Bye-bye purchase option: First year without it won't be pretty

WASHINGTON - HME providers who supply standard power wheelchairs are bracing themselves for a major blow to their cash flow thanks to the elimination of the first-month purchase option.

On Jan. 1, Medicare started paying providers for standard power wheelchairs over the course of 13 months instead of in one lump sum in the first month.

"Well, we've been buying up good used equipment where we can find it and we're keeping cash aside so we can make it through the first few months," said Roger Bowman, a partner at Penrod Medical Equipment in Salisbury, N.C. "In those first few months, we're not going to be profitable."

Medicare now pays providers 15% of the allowable for a standard power wheelchair in the first three months and 6% in the remaining 10 months. Overall, Medicare will pay providers 5% more for a wheelchair as a capped rental item, something one provider called a "boondoggle."

In the short-term, however, providers will have less money coming in and the same amount of money going out. They say it will take them at least three months just to recoup the cost of buying a wheelchair. Then there are, among other things, the administrative and billing costs; delivery costs; and maintenance and repair costs (for labor, not parts, which are covered under warranty, at least for new equipment).

"Those fixed costs are expensive," said Rick Perrotta, president of Network Medical Supply in Charlotte, N.C. "Say you get a couple of substantial repairs. It costs me at least $100 just to send one of my repair guys out to make a stop. That can add up quick."

Some providers are less worried about their cash flow, because manufacturers like Invacare and Pride Mobility Products have made concessions like allowing providers to pay for wheelchairs in installments. They're more worried about logistics.

"What if, after the 13 months is up and the title has been transferred to the beneficiary, I get audited and they ask for their money back?" said Rex Maxey, president of Penn York Medical Supplies in Binghamton, N.Y. "It's asinine."

The individual situations of providers have a lot to do with how well they will weather the elimination of the purchase option, they say. If providers are also in competitive bidding areas or if they do a lot of power wheelchairs or if they rely on Medicare for a good chunk of their revenues, it could be the straw that breaks the camel's back.

"The strong and efficient will probably survive, but I think some folks are going to go out of business," Perrotta said. "We'll have to see what the fallout is."

Providers say half the battle will be making it through 2011.

"Once we've gone 13 months, things should begin to improve," Maxey said. "That's if, and it's a big if, we can obtain the necessary documentation, which keeps getting more and mode difficult to do, and CMS pays in a timely fashion."