Editor's Note

Shock and Awful

Who isn’t reeling from re-bid sticker shock?

• By David Kopf
• Aug 01, 2010

I feel like I just got sucker punched by CMS. True, we all knew that the Centers for Medicare and Medicaid Services would announce the bid amounts for the Round one re-bid in early July, but I don’t think anyone in the industry anticipatedexactly how low the winners would go.

And we’re talking low. The entire process was akin to doing the limbo under an electric fence. Go too high and — ZAP! — you’re instantly relegated to wallflower status in CMS’s not-so-grand bidding ball. And if the last ill-fated attempt at Round One is any indication of how things will go, sitting out this cha-cha from hell might not be so bad.

Let’s Do Some Quick Math

Once you look at the numbers, getting sidelined in CMS’s game of sudden death elimination doesn’t look so bad. Funding for the re-bid’s affected product categories and competitive bidding areas was slashed by an average of 32 percent. So, add in the industry-wide 9.5 percent cut ushered in at the beginning of 2009 by the Medicare Improvements for Patients and Providers Act, and the re-bid’s “winners” are down by 41.5 percent, on average.

This makes zero sense. CMS says it awarded its contract offers to businesses based on the presumption that they will be able to serve patients in accordance with reasonable care expectations for the duration of their three-year contracts, which start Jan. 1, 2011. What business in the world can successfully operate — let alone provide adequate healthcare services — when its largest revenue stream is going to be slashed by 41.5 percent?

Then again, CMS is amazingly adept at saying absolutely nutty things with a straight face. (That “World Series of Poker” television show must feature nothing but ex-CMS administrators as competitors.) For instance, during CMS’s press teleconference announcing the new numbers, CMS Deputy Administrator and Director Jonathan Blum touted as a great success the fact that 28 percent of all winning bidders had no locations in the CBA in which they won, or hadn’t provided that service in that area before. Again, more than a quarter of the winning bidders won contracts for markets they don’t currently serve, and CMS says that’s good.

But that crazy math eventually hits the entire industry. In fact, it’s hit it pretty fast and hard. The re-bid’s 32 percent average cut is a whopping six percent worse than the 26 percent average cut from 2008’s attempt at Round One. This has almost completely stalled H.R. 3790, the bill introduced by Rep. Kendrick Meek (D.-Fla.) that calls for the repeal of competitive bidding, because now the bill’s scoring is way off. Part of the Meek bill’s success in garnering 252 co-sponsors in the House (at press time) was partially based on its pay-go appeal, but that was calculated assuming an average funding cut of roughly 18 percent for the re-bid — not nearly double that figure.

The industry must work to quickly re-score H.R. 3790 and recapture the momentum the Meek Bill had prior to CMS’s July 1 unveiling of the re-bid rates. The end of the year isn’t too far off, and the industry still has considerable work to do in order to find a Senate champion who can effectively back companion legislation in Congress’s other half, let alone get the legislation approved.

Keep Fighting

Now is not the time to shake our fist toward Capitol Hill in impotent rage. Work with your state association and national associations to see how you can join the effort to get the Meek bill passed before Round One goes into effect.

And in the meantime, look for new ways to survive a funding environment where math has no place. One way to do that is through driving new revenue, which is why we have devoted this issue to cash sales (see “Razor-Sharp Retail” on page 17, and “The Point of Sales” on page 23 to read more).

Don’t be stunned into inaction by CMS’s relentless volley of funding hits. Let’s shake off our collective re-bid sticker shock and get the industry back in the driver’s seat when it comes to blowing the doors off competitive bidding.

This article originally appeared in the August 2010 issue of HME Business.