Durable Medical Industry’s Proposal to Fix Medicare’s Competitive Bidding Program

January 18, 2012 by  
Filed under Feature Story, Guest Bloggers

Guest blog post by Bob Vogel

The current Centers for Medicare and Medicaid Services (CMS) competitive bidding program is deeply flawed and jeopardizes wheelchair users ability to get the seating and mobility equipment we need. Furthermore, competitive bidding will put the entire Durable Medical Equipment (DME) industry in jeopardy. Dave McCausland, Senior VP of Planning & Government Affairs for The ROHO Group explains that 244 leading economists, including several Nobel Prize winners, have examined the current competitive bidding program and all signed a document stating that the current competitive bidding system will fail, it is not a question of “if,” it is a question of “when.” What makes this all the more dangerous is that DME industry may be irreparably damaged in the process.

CMS competitive bidding has DME dealers bid to provide equipment in a certain category for the lowest price. The winning bidders get the contract to be the exclusive Medicare providers for a specific area for the product category(s) they win. For wheelchair users, this category is “power and manual wheelchairs and accessories.”

Round I of competitive bidding is already in place in 9 regions. Round II of competitive bidding is looming on the near horizon and will include 91 regions, including the largest cities in the country.

Congress’ plan was that competitive bidding would lower prices for DME, thereby reducing Medicare and beneficiary costs, while ensuring that beneficiaries (you and I) have access to quality items and service we need. But because competitive bidding is based on price alone, it is likely to create unrealistic and unsustainably low prices, the result will be that beneficiaries won’t have “access to quality items and service.” This means you and I won’t be able to get the equipment and service we need to stay healthy. McCausland explains that in it’s current state, competitive bidding isn’t really competitive. There is no accountability for bids, there is nothing in place to ensure bidders are truly qualified to provide the equipment and service needed in the areas they bid, and low-ball bids are likely to drive prices to an unreasonably low level that won’t provide a living wage for DME dealers.

But there is a plan to fix these flaws with competitive bidding. The American Association for Homecare (AA Homecare, the largest association of DME manufacturers and providers) worked with DME manufacturers and providers and created a plan to fix the problems that arise with competitive bidding. They created a legislative proposal called the Market Pricing Program (MPP). AA Homcare submitted the MPP to Congress and is asking that the proposal be included in the final doc fix bill to be sent to the President.

The current competitive bidding system allows a company with no physical presence in an area, to still submit a bid for that area. This encourages low-ball bids and there is no accountability. A dealer with no physical presence can submit a ridiculous low-ball bid that guarantees that the dealer wins the contract. Let’s say a local dealer needs to sell a product for $100 to stay in business. Another out-of-town dealer submits a low-ball bid for $50 to guarantee a wining bid and get the contract. Because actual reimbursement prices are based on the median price of bids, the winning bidder will get paid at the median price, lets say that ends up at $80. Now, the winning bidder from out-of-town looks at the reimbursement price of $80 and decides if they can make a profit. If they can, great they accept the contract and move into the market. If not, they can just walk away. But the rate is still set at $80  — CMS doesn’t adjust the price, they just go to the next bidder, and the next, until they find somebody desperate enough to take the bid  — the problem is that a dealer can’t survive by being reimbursed $80 for a specific product in that specific market. The only way for a desperate dealer to survive in this situation is to substitute the cheapest equipment and services allowed within Medicare guidelines, at the expense of the health and mobility of wheelchair users. This is explained in an earlier blog post, “Why You Need to Ask for Your Cushion by Name.

To address low-ball bidding and accountability, and make sure only serious DME dealers bid, the MPP requires bids to be binding. This means that the dealer must accept the offer presented by CMS, rather than being able to pass it off to another dealer. The MPP also requires bidders to put up a cash deposit with their bid. If the dealer wins the bid, it is binding and they must accept it. If the dealer walks away, they loose the cash deposit. This wipes out the out-of-town speculators and low-ball bidders. In addition, the MPP insists that the final price of a DME item be based on the “market clearing price” rather than the median price. This helps ensure that the winning bid allows enough profit to provide a living wage for the DME dealer and enable them to provide the proper equipment and services for wheelchair users.

As described previously, another problem area in the current competitive bidding system is that there is nothing in place to ensure bidders are qualified to provide the equipment and service that beneficiaries need in the areas they bid. A quality DME dealer has spent years developing relationships with therapists, rehab centers and hospitals in the area, has established a working relationship with wheelchair users they service and are well equipped to handle the equipment and service needs of their area. With the current system, speculative dealers with no physical presence in a market can submit low-ball bids all over the country with no knowledge of the equipment or service needs of the area  — these bids may overwhelm local dealer’s bids. And, if a speculative dealer wins a bid they can turn it down if there is no profit, or they can swoop in and grab it, leaving wheelchair users at their mercy.

The MPP says that in order to bid in a market area, DME dealers must have a history of doing business and providing equipment to the population — based on Medicare records — in that area. This will ensure the winning bidder has a presence and working relationship in the region.

AA Homecare is asking all of its members — DME manufacturers, dealers and providers — to contact their Representatives and Senators to support the Market Pricing Program proposal and ask that it be included in the upcoming doc fix legislation.

The Market Pricing Program proposal is one example of the many ways the DME industry is working to insure that beneficiaries like you and I have access to the equipment we need. Thanks to the ongoing hard work by many individuals and groups within the rehab sector, Congress passed legislation to specifically exclude complex power wheelchairs from competitive bidding. And recently, CMS officially announced that ultra-light weight manual wheelchairs, power assist accessories for manual wheelchairs and adjustable skin protection cushions will be removed from the upcoming round of the competitive bidding program!

Working together we can make a difference!

More information on the Market Pricing Program can be viewed here.

 

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Bob VogelBob Vogel, 51, is a freelance writer for the ROHO Community blog. He is a dedicated dad, adventure athlete and journalist. Bob is in his 26th year as a T10 complete para. For the past two decades he has written for New Mobility magazine and is now their Senior Correspondent. He often seeks insight and perspective from his 10-year-old daughter, Sarah, and Schatzie, his 9-year-old German Shepherd service dog. The views and opinions expressed in this blog post are those of Bob Vogel and do not necessarily reflect the views of The ROHO Group.

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