As utilization goes, so goes The Scooter Store

Friday, October 5, 2012

NEW BRAUNFELS, Texas – Utilization for K0823, the most popular power wheelchair, is down about 25% so far this year—a statistic not lost on The Scooter Store.

The top provider of power wheelchairs announced in September that it plans to lay off 220 employees. The company blamed changes in Medicare policy, which have been a big factor in driving down utilization, for the layoffs.

"Utilization is definitely down for K0823," says Martin Szmal, owner of The Mobility Consultants.

In the first four months of 2012, the number of allowed Medicare beneficiaries for K0823 decreased from 8,097 in January to 6,069 in April, about a 25% drop, according to data acquired by HME News through a Freedom of Information Act request.

One of the biggest changes in Medicare policy to drive down utilization, stakeholders say: the dramatic increase in audits. The stakes are so high that even some physicians are abandoning the benefit, they say.

“In the last year or two, doctor’s offices have told us: We do not fill out Medicare paperwork anymore,” said Rick Perrotta, president of Network Medical Supply.

Audits have helped to not only reduce utilization but also tie up staff resources and freeze up cash flow, stakeholders say.

"Providers are spending a lot of money to get less reimbursement," Szmal said. "The return on investment just isn't what it used to be."

Unfortunately, the struggles at The Scooter Store are representative of what’s going on in the power mobility industry at large, just on a much larger and much more public scale, stakeholders say.

“Our volume is down, too,” Perrotta said.

Other changes to Medicare policy that have helped to drive down utilization: documentation changes (2006), competitive bidding (2011), elimination of the first-month purchase option (2011) and, most recently, for providers in seven states, a PMD demo (2012).

"It's been a perfect storm," said John Letizia, chairman of AAHomecare's Complex Rehab and Mobility Council. "If you look at the mobility market and all the changes we've been through—it's such a different market than it was five or six years ago."


Perfect Storm? Storms are unpredictable. This is simply a systematic disassembly of the PMD aspect of the Medicare system. We have 10,000 persons per day reaching the age of 65 over the next 20 or so years. If the DME HME industry is not slowed with these types of changes there will be little resources left for those in this age group. With the Internet companies selling at unrealistic low prices combined with low or no service or traditional support the equipment being sold on the Internet leaves no room for growth. The Medicare system does not require DME HME companies to sell, it's simply order takers. Cash sales require product knownledge as well as customer need. Selling DME HME equipment slightly over cost ( LAP or MAP) with expectations of being able to supply quality service is an illusion. This will continue to plague the industry until we have at least another 40-50% more HME DME business closures. Manufactures will continue to have less for R&D because of lower price pressure from the retail industry. The manufactures will eventually strike a deal to sell directly to Medicare and private pay insurance with the use of larger retail locations for support and service.

I agree with Scooterdeal. Plus, several variables of the whole PMD policy with respect to DME suppliers have provided fodder for a growing monster, i.e., the auditing process.  Documentation is being picked apart with a lice comb without regard to medical necessity; it's as if ethics play no role in determining coverage anymore.  I fully understand the record requirements for coverage.  Clinicians who are required to justify the equipment are not mandated in any way to be even slightly familiar with the policy, regardless of the financial incentive (CPT G0372) involved.  Add the problems of internet sales, suppliers who sell for just profit without providing any type of post-sales service, and we have an even bigger monster.