In 1975, David was diagnosed with multiple sclerosis. This form 

of multiple sclerosis is characterized by acute exacerbations of the 

disease, resulting in the formation of scar tissue in various locations in the brain and spinal cord. This in turn causes a wide variety of symptoms. 

In David’s case, the location of the multiple lesions in his spinal 

cord have resulted in multiple symptoms and disabilities, including 

quadriplegia and multiple complex medical conditions. 

The process of obtaining his wheelchair started with the thorough review of his medical record and complete and detailed evaluation by a multidisciplinary wheelchair seating clinic. Based on 

this evaluation, David’s neurologist prescribed a power wheelchair 

and a seating system that would give him pressure management, 

respiratory relief when necessary, postural stability, abductor spasticity control and the ability to periodically reposition and elevate 

his legs. 

The certified rehab technology specialist conducted an environmental assessment including his home, his workplace, and his vehicle. Based on the doctor’s prescription and the recommendations 

from the various health professionals that were at the seating clinic, we ordered the following components to provide David with an 

appropriate wheelchair: a power wheelchair base, a transportation 

securement system, joystick-style driver control with tremor 

dampering, power elevating leg rests, and a power seating system 

with the following functions: tilt, recline, power elevating seats, lateral trunk supports, adductor positioning device, and a headrest. 

To meet David’s unique needs, the wheelchair he is driving today 

is built from components derived from seven different manufacturers. The component parts were assembled by a rehab technology 

company who had to fabricate some of the hardware needed to 

blend the different components into one system. A customized 

wheelchair system was then delivered to David, and several field 

adjustments were made during multiple visits to David’s home. 

The costs of all of these services that were provided are included 

in the base Medicare payment for the power wheelchair system. 

19

Between the time David notified the staff of the seating clinic, the 

team assigned to his case had spent about 40 hours. This time includes doing environmental assessments, working with David to 

see what kinds of things he must do every day to maintain the best 

possible functionality and quality of life, ordering the components, 

assembling, fitting, adjusting the product and training David in the 

proper use of the system. 

As the supplier, we also incur significant costs of obtaining all of 

the necessary complex medical documentation that Medicare requires. David’s case is not unique. It represents the kind of challenge rehab technology companies see on a regular basis. Imposing 

a competitive bid process on complex rehabilitative services will 

substantially undercut the quality of services and the life for thousands of persons with disabilities and will essentially determine 

whether my business will continue or not. 

If my company loses this bid, the impact will be far greater than 

just losing my Medicare business. I will likely lose most of my 

other business for those product categories, because referral 

sources prefer to refer the providers who can take care of all of 

their business, not just patients who have one particular payer. 

In addition, State Medicaid programs and private payers will 

likely adopt the new lower Medicare bid fees, further negatively 

impacting any remaining business. Therefore, the majority of my 

business will be lost, forcing me to close my doors. 

As a small business, I believe we are disproportionately negatively impacted by this bidding program. 

There are two bills that have been introduced, H.R. 1845 and 

H.R. 2231, that would make reasonable changes to how CMS implements this bidding program, and it would begin to address some 

of the problems faced by small businesses. 

I strongly urge this Committee to actively support these measures. 

Thank you for the opportunity to be here today and I willbe 

happy to answer any of your questions. 

ChairmanALTMIRE. Thank you, Ms. Gilligan. 

[The prepared statement of Ms. Gilligan may be found in the Appendix on page 89.]

ChairmanALTMIRE. I now introduce Ms. Georgie Blackburn. Ms. 

Blackburn is Vice President for Government Relations and Legislative Affairs for Blackburn’s and has worked within the homecare 

industry since 1978. 

Blackburns is an independent pharmacy and medical equipment 

and medical supply company with a staff of 150 people. Ms. 

Blackburn is the immediate past president of the Pennsylvania Association of Medical Suppliers and member of the American Association of homecare. 

She is here on behalf of the American Association of homecare, 

which represents health care providers, equipment manufacturers, 

and other organizations within the homecare community operating 

in approximately 3,000 locations in all 50 States. 

Welcome, Ms. Blackburn. 

20

STATEMENT OF GEORGETTA BLACKBURN, VICE PRESIDENT, 

GOVERNMENT RELATIONS AND LEGISLATIVE AFFAIRS, 

BLACKBURN’S, TARENTUM, PENNSYLVANIA, ON BEHALF OF 

THE AMERICAN ASSOCIATION OF HOMECARE 

Ms.BLACKBURN. Thank you, Mr. Chairman. We appreciate this 

opportunity to speak directly to you today, and the distinguished 

panel. 

The American Association of Homecare represents durable medical equipment providers and manufacturers who are part of the 

continuum of care that assures that millions of seniors and disabled Medicare beneficiaries receive cost-effective, safe, and reliable homecare equipment and services in their homes. 

It is essential that Congress examine the Medicare competitive 

bidding program and its impact on patients and on small providers. 

The Association is very concerned about the effect that competitive bidding would have on the survival of small homecare providers and also on the ability of providers to meet the needs of 

their patients. 

A typical beneficiary using home oxygen, which is a life sustaining therapy, is a woman in her seventies who suffers from latestage chronic obstructive pulmonary disease, COPD. COPD is a debilitating disease characterized by low levels of oxygen in the blood 

and severe air flow limitation resulting from inflammation of the 

airways. 

Medicare beneficiaries who use power wheelchairs are seniors 

and Americans with disabilities who have lifelong debilitating conditions such as multiple sclerosis, Lou Gehrig’s disease, cerebral 

palsy, traumatic brain injury and spinal cord injury. A power 

wheelchair enables individuals to live at home independently rather than in a more costly constitutional setting. 

Mr. Williams’ chair, as Ms. Gilligan stated, is a prime example 

of complex rehab power mobility, and Mr. Williams exemplifies the 

independent, high-functioning beneficiaries we service. 

Blackburn’s has had a very difficult but not unique experience 

with the bid process. As you mentioned, we are in the Pittsburgh 

CBA. We struggle to submit bids on all nine product categories. 

The bidding system is complex, and it is confusing. 

Medicare expected 16,000 providers to submit bids. Mr. Wilson 

stated 6,300 certified bids were received. My feeling is many providers looked at the convoluted program and chose not to bid at all. 

Under the first round of the bidding program, providers submitted bids to CMS to provide items and services at a reduced reimbursed rate. Providers who meet Medicare participation requirements and whose bids are deemed low enough will be selected as 

contractors. 

Those who are not selected as winning contractors will not be 

able to provide competitively bid equipment or services to Medicare 

beneficiaries. Since Medicare payments typically comprise 35 to 50 

percent of a small providers’s revenue, losing the ability to provide 

competitively bid items for a 3-year contract period is essentially 

a death knell. 

The risk that this program poses to homecare providers cannot 

be overstated. If our company is not selected as a contractor, our 

very survival is in jeopardy. 

21

The competitive bidding rules designed by CMS are stacked 

against small providers. Small businesses lack the economy of scale 

to negotiate lower prices for manufacturers and the physical size 

to cover an entire CBA, the area of the bid. 

Even with the small business protection, such as the ability to 

form networks or the 30 percent set-aside, the program will still 

radically reduce the number of providers that exist today. 

The American Association of Homecare believes that the changes 

to the program contained in H.R. 1845, the Durable Medical Equipment Act of 2007, are critical. This bill will protect homecare patients and give a fighting chance to small providers. And we thank 

the Subcommittee members for your overwhelming support of this 

legislation. 

H.R. 1845 does not repeal competitive bidding; rather, it makes 

sensible changes to ensure patients access to home medical equipment, while protecting small providers. 

Specifically, the legislation would accomplish the following: 

First, it exempts smaller rural areas from competitive bidding. 

Congress gave CMS the authority to exempt areas with low population to ensure that bidding is not implemented in areas that lack 

a sufficient number of providers. 

Second, under H.R. 1845, all providers who meet Medicare participation standards and who submit a bid would be allowed to continue to provide equipment and services at the lower competitively 

bid rate. This provision restores fairness for small providers and 

would ensure that beneficiaries have choice. 

Third, the bill would restore the rights of participating providers 

to administrative and judicial review. Presently, homecare providers have no recourse if a mistake is made by CMS in calculating 

the award reimbursement rate or in awarding a contract. An error 

can result in the loss of a bid, and more importantly, the loss of 

a business. 

Fourth, the bill exempts items and services unless savings of at 

least 10 percent can be demonstrated. CMS should be required to 

show the competitive bidding saves money. 

The American Association of Homecare believes that unless it is 

modified, the Medicare competitive bidding program will undermine our Nation’s homecare infrastructure. It will also jeopardize 

patients’ care, choice of providers, and access to the medical equipment and services they desperately need. 

I look forward to working with this Committee and its staff to 

address small business issues and would like to continue to work 

with Committee members to enact H.R. 1845. 

Thank you so much for the opportunity to testify today. 

ChairmanALTMIRE. Thank you, Ms. Blackburn. 

[The prepared statement of Ms. Blackburn may be found in the 

Appendix on page 97.]

ChairmanALTMIRE. I now introduce Richard Saxon. Mr. Saxon is 

President and CEO of BioMedical Life Systems, Incorporated, a 

manufacturer of portable electrotherapy devices and accessories 

founded in 1983. BioMedical Life Systems focuses on the development and manufacturing of durable medical equipment. 

22

Mr. Saxon is a member of the Advanced Medical Technology Association, AdvaMed, which represents more than 200 small and 

large businesses producing medical devices, diagnostic products, 

and health information systems throughout the country. 

Welcome, Mr. Saxon. 

STATEMENT OF RICHARD SAXON, PRESIDENT AND CEO, BIOMEDICAL LIFE SYSTEMS, INC., VISTA, CALIFORNIA, ON BEHALF OF THE ADVANCED MEDICAL TECHNOLOGY ASSOCIATION 

Mr.SAXON. Good afternoon. My name is Richard Saxon, and I am 

President and CEO of BioMedical Life Systems, a small business 

manufacturing durable medical equipment, based in Vista, California. I thank the Committee for inviting me to testify on behalf 

of AdvaMed at this important hearing today. 

AdvaMed represents over 1,600 of the world’s leading medical 

technology innovators and manufacturers of medical devices, diagnostic products, and medical information systems. 

Over 70 percent of our members are small companies with sales 

under 30 million per year. AdvaMed members are devoted to the 

development of new technologies that will allow patients to lead 

longer, healthier, and more productive lives. 

The medical technology industry is filled by intensive competition 

and the innovative energy of small companies, firms that drive 

very rapid innovation cycles amongst products, in many cases 

heading to a new product version every 18 months. 

The medical device industry has developed a wide range of 

DMEPOS products to meet the many needs for many 

complexconditions. Access to DMEPOS can often mean the difference between a patient being able to remain at home or being 

admitted to a more expensive treatment in a nursing home or hospital. 

The primary focus of a competitive acquisition program is cost 

savings. Under such a program, my industry has strong concerns 

about the potential impact on quality of care and patients’ access 

to lifesaving and life-enhancing technologies that companies like 

mine develop. 

The competitive acquisition program will limit the number of 

suppliers serving Medicare beneficiaries. It will encourage the 

smaller number of suppliers to limit devices to those that meet the 

average basic patient’s needs. We feel that patients who have those 

special needs, those special needs will not be met. 

This program will significantly impact companies like mine that 

manufacture devices to meet all levels of individual patient’s needs, 

including innovative and unique technologies. 

It will also directly impact companies working to modify highly 

complex technologies that are currently used in the hospital so the 

patients may successfully use them in a homecare setting. 

It could also dampen the significant investment my industry 

makes in research and development, R&D. If the program reduces 

payments to a point where innovative devices cost more than the 

payment amount, the incentive to reinvest in additional R&D is 

eliminated and the patients will suffer. 

23

When Congress established the competitive acquisition program 

in 2003, AdvaMed recommended a number of safeguards to ensure 

beneficiary access to products prescribed by their physicians. We 

appreciated the establishment of the Program Advisory and Oversight Committee, PAYOUT, to allow for stakeholders’ discussions 

about program implementation. 

We believe it has been a helpful tool. 

However, given the likely impact of the program on daily patient 

care, we believe that there are still many details warranting careful consideration. 

We appreciate your willingness to listen to our concerns and to 

work with us to ensure that Medicare beneficiaries continue to receive high-quality DMEPOS. My written statement provides details, but let me highlight a few actions that should be taken by 

Congress or CME. 

Congress requires CMS to report on the program by July the 1st, 

2009. We ask that CMS be required to accept public input to ensure the reports analyze clinical outcomes, quality measures, measures to assess beneficiaries’ access to the range of effective technologies, and potential impact on other Medicare services such as 

hospitalizations that are a result of the competitive bidding program. 

We have strong concerns about CMS’ ability to use bid amounts 

submitted in one MSA to set rates in another MSA. Patient needs 

and costs for providing care and technologies are not the same in 

every MSA. 

If this program continues, CMS should be required to conduct a 

separate bidding process in each and every MSA to ensure that the 

payment amounts reflect local market conditions. 

The product categories used by CMS and the individual codes 

within these product categories are often broad, and fail to adequately differentiate between products with diverse and wide 

ranges of quality, functionality, technology and clinical utility. 

If the accepted bid amount does not reflect the various costs of 

the range of products, beneficiaries will not have access to the full 

range of products within a category or code. 

We urge CMS to allow for public comment on the categories and 

codes being bid. 

Thank you, again, for holding this important hearing. We look 

forward to working with this Committee on ways to make sure that 

beneficiaries maintain access to quality care, medical technologies, 

as the program continues to be implemented. 

Thank you. 

ChairmanALTMIRE. Thank you, Mr. Saxon. 

[The prepared statement of Mr. Saxon may be found in the Appendix on page 104.]

ChairmanALTMIRE. Now we turn to Mr. Jose Navarro. He is a 

pharmacist and owner of Navarro Discount Pharmacies in Florida. 

Navarro Discount Pharmacies is currently a chain of 20 drug stores 

and is currently the top drug store in the Nation. 

Mr. Navarro sits on the Board of the National Association of 

Chain Drug Stores, which represents more than 200 chain pharmacies throughout the Nation. 

24

Welcome. 

Mr.NAVARRO. Thank you. 

STATEMENT OF JOSE F. NAVARRO, RPh, NAVARRO DISCOUNT 

PHARMACIES, MEDLEY, FLORIDA, ON BEHALF OF THE NATIONAL ASSOCIATION OF CHAIN DRUG STORES 

Mr. Altmire, Ranking Member Gohmert, Congressman Gonza ́lez. 

Regardless of the size of the members of NACDES, which range 

from 4- to 6,000 stores, all members are deeply concerned about the 

impact of patient access and the competitive acquisition problem it 

will have. 

Many beneficiaries obtain their supplies from local pharmacies. 

In fact, a study found that nearly two-thirds of all of older diabetic 

patients obtain their diabetic test strips from retail-based community pharmacists. 

Retail pharmacists are the largest provider of medical equipment 

and supply services to the Medicare patients. And in many cases, 

the pharmacist is the most readily accessible health care provider 

in the community for Medicaid beneficiaries. 

We offer the following four suggestions to improve the competitive acquisition program to ensure continued participation by pharmacists servicing Medicare patients. 

First, State-licensed retail pharmacists should be exempt from 

accreditation requirements. The competitive acquisition program 

requires suppliers to be accredited before they are awarded a contract. The goal of these requirements is to reduce fraud, waste, and 

abuse to the Medicare program. 

While requiring accreditation of pharmacists is unlikely to reduce 

fraud, waste, and abuse, it will have the results of reducing the 

numbers of pharmacists that would be available to supply durable 

medical equipment and supplies to the American beneficiaries. 

The costs associated with the accreditation processes, which can 

amount to several thousand dollars and hundreds of man hours for 

each pharmacy, creates a tremendous disincentive for pharmacists 

to participate. 

I would like to clarify for a minute the number of 2,200 that was 

stated before, which Mr. Wilson did not know about it. That number comes from a program adviser on Oversight Committee for 

CMS in a meeting of October 11, 2007, in Baltimore, Maryland. 

The timing and extensive paperwork required by accreditation 

requirements is likely to be blamed for this low turnout, and, as 

a result, our seniors may face difficulties in obtaining essential 

medical equipment and supplies. 

Further, requiring accreditation of State-licensed pharmacies is 

necessary. Pharmacies and pharmacists are licensed by the board 

of their respective States to provide services to patients. This very 

important feature allows pharmacists to bring a great degree of integrity to the Medicare program. 

Second, diabetic testing supplies sold at retail pharmacists 

should not be subject to competitive acquisition. Currently Medicaid beneficiaries can obtain the diabetes glucose monitoring and 

testing strip from retail pharmacies that participate in the program, allowing the beneficiaries to obtain their equipment, supplies 

25

and prescription drugs for managing their diabetes from qualified 

pharmacists. 

Evidence for programs such as the Ashfield Project prove that 

the pharmacist-based programs can result in clinical significant improvement to the health outcomes of diabetic patients. 

Further, unlike DME supply, CMS did not evaluate the effects 

of competitive acquisition on diabetic supplies during the competitive bidding project. Those expansions of the competitive acquisition program to diabetic supplies sold at retail pharmacies would 

create significant confusion and frustration in diabetic providers. 

And if you look at Mr. Wilson’s testimony, the problems are 

mainly based on very expensive equipment like wheelchairs, oxygen equipment. At no point was the point of diabetic strips brought 

up by him. Also the fraud issues that he mentioned through his 

presentation were not related to diabetic supplies. 

Fourth, State-licensed and retail pharmacists should be exempt 

from CMS proposed surety rule. In addition to the competitive bidding program, CMS also proposed to require $65,000 surety bond 

program for all Medicare and medical equipment supplies. For 

many pharmacies this will be more—this will represent almost 

over $2,000. 

According to CMS’ own calculations, up to 15,000 DMEPOS suppliers currently enroll in the Medicare; 22 percent are in rural 

areas, who will cease to provide Medicare beneficiaries as a result 

of the surety bond. 

CMS envisioned that most, if not at all, of the Medicare business 

conducted by DMEPOS suppliers will be assumed by other medical 

equipment and supplies remaining in the program. We really contest that. I think that is an incorrect figure. 

Clearly, CMS has indicated that these proposed rules will result 

in even fewer pharmacies participating in the Medicare Part B program. As a result, patients could face tremendous difficulties in obtaining the necessary equipment and supplies. 

The last one is that we will ask that CMS does not create national original competitive acquisitions area for mail order. CMS 

has stated that for the year 2010 and thereafter, he has the authority to establish national regional competitive acquisitions areas 

for supplies that furnish items through mail order. As I have already shared with the Committee, the majority of older patients 

prefer to obtain DME supplies through their local pharmacy, and 

this will impede that. 

In conclusion, I am grateful for the opportunity to testify before 

you today. Thank you for providing a forum to air our concerns on 

the medical equipment and supplies acquisition program. 

ChairmanALTMIRE. Thank you. 

[The prepared statement of Mr. Navarro may be found in the Appendix on page 109.]

ChairmanALTMIRE. We will do at least two rounds of questioning 

from each of the members here. 

I want to start with Ms. Gilligan. Can you share with the Committee your thoughts on some of the modifications CMS in its final 

rule to address concerns raised specifically by small suppliers? 

26

Ms.GILLIGAN. Yes, Mr. Chairman. I would reference you to my 

written testimony in the record for additional details, but I have 

a couple of concerns. 

First of all, CMS established a network scenario that is theoretically geared to help small business, but the logistics and the legal 

issues associated with that scenario make it unlikely that any 

small business could pursue that approach. I don’t know of any myself, and I have heard testimony this afternoon that not many people do know. 

Secondly, CMS sets a target that 20 percent of the suppliers be 

small business. But then, again, the low bidders who are forced to 

accept the bid amount would most assuredly have to take a financial loss on their product category. 

And I will give the example. In my marketplace I have large 

competitors. And if small business is targeted that will give us one 

or two small businesses. But because of the buying ability of the 

large business, the small business, even if offered the ability to 

take it at a lower price, we can’t buy it at that price and we can’t 

compete. So it is not really access. 

So I would say despite these modifications, I don’t believe that 

CMS has taken any meaningful steps to address the special needs 

of small business and our ability to participate in this program. 

I think those who have a small business, like myself and all of 

the panel at the table here today have, a clear case of grievance 

under the Regulatory Flexibility Act which provides Small Business Administration with the authority to raise issues of unfair 

government, such as the CMS imposing right now. 

I was hoping that with the regulatory impact on small businesses 

being disproportionate, that you could help us out today and work 

with us on the Regulatory Flexibility Act. 

ChairmanALTMIRE. Thank you. 

I want to say for the record that I do agree with Ms. Gilligan 

about the need to protect our small businesses and the beneficiaries they care for. 

The Regulatory Flexibility Act was intended to encourage agencies such as CMS to tailor regulations to be less burdensome to 

smaller entities, like these small suppliers, under DME competitive 

bidding. 

I am concerned that given the magnitude of this program, that 

CMS has similarly failed to address the requirements of the Regulatory Flexibility Act in isolating the impact that a rule will have 

on small businesses. 

In the absence of a rigorous analysis of this rule and the impact 

on small businesses, this Committee cannot be certain that small 

suppliers can compete or that rural beneficiaries will not have difficulty obtaining DME. 

So I appreciate your answer. 

And I would now ask, Mr. Saxon, in your statement you recommended that CMS should be required to conduct bidding to set 

prices within all MSAs as it expands the program, essentially prohibiting the agency from using bid amounts determined in setting 

payments in one MSA to set rates at another MSA. 

Why do you feel this is important? 

27

Mr.SAXON. Mr. Chairman, the cost of doing business in different 

parts of the country are undeniably always different. The cost to 

rent a building in New York is certainly different to a supplier 

renting a building in a rural area. 

CMS should conduct bidding in each MSA with the local suppliers to establish the prices within that specific MSA. They should 

not simply be transferring a bid amount from one MSA, assuming 

that would be good for the whole country as far as moving it from 

one MSA to another. 

As you know, and I will just point out, the cost of doing business 

in one State or one MSA are very different. So the prices should 

be set locally to ensure the programs meet the needs of the patients in that area. 

I think that it is a fairly logical thing that one should not allow 

CMS to be able to establish what works in one or what is established for one MSA cost and just transfer that across. 

ChairmanALTMIRE. Thank you. 

My last question for the first round is for Ms. Blackburn. 

Given your experience in serving Medicare beneficiaries, what 

would you anticipate the impact of this program would be for patients and their caregivers, and what kind of education will Medicare beneficiaries and suppliers need? 

Ms.BLACKBURN. That is a good question, Mr. Chairman. 

We know there will be a problem. We know that there has been 

no education. When the Drug Act came about last year, we know 

when the—we know when the drug act came about, the Medicare 

drug act came about, there was a huge amount of information that 

was shared with the public as well as caretakers who take care of 

people who are on medications. 

We have seen none of that with competitive bidding. We have 

very little information to handle the bids ourselves. There is just 

not a lot of information out there. 

As far as the patients, what they need and their caretaker, we 

feel that the impact will be, if you look at the market, the impact 

may be if you have a growing demographic and you have less suppliers to provide to that demographic, we suspect that the quality 

of care will be at risk. 

And we are concerned that the type of services we provide now—

those of us who are in that business, that you could call us 24 

hours a day—just may not be there, because the award winners 

will be working on the basis of volume. 

So how that will impact on the caretakers, I am not sure. But 

I will say there will be a higher level of frustration for those that 

care for those at home. 

ChairmanALTMIRE. Thank you. 

I will turn it to Mr. Gohmert. 

Mr.GOHMERT. Thank you. 

Mr. Navarro, thank you for providing the information on the 

2,200. I will see that gets passed on to Mr. Wilson so he will know 

what came from his agency in the future. 

Mr.NAVARRO. Thank you. 

Mr.GOHMERT. And I have a good deal of rural area in my district, 

and it has been an increasing concern. It looks like someone has 

to go toward almost complete elimination of people in retail, so that 

28

you basically can watch television, decide what your symptoms are 

and which commercial best fits your situation, and then get on the 

Internet or telephone and order whatever pill you want and what 

other orthotic piece of equipment looks appropriate. But we know 

that we need help. That is why people get licenses: doctors, health 

care providers. So I am very concerned that we are about to lose 

one of those elements. 

Of course, CMS wants accreditation. They have got these procedures. 

Let me just throw the question out to each of you as to whether 

or not the public would be adequately protected without this particular accreditation procedure, or if there is something that would 

not be quite as onerous? 

Yes, Dr. Taubman. 

Dr.TAUBMAN. Thank you, Mr. Gohmert. 

I think from the physician’s standpoint, physicians go through 

rigorous education, training, licensure. That is a significant burden 

to get through that process. 

Mr.GOHMERT. That is why we have prescriptions, is because you 

are supposed to know more what we need than we do. 

Dr.TAUBMAN. I would agree with you, sir. 

So I would submit to you, as I said in my testimony, that I believe physicians to be exempted from the accreditation process because we have already proved that we are capable of dispensing 

and prescribing these items for our patients by virtue of our licensure and our training. 

I also want to point out to you, in case you didn’t know, I happened to download from one of the deemed accrediting organizations, the standards manual, which is 128 pages long, that I am 

supposed to follow to become accredited. 

I would submit to you, as a small business person in a small 

practice with six employees, the burden for me to comply with this 

is nearly impossible. And I think most physicians who supply DME 

at the point of care for our patients, would be unable to do this, 

and we are not going to be able to give these devices to our patients. 

Mr.GOHMERT. I may need to get a copy of that downloaded, too, 

so we can provide that to Mr. Wilson, because apparently that is 

a little more than 14 I think we were talking about earlier. 

Mr.SHIRVINSKY. We do support accreditation for DME companies. 

And here is why. 

The CMS testimony today spent an inordinate amount of time 

talking about fraud, and they paint a very—they painted a picture 

with a very broad brush that made this entire industry appear corrupt. 

Mr.GOHMERT. And you are not? 

Mr.SHIRVINSKY. We are not. And we strongly object to the way 

they utilize the data on fraud. 

Now, if they want to look at fraud, you have got to take a look 

at some situations like Miami, where 40 companies were given provider numbers inside of a burned-out, closed-up strip mall. You 

cannot bill for Medicare without a provider number. You cannot get 

a provider number without CMS or their subcontractors coming in 

29

and verifying that the business that is applying for a provider 

number is a legitimate operation. 

Obviously, something is wrong. I mean, CMS has let a lot of companies slip through the cracks. Whether there are payoffs or kickbacks or bribes that are involved, I don’t know. But something is 

terribly wrong when that number of companies can appear at a single address and bill millions upon millions upon millions fraudulently to the government. 

Mr.GOHMERT. So you think we need an accreditation process for 

CMS? 

Mr.SHIRVINSKY. I think accreditation for process for CMS would 

be a good idea at this point. 

But accreditation is a good idea for this industry. All it means 

are people are abiding by the rules. They are following the law. 

That is what we try to do with our members as an association. 

That is what the national organization does as well. That is what 

State by State, organization by organization, company by company, 

tries to do. 

Mr.GOHMERT. You think the accreditation process as it is too onerous, or you think it is about right? 

Mr.SHIRVINSKY. Most of our companies have no problem with the 

accreditation process. 

Mr.GOHMERT. Apparently some that don’t have problems should 

have problems. 

Mr.SHIRVINSKY. That, I can’t speak. 

All I know is the companies in my organization that are accredited do not complain. I have never heard one complaint from my 

companies about the accreditation process or accrediting companies. 

I do know that a lot of hospitals, for example, take issue with a 

lot of the accrediting companies. Our people have been able to work 

with them. They worked very hard. Our companies worked very 

hard to comply with the law. And a lot of the violations that appear 

when CMS, their subcontractors, conduct audits, we are normally 

caught in the middle. If an audit is done today, it is likely to find 

some violations. But the violations won’t be something that our 

company did. They will likely be in what is contained in the physician’s order. Again, we are in the middle. 

Mr.GOHMERT. Let me hear from other witnesses. 

Ms.GILLIGAN. I also agree with my partner here. I am in the 

State association in Ohio. And we already have licensure in the 

State of Ohio for accreditation, and you cannot dispense life-sustaining equipment or technology, sophisticated technology equipment in Ohio, 

Mr.GOHMERT. Is your mike on? 

Ms.GILLIGAN. You cannot dispense life-sustaining equipment or 

technologically sophisticated equipment in Ohio without a license, 

but we do exempt physicians because they already are licensed and 

all of those things. 

And I do applaud, and I do like requiring credentials, and I do 

like the accreditation process, because I think it makes me have a 

better company. I am very proud of that. We went through a lot 

of work to do that, and we put in a lot of practice, and it is very 

expensive and time-consuming. And I think we have a better end 

30

product. And with that, the customers and the public benefits from 

that. 

And I think that we should have it, but I don’t think it is a solution to fraud and abuse that CMS is using. It is, absolutely, bad 

people are going to do bad things. They are going to lie. They are 

going to write bad things. 

Fraud and abuse is not accreditation. Accreditation is raising the 

level of care and the quality, which is what we should all be wanting to do for our patients. It is not to keep out the bad people. They 

will just lie. Bad people are bad. 

Ms.BLACKBURN. The American Association of Homecare does 

support accreditation. We also feel it raises the bar for the companies and it gives an even playing field for how things are done 

within each firm. 

We have actually asked CMS to announce a final date for accreditation, and that has never been forthcoming. This has been going 

on all year. 

On a personal level, I can tell you that Blackburn was accredited 

in 1995 by the Joint Commission. Is it difficult? It is a little tedious. You do have a manual to follow. There are some things that 

are introduced into your business that you may not have thought 

about that, absolutely, it gives that business the ability to improve 

through the accreditation process. 

And I also agree that the end result is a help to the patients 

whom we serve. 

Mr.GOHMERT. Thank you. 

Mr. Saxon. 

Mr.SAXON. Well, from the manufacturer’s side, admittedly, few of 

the smaller DME manufacturers will be endeavoring to bid for 

equipment under the competitive bidding program. But I would say 

that—I leave it to the Association of Homecare and other people 

here on the panel, since they are representing more of the suppliers, which are the people that are asking to be accredited. 

So I won’t go any further in this matter. 

Thank you for the opportunity. 

Mr.GOHMERT. Mr. Navarro. 

Mr.NAVARRO. I am here, you know, I can tell you from a pharmacy. Today, pharmacists are highly educated individuals. They go 

through 6 years of higher education plus 1 year of training. They 

are licensed by the State Board. Pharmacies and pharmacists are 

licensed by the State and, really, there is no need to offer an accreditation program for pharmacists. I mean, we go through that, 

and we—on top of that, we are—we have continuing education 

every year. I do not see a need why we should go through an accreditation program when we are licensed by the State and audited 

on a weekly basis. 

And just tell you, with regard to the fraud that Mr. Wilson 

said—and I am from Miami—really the fraud has to be blamed on 

CMS. I mean, the licenses, the fraud is happening with storefront 

locations that get patients recommended, that then they open their 

own DME stores. I mean, these are licenses that should never have 

been granted. You know, they do not visit the location for an inspection. 

31

And then they complain there is fraud. And at the same time, 

they want pharmacist accreditation for us to get a license. They go 

in and inspect us. They inspect us every year and they issue a license. 

I don’t think pharmacists require accreditation. 

Mr.GOHMERT. Thank you very much. 

ChairmanALTMIRE. Mr. Gonza ́lez. 

Mr.GONZA ́LEZ. Thank you very much, Mr. Chairman. 

When we think of DME suppliers and vendors, I don’t know, we 

envision doctors and pharmacists. And when we look at the grand 

scheme of what CMS is trying to do, we are not sure how that impacts manufacturers and such. But you are all up here and you are 

all expressing your deep concerns about the negative impacts from 

where you operate and how you take care of patients in your own 

right. 

Mr. Navarro, I visited a small pharmacy in San Antonio; the father and the daughter, the daughter that followed in the father’s 

footsteps. 

I know what you described. But if this went into effect, there is 

no way that Ortiz Pharmacy is going to be able to prevail. And I 

know Mr. Wilson told me that they are going to make exceptions 

somehow within that San Antonio area, maybe somehow within 

that CBA, to accommodate someone like the Ortiz family and the 

Ortiz Pharmacy. 

How do you see it playing out? 

Mr.NAVARRO. We have 20 stores so we have a decent number of 

employees and supporting staff and a warehouse. 

We were not able to do the accreditation. Okay. At the end, we 

were going to go out to hire a firm to do accreditation for us, and 

it was impossible. We could not do it. And we, you know, we are 

pretty sophisticated. We are in the top pharmacies in the Nation 

and really we were not able to complete that—and Ortiz pharmacies will not survive. I don’t care how many exceptions they do 

and how many things they do; at the end, I will guarantee you the 

community pharmacist, the independent pharmacist and many 

small pharmacists will not be able to participate in this program. 

And just one more second. I cannot really imagine how an older 

lady will get the test strips and medication to measure those test 

strips without consultation with the pharmacist. That is why it is 

beyond my mind to go on the Internet and get it. 

Mr.GONZA ́LEZ. I think any member has a pharmacy like I described in their town and such, and thank God that we have them. 

If I told you to what extent they go to serve their clients, it is extraordinary. It is just beyond belief. To lose that would be a true 

tragedy. 

Mr. Saxon, you are from the manufacturer and device maker and 

those people, and I wonder how does it impact you? 

I did pose a question about—from what I learned about how to 

categorize things first, which could limit choice. Then obviously 

limiting the number of vendors could very well impact what would 

be available to that user, to the patient, to the beneficiary. 

How does that play out as far as unique type of DME? And all 

of it is important. All medical equipment supplies are important 

one way or another. But some are unique. They are a little more 

32

sophisticated, need more instruction, and so on. And that is what 

I am talking about. 

What could be the potential negative impact on, one, the availability because of choice and such, of these products for patients, 

beneficiaries? 

Mr.SAXON. The first thing that I think is important to note is 

that this bidding contract is for 3 years. So any new innovative 

products that come into the market and try and obtain a HCPC 

code and category will have to wait 3 years. And even then, it will 

take time for them to be able to establish to CMS that this is a 

proven technology. 

So this is one issue. 

The other issue is that there has to be accountability in the categories and codes that are the HCPC codes that CMS establishes 

for different types of sophistication of devices. We can have, for example, in wound care, whereby a patient is treated with gauze and 

ointments, and that patient can be having to have those gauze and 

ointments treated, put on daily, and/or we can look at offering a 

more sophisticated DME product that allows for a more likely success of treatment in a short period of time. 

And I have to point out, these people are elderly. They are 65 

and older. These people are generally given and take what they are 

presented with. They are not likely to say okay, that is not what 

I wanted or that is not what I believe I should be treated with. 

They are given the equipment that Medicare decides they should 

have, whether—and it is probably, under this program, going to be 

the least expensive basic treatment equipment, and they are going 

to not be able to compare it with other treatments that are available or on the market. 

It is very important that we ensure that Medicare, under this 

bidding program, takes account of the total cost of the treatment. 

I mean, you can get a more expensive device, treat the patients, 

and successfully treat the patient, or you can prolong that treatment. And then you are involved with daily dressing or whatever 

is necessary to prolong that cheaper means of treatment. But in 

the end, the cost to Medicare will be greater than if they initially 

supplied the more expensive equipment. 

So there has to be accountability somehow that the codes allow 

for different sophistication of treatment if they are needed, and 

that it is not just the basic and everything bundled together in one 

HCPC code. And then, of course, it is going to be the cheapest product, because that is the way—it is a bidding system, and that poor 

patient then is going to suffer. 

This is talking about costs, first of all, but also the suffering of 

the patient having to wait for this treatment period of time to be 

successful. 

I mean, if you talk about wound care, you are talking about bed 

sores in particular, but you are also talking about other areas of 

wound care. I mean, they use wound care for—

Mr.GONZA ́LEZ. I appreciate it, Mr. Saxon, and my time is up and 

I yield back. 

ChairmanALTMIRE. Mr. Gonza ́lez, I would say that we are not 

planning to ask more questions. But if you do have one more, you 

can ask it. 

33

Mr.GONZA ́LEZ. Dr. Taubman, is that correct? Do you know Dr. 

Larry Harkus? 

Dr.TAUBMAN. I know him very well. 

Mr.GONZA ́LEZ. He is a good friend, dear friend in California. 

I would like to play out one scenario, and we also have to think 

in terms of the Medicare beneficiaries, whoever that may be—yourself or your mother or father or whoever—going down to Mr. 

Navarro’s pharmacy or the Ortiz Pharmacy and suddenly finding 

out they are not going to get that particular DME. So where are 

they going to go? And we have to start thinking that through. 

Now from a physician’s point of view, my mother goes to you, 

and soon I will be going to you, and I will be covered, regardless. 

My mother is a beneficiary. She goes over there and, because of the 

new rules and the new model and such, you are not going to be 

able to provide her something as basic as this boot that you are referring to. So where is my mother going to go? From your office, 

where are you going to make my poor mother go? 

Dr.TAUBMAN. Let us play that out, and we will use my walking 

boot that I brought here today. 

The way the regulations are written, currently CMS did in their 

recent final role, exempt some products from the competitive bidding. And also, in fairness to them, they did say that all physicians 

could supply these products at the point of care. 

They were things like walkers, those metal four-poster things 

you see people with. Canes, crutches, and manual wheelchairs are 

some things that I could give out to my patients if need be. 

But let us talk about your mom who comes to see me, and I practice in Maryland and it gets icy and it snows. She has a fracture 

that is unstable, and I am now seeing her in my office, but because 

this item, which is an off-the-shelf orthotic, and as Mr. Gohmert 

said, only PTs or OTs are allowed to dispense those without competitive bidding, I as a doctor can’t do that. 

So I say to her, you know what? I am really sorry, but I will give 

you a set of crutches, and you can walk across the ice with your 

crutches, get on three buses and go across town and get this item 

from a larger supplier. 

I am not sure that is exactly what Congress intended in this 

process here. It is certainly not good medical care. So I think in 

that scenario we are talking about a very serious problem for physicians at the point of care. 

Physicians are not dispensing through their office power-operated wheelchairs. We are not dispensing hospital beds. We are not 

dispensing oxygen tanks. We are not dispensing CPAP machines 

that are used for sleep apnea, and all of the things that are larger 

cost items. And clearly these folks are much better equipped to do 

that than I as a doctor in my practice. 

But these items are things we are not going to be able to dispense, and it is going to impact care; and from that standpoint, it 

makes no sense whatsoever to include physicians in this particular 

process for these items that we dispense as a critical part of our 

care at point of care. 

Mr.GONZA ́LEZ. Thank you very much. 

I yield back. 

34

ChairmanALTMIRE. I want to thank the panel. You all came in 

from out of town, and at some expense and travel, and I really appreciate it. The Committee appreciates the fact that you took the 

time to join us today and offer your expertise on this very important issue. We are going to continue to study this, and we ask for 

your consideration and help in moving forward in offering your expertise. 

So thanks to each and every one of you. 

I ask unanimous consent that members of the Committee have 

5 days to submit statements and supporting materials for the 

record. Without objection, so ordered. 

And this hearing is now adjourned. 

[Whereupon, at 4:20 p.m., the Subcommittee was adjourned.]

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