HCFA will establish as many as 15 demonstration projects to create a competitive-bidding process for durable medical equipment suppliers serving Medicare beneficiaries.
A provision mandating the projects was included in the federal balanced-budget legislation President Clinton signed into law last month. With strong support from the Clinton administration, it passed over the objections of the DME industry, which claims HCFA has shown itself unable to run a successful competitive-bidding program.
Medicare is projected to spend $13.1 billion in fiscal 1997 for DME, oxygen, clinical laboratory and related items, according to the Congressional Budget Office. Under previous law, spending in such areas would reach double-digit annual growth rates by 2000, the CBO said.
Savings projections haven't been made for the competitive-bidding projects. But the combination of competitive bidding, payment caps and other provisions in the budget law is expected to save Medicare $4.8 billion under Part B from 1998 to 2002.
HCFA can establish up to five competitive bidding projects at each of three sites around the country. The projects expire after three years of operation, the latest expiration date being Dec. 31, 2002.
Except for physicians, nearly any provider reimbursed under Medicare Part B can be included.
One demonstration project will cover oxygen and related equipment. The others also could cover oxygen supplies or be expanded to DME, ambulance services and clinical laboratory services.
The demonstrations could be expanded if HCFA determines competitive bidding saves money for Medicare but doesn't reduce beneficiaries' access to services.
Equipment companies said they are skeptical HCFA will be successful in its latest competitive-bidding effort. They cited the agency's attempts to impose competitive bidding for Medicare HMOs in Baltimore and Denver.
"They've tried doing some competitive-bidding projects before and they haven't worked," said Steve Haracznak, vice president of the National Association for Medical Equipment Services.