The Business of Health

Competitive bidding hits Treasure Valley medical-equipment companies

A new Medicare process that Congress required to save money is putting Idaho-owned businesses in a bind.

adutton@idahostatesman.comAugust 13, 2013 

Medicare patients in the Treasure Valley who had to buy standard wheelchairs last year could choose from a theoretically endless menu of suppliers. Now, as of July 1, they have 14 suppliers on the menu. Nine are more than 1,000 miles away.

Under a just-rolled-out competitive-bidding system, the federal government has picked a small number of suppliers for several categories of medical equipment. Medicare patients cannot go to any other suppliers for certain wheelchairs, walkers, hospital beds, oxygen equipment and other high-demand home medical supplies and devices.

Few of the suppliers chosen to serve the Boise area are based in Idaho. For one category — diabetic supplies — none have local addresses.

The new system has been under fire at the national level by members of Congress and the medical-equipment industry. They argue that bid winners weren’t properly vetted and may not adequately provide products and services to patients.

Competitive bidding for this part of Medicare was created by the Medicare Modernization Act of 2003. Bidding was scheduled to launch in 2008 but was delayed by Congress until this year.

Pressure has mounted for Medicare to rein in spending. The inspector general for the U.S. Department of Health and Human Services reported in 2009 that 173,300 people on Medicare received power wheelchairs in 2007 at a cost of $686 million. The average supplier spent $1,048 on wheelchairs, for which Medicare allowed an average $4,018 reimbursement. The suppliers also serviced those chairs several times.

The federal government announced this year it would cut reimbursements on average by 45 percent. Medicare now will pay a Boise company $40.25 for a new folding walker that has a suggested retail price of about $90 to $120.


The medical-equipment industry was already struggling to keep up with more federal documentation rules and lower reimbursements, local businesses say. The new bidding system has put pressure on some companies to put themselves up for sale. Many local suppliers have left the industry altogether.

“Basically, there’s multiple winners, and it’s all or nothing. ... If you don’t win, you might be out of business,” says Brent Seward, executive vice president of Norco, a Boise company that sells medical equipment and other products in Idaho and its six neighboring states. “We were one of the winners in several categories but not all. So now, basically, we’re trying to figure out how to do business while taking a 42 percent haircut.”

Medicare patients make up a significant share of Norco’s medical-equipment business.

The idea behind competitive bidding — to eliminate overpricing and help curb Medicare’s mounting costs — was a good one, Seward says.

The problem, Seward says, is that the auction process “encourages suicide bidding,” where some companies low-balled with the expectation of the end reimbursement rates being higher. Medicare has said the system would lower costs by almost half.

Aside from what it means for Norco, Seward worries the system will be harmful to Medicare patients.

“If they’ve got UPS dropping [a piece of equipment] off, and nobody showing them how to use it,” he says, “they end up in the ER.”


One of the bid winners was Valley Medical, a Meridian company that started in 2009 and has 13 employees. The company sells and rents equipment mainly for hospice care.

General Manager SheriAnn Runchel says the business is doing well despite the setback, because Valley Medical isn’t heavily reliant on Medicare for its sales, which she declined to disclose.

“We need to be able to make a profit in order to stay in business. And their [Medicare] reimbursement rate is lower than what we can get some of the pieces for,” Runchel says. “We’re certainly hoping it will change.”

For some businesses, it’s already too late for that. The new system may have been a bridge too far for already stressed companies.

“Our industry is really in a massive consolidation right now, so you’re seeing tons of businesses going out of business,” Seward says. “We’re being contacted — and I’m sure all the nationals are as well — on a regular basis by companies wanting to sell or give away their businesses.”

Norco announced in May that it had acquired two home medical equipment companies in Oregon and Washington, Care Medical and Walgreens Respiratory Services. In its announcement, Norco mentioned it had been awarded Medicare competitive bidding contracts in the Seattle and Portland areas.


Leslie Rigg and Robert Krogh started ATS Wheelchair and Medical in 1988. They owned the company on the Boise Bench until this year, when the “struggles of running a small business in today’s health care climate” became increasingly difficult, Rigg says. They sold to Missouri-based Numotion, which is the product of a recent merger of two other businesses.

Rigg and Krogh now work for Numotion, and they have about the same number of employees at their Boise office as before.

They specialize in complex-rehabilitation wheelchairs and supplies, which were exempted from competitive bidding. Rigg hopes that exemption will be made permanent by law.

“I wake up every morning thinking they’re going to rescind it,” she says. “I think we all had to reassess our businesses and our business models to see how we would manage with that kind of reimbursement,” cut by 45 percent, she says.

The average consumer probably has not felt the effects of having fewer options, she says. Only a fraction of a percent of the population needs some of the supplies, so she worries their voices won’t be heard.

Seward and Runchel say their companies will likely survive this. Rigg says long-term effects on the industry are “yet to be seen.”

“I think Norco has enough foundation blocks put in place to withstand some of this and try to take the time to restructure and relearn how to do our business,” Seward says. “That’s what it’s going to take.”


Audrey Dutton: 377-6448, @IDS_Audrey

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