WASHINGTON -- Western Pennsylvania is home to 479 companies that provide medical devices to patients in their homes.

Officials of those companies are keenly interested in how health care reform turns out, but there is a more immediate -- and, in their eyes, dire -- issue confronting them: a new bidding process limiting the number of companies that can serve Medicare patients.

The Centers for Medicare & Medicaid Services, under Congressional direction to stem rising costs for in-home medical devices, last month began a pilot program to seek competitive bids from companies that deliver and service certain types of devices.

The centers previously did not limit the number of suppliers in the marketplace or the amounts they charged. Pittsburgh is one of nine metropolitan areas in which CMS is implementing the program, which could expand nationwide.

CMS will select a few winners in nine categories -- covering such devices as oxygen tanks and powered wheelchairs -- from companies that submit the lowest bids. The program has the in-home service industry in an uproar, as cutting off companies from Medicare funding also cuts them off from much of their business.

" 'Competitive' is a misnomer of Orwellian proportions," said John Shirvinsky, executive director of the Pennsylvania Association of Medical Suppliers. "You cannot eliminate nine out of 10 competitors from the market and expect to achieve a competitive result."

Bidding is scheduled to close Dec. 21. CMS next year will announce the successful bidders for contracts, which will begin in January 2011.

CMS Director of Chronic Care Policy Laurence Wilson said he isn't concerned about creating monopolies because plenty of safeguards have been built into the bid process.

No single company will be granted more than 20 percent of the market for any device. That means at least five companies will be awarded bids to serve the Pittsburgh area in each category, but it probably will be more like 15 to 20, Mr. Wilson said. Also, CMS regulations require at least 30 percent of bidders who receive contracts to be small businesses, which Mr. Wilson said negates concerns that big national companies will take over the marketplace.

Mr. Wilson said the bidding process will subject companies to scrutiny aimed at weeding out fraud and abuse that can drive up costs of medical devices. Companies sometimes submit bills to Medicare that are three to four times higher than the cost listed on Web sites for the same devices, he said.

Device distributors countered that prices listed on the Internet don't include delivery, maintenance and other valuable services they provide -- which might be hindered with fewer local outlets to develop relationships with customers.

"We're very concerned that if we again end up with a small number of inexpert bidders that we're going to consistently be getting equipment that isn't right for us," said Lucy Spruill, a cerebral palsy patient and director of public policy for United Cerebral Palsy of Pittsburgh.

Ms. Spruill participated in a recent conference call organized by Mr. Shirvinsky to assail the competitive bid program and push congressional legislation to end it.

A bill introduced in the House of Representatives by Rep. Kendrick Meek, D-Fla., would repeal the competitive bid program. It has garnered 75 co-sponsors, including Reps. Jason Altmire, D-McCandless; Tim Murphy, R-Upper St. Clair; John Murtha, D-Johnstown; Kathy Dahlkemper, D-Erie; and Glenn Thompson, R-Centre. The bill also would phase in price reductions, which Mr. Shirvinsky said would produce the same savings without upending the industry.

"I understand why in terms of the Deficit Reduction Act and with this competitive bidding why this was looked at, but really it was misguided," said Mr. Thompson, who worked in rehabilitation services before running for Congress.

In 2008, Mr. Altmire played a role in pushing back the implementation of competitive bidding because, he said, the focus on cost was too shortsighted. "Cost is certainly a part of it, but so is the quality of care you're seeing, so is the fact that local suppliers are a part of our communities," Mr. Altmire said.

Before pushing back the program in 2008, CMS held a first round of competitive bidding. Only about 10 percent of suppliers in the pilot markets supplied what would have been winning bids, said Mr. Wilson of CMS. Those bids would have saved Medicare an average of 26 percent, he said.

Responding to concerns that service will suffer, Mr. Wilson said Medicare patients still would pick from among several bid winners and could select the one with the best service. Both Medicare and its patients, who foot about 25 percent of the bill for home medical equipment, will benefit, Mr. Wilson said.

""[The industry doesn't] want to see prices come down," he said.

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