Who fleeced who?

Sunday, June 30, 2002

Here's what the NBC Nightly News
"Fleecing of America" report, and the other national media outlets, didn't tell America last month after Sen. Tom Harkin blitzed them with another VA / Medicare cost comparison report.

Start with NBC's numbers: They say the VA pays $700 for a hospital bed; Medicare pays $1,700. What they don't say is this: the VA pays about $100 for an HME provider with a VA contract to deliver and set up that bed, and another $100 to pick it up. That's what the VA pays Merriam Graves of Charlestown, N. H.

Merriam Graves charges the VA $60 per hour for service calls. Let's say every hospital bed requires one service call, and let's say it only takes an hour. Suddenly that VA bed costs $1010. Don't know that Harkin could argue those numbers, or that an NBC journalist would consider that information inadmissible.

But let's not stop there. The GAO acknowledged, during its cost comparison of Medicare and VA oxygen in 1999, that the administrative burden imposed by billing Medicare is tantamount to 30% of the cost of the product. So let's take 30% of $700 or $210 and add that to the price of our bed. Now we're at $1220.

These variables are easily quantifiable. Ask any HME what he charges the VA to deliver that bed. Dig through the GAO's 1999 analysis. Simple stuff.

From here the cost analysis is a little tougher to navigate, but as a journalist - especially one who is about to tell America it's getting fleeced by HME providers on hospital beds - you're obliged to muddle through. You're obliged to call a guy like Steve Gulick at Illiana Home Medical in Danville, Ill. Illiana traces its history as a business back 153 years and counts Abraham Lincoln as one of its customers in the 1850s. Today, Illiana doesn't command the buying power of the VA, for which it also provides product and services. He can't buy a bed as cheaply as the VA. So for the sake of argument, let's tack on another $100. Seems a fair differential, though it's probably larger, and if we're going to purport that HME providers are fleecing America, we ought to figure it out.

So now that VA bed, in a real apples-to-apples comparison, costs $1320, and doesn't include the costs of maintaining a facility, maintaining accreditation and the other fixed costs of running a business.

Yes, the VA buys cheaper. Larger buyers always can. Congress has to ask itself whether Medicare is to be a program that buys from institutional players or from a nation of small businesses, like Gulick's.

NBC and USA Today didn't tell this story. That was sloppy journalism and begs the question: Is America really getting fleeced, or did we just have the wool pulled down over our eyes. HME