Medicare regulations killing small business, ombudsman told

Regulations on competitive bidding for medical equipment have forced the closure of small businesses across the rural U.S. and forced a price spike for consumers, business owners told a Washington, D.C. ombudsman Thursday.

Retired Navy Admiral Earl Gay of the Small Business Administration heard that message at the Oakview Library in Sioux Falls, where the ombudsman appeared with other SBA officials for an on-the-record Regulatory Fairness and Compliance Hearing.

The hearing was an opportunity for small business owners and groups to offer testimony on any kind of federal regulation, but the medical equipment issue dominated much of the nearly two-hour hearing.

Company representatives and trade groups talked about long waits for payments from Medicare, holdups or audit troubles sparked by misplaced signatures, reams of cumbersome paperwork, huge cuts in reimbursement rates and the resulting spikes in costs for users of devices.

The loss of or belt-tightening at rural device dealers has been devastating for customers, said Kay Johnson of Watertown’s Midwest Medical Service, Inc.

She told Gay an active, Medicare-covered client was forced to decide if she’d be able to afford a “leg bag” to carry the urine that pumps from her kidney, as bidding-inspired coverage changes pulled the product from a list of items considered medically necessary.

“It was the most devastating, dehumanizing thing I’ve ever had to tell someone,” said Johnson, whose voice cracked with emotion at times during her testimony at the regulatory fairness hearing.

Sixty to 70 percent of the Medicare beneficiaries Johnson’s company serves ultimately decide to shop elsewhere, buy lower-quality products or go without once they learn of the price hikes.

Johnson, whose company serves patients in an 80-mile radius of Watertown and employs 10 people, told Gay that the next round of cuts could force her to stop making deliveries to make ends meet.

“Trying to prepare for the (Centers for Medicare and Medicaid Services) cuts, Midwest Medical has cut as low as we can go,” Johnson said.

Other companies haven’t fared as well, said Rose Schafhauser, the Stillwater, Minnesota-based head of the Midwest Association for Medical Equipment Services. In 2013, when the first round of Midwestern competitive bidding took place, her group had 230 members. Today, the figure is 192.

The loss of rural providers, whom Schafhuaser said can’t make up for payment cuts through volume like their large-scale and urban counterparts, makes it more difficult for rural residents to find the wheelchairs, diabetic equipment and other devices their doctors prescribe.

One member business is preparing to close in May, Schafhauser said. When that company began searching for a supplier to direct its clients to, she said, it found that the next-nearest supplier couldn’t help. It was closing its doors, as well.

Paperwork issues and post-sale audit requirements have become an issue for smaller companies, too, said Bill Donat of Northland Rehab & Supply in Sioux Falls. Donat told the SBA reps he often waits up to six months for payment on a mobility chair, fronting it to beneficiaries and waiting as CMS sifts through 30-odd pages of paperwork. The paperwork will sometimes rejected over errors and irregularities like mismatched dates from a doctor’s office. Doctors aren’t offered adequate training on the paperwork, according to Donat, Schafhauser and others.

Donat feels his companies and others like it are fronting money to the federal government, punished by the wait and punished again when technical errors emerge. Moving 20 chairs at $5,000 apiece amounts to $100,000 loan, he said.

“The people at CMS should not get paid until I get paid,” Donat said. “I can’t make my payroll until I get paid.”

Donat was among the testifiers who urged expedited payments and pre-authorization for devices instead of post-sale audits.

Sen. John Thune of South Dakota and Sen. Heidi Heitkamp of North Dakota have introduced a bill to postpone the next round of bidding in July. The bill would push the next round out 15 months from July, in hopes of dealing with some of the issues raised by the bidding process for small businesses.

Gay told the hearing’s attendees he has high hopes for their efforts. Thirteen senators have signed on to support it, including Sen. Mike Rounds and senators from a cross-section of mostly-rural states from Hawaii to Maine.

“The medical equipment issues is an easy one,” Gay said. “It’s a bipartisan issue, so there’s no reason we shouldn’t be able to push that forward.”

Gay also heard from a representative for small South Dakota’s community banks about the burdens of banking regulations designed to police large banks, and from the South Dakota Retailers Association, whose members oppose impending changes to overtime rules.

Greg McCurry of the Independent Community Bankers of South Dakota said small banks in small towns are small businesses and often the economic engines of a community, lending to entrepreneurs. Some banks have as few as three or four employees and have a difficult time keeping up with regulatory changes.

An upcoming regulation requiring banks keep a record of all loan applications of minorities and women has a laudable goal, McCurry said, but part of the regulation requires that those records be walled off from loan officers and other bankers. In tiny banks, he said, doing that could mean hiring someone simply to keep the records of sometimes-sporadic loan applications

“The biggest growth area in hiring for community banks right now is compliance staff,” McCurry said.

Jamie Farmen of the Retailer’s Association told the SBA reps that small retailers are sure to be hurt financially if new overtime rules for salaried employees are put into effect. The rules would change the bar for salaried employees from $23,660 a year to $50,440, meaning anyone making less would be subject to overtime payments. An August 2015 survey of the group’s members saw 75 percent saying they’d be negatively impacted by the change.

In South Dakota, Farmen said, the changes are unnecessary.

“The rules do not take into account the different costs of living across the country,” she said.

Gay thanked the South Dakota business owners and trade groups for braving the weather to share their stories and promised to fold those stories into his agency’s advocacy in Washington, D.C.

“As someone who put it on the line for America, I’m happy to come hear, hear from you, and fight for you,” Gay said.

The regulatory fairness hearing was the first in South Dakota in eight years.

Gay, who was appointed in October and has been traveling the country collecting input from small businesses since February, said he hopes it doesn’t take as long to get back to the Midwest again.