Economists: CMS’s Competitive Bidding Needs Fixing
Other presenters included economists representing two studies of the current CMS competitive bidding program, who questioned the program’s effectiveness while speaking at the conference.
“You cannot put any old competitive bidding process together,” said Brett Katzman, Ph.D. with the University of Miami’s Department of Economics. “How the rules are set affects everything that comes after it.”
Katzman along with Kerry Anne McGeary, Ph.D. of Drexel University’s Department of Economics & International Business studied the early competitive bidding demonstration projects in Polk County, Fla. and San Antonio, Texas circa 2001.
What they found was that current process if “filled with potential problems,” Katzman said, and that it runs the risk of actually creating higher prices, reduced quality and is open to a “gaming” of the system in which products are initially underbid and then prices are subsequently raised.
McGeary said there was a “strong correlation” between products that were initially underestimated and then experienced price increases. She added that the system could undermine quality of care, as well. “We did find that CMS’s competitive bidding process created an inefficient supply, which caused potential access problems for the beneficiaries,” she said. Robert Morris University professors Brian O’Roark, Ph.D., who co-authored another study of competitive bidding with his colleague Stephen Foreman, Ph.D., shared the Katzman and McGeary’s conclusions and added that most of these problems result from the fact that the program’s current structure ignores the law of unintended consequences.
“If you are reducing the number of suppliers, you have to think about people who are waiting for oxygen or to have their wheelchairs repaired,” said O’Roark, whose study was sponsored by the Pennsylvania Association of Medical Suppliers. “Some will get service, some will wait, and some will get none.”
O’Roark added that when diminishing supplies are met with increasing demand, that is yet another factor that will increase prices beyond initial bids. “Baby Boomers are getting older,” he said. “If there are going to be more of them and fewer suppliers, prices are going to go up. It’s a huge concern. If you don’t pay attention to that, you’re going to be in trouble.”
“One of the biggest problems I have with the entire process is that we started this study in 2001 and we communicated these problems at that time,” Katzman said. “The program could have been updates and improved, but it wasn’t. There is a problem with this process, and it should be fixed.”
This article originally appeared in the April 2008 issue of HME Business.