2011 Big Ten

Competitive Bidding

The industry has fought a long fight, but Round One has reached implementation. What next?

• By David Kopf
• Jan 01, 2011

Unquestionably, the one trend that will define the entire year for the home medical equipment industry is competitive bidding. For the past few years, the industry has watched the Medicare storm clouds gathering, knowing that a competitive bidding cloudburst would create the equivalent of a 100-year flood for providers and the patients they serve. And now that storm is here. Starting Jan. 1, Round One of competitive bidding has reached its implementation phase, but not before a long drawn out political punching match to stop the program.

The first attempt in 2008 at Round One was fraught with errors: scores of providers instantly complained that their bids were refused by CMS due to errors that were never errors. Many bid winners were offered contracts for CBAs in which they had no location and for products and patients for which they had no expertise or experience in serving. In fact, the program was so heavily plagued with problems that the industry was able to work with Congress to pass the Medicare Improvements for Patients and Providers Act of 2008 (MIPPA) which delayed Round One implementation and called for a re-bid of the program.

That was a sigh of relief for the industry, but it came with a cost. The industry had to trade a 9.5 percent funding cut to the categories covered by competitive bidding to secure the delay. From a numbers perspective, that was better than the 2008 bids’ average 26 percent cut to those categories, but a near 10 percent cut to funding is significant to say the least.

But the delay gave the industry time to seek a repeal of competitive bidding. The industry worked with Rep. Kendrick Meek (D.-Fla.) to craft and introduce into the House of Representatives H.R. 3790, a bill that called for the repeal of competitive bidding. It followed up on that effort with a tremendous level of lobbying to get lawmakers to sign onto the bill. Lawmakers in districts with heavy homecare penetration clearly saw the flaws in the program, and the ensuing bi-partisan support for the bill reached 259 co-sponsors.

Beat the Clock
Unfortunately, just like the HME industry, CMS was busily at work on the re-bid of Round One. It pledged a more transparent process that would have better communication between providers and CBIC, and the program progressed. In the end, the industry lost the race against the clock. The Round One re-bids came in with an average 32 percent cut to the Round One categories. This meant the Meek Bill would need rescoring in a pay-go congress, which immediately stalled the bill.

So, the industry had to adopt a new tack and instead focused on waging a highly visible public awareness campaign. Highlights of this included pressuring CMS, which was supposed to run a transparent program to release the names of the bid winners. Also, the industry leveraged a letter to Rep. Pete Stark (D-Calif.) from 166 economists with expertise in auction models — including a Nobel Laureate — that cataloged the many flaws with the program.

However, CMS went ahead with the program, announcing the winning bidders several weeks behind schedule, but enough in advance of the Jan. 1 implementation for the industry to begin reviewing the winners. So far, it’s been determined that a significant portion of the winners have poor credit and, at least for the Orlando area, a significant portion are located outside the CBA. This gave credence to industry concerns that the lack of transparency belied problems with the contract holders.

What Next?
So what is the industry’s game plan moving forward? So far, more of the same. The goal is to draw attention to the programs problems in the hopes of creating a groundswell of public and political sentiment that can get the program stopped. That sentiment should become increasingly sharp — and outright angry — as patients run into the multiplicity of serious healthcare access and quality issues the industry has been predicating for would result from competitive bidding.

And, of course, providers covered by Round One must content with that fallout. Bid winners will somehow have to support large patient populations they possibly never served before and those without contacts will have to reinvent their businesses. And providers trying to establish subcontracting relationships will face some difficult math in terms of trying to eek out meaningful margins.

And let’s not forget Round Two. CMS should have outlined a timeline by now, but is clearly running late. That said, the industry can expect the program to start getting bid out later this year, so that CMS can announce the winners in 2012 and implement Round Two on Jan. 1, 2013. Given that the historic healthcare reform legislation passed last March expands the geographic coverage of Round Two to include 21 more competitive bidding areas, providers need to make stopping competitive bidding lock, stock and barrel their No. 1 agenda item for 2011.

Points to Remember

• The industry secured a lengthy delay to the program in the summer of 2008.
• This gave it time to fight for a repeal.
• It made significant political progress with H.R. 3790
• However the HME industry lost the race against the clock.
• Now the industry must go on the offensive with a public awareness campaign to stop the program.
• Now, both winners and losers — and patients — must somehow try to make things work.
• Meanwhile, expect CMS to start pushing Round Two down the field.

This article originally appeared in the January 2011 issue of HME Business.