2013: The Year Ahead

Hoping for the Best, Planning for te Worst

Round Two of Competitive Bidding could radically redefine the HME industry if it starts rolling out in July. Here’s what you need to know.

• By Joseph Duffy
• Jan 01, 2013

With the implementation of competitive bidding Round Two looming, HME providers are left to contemplate the many unresolved issues plaguing this controversial and industry-changing CMS program.

In spring of this year, CMS will announce bid-winning providers and start educating them, referral partners and beneficiaries on how the program will proceed. In July, CMS plans to implement Round Two of the program. In the meantime, providers search for answers regarding what to do if they win or lose bids. And, if needed, whether there is enough time to turn to a contingency plan.

As this issue goes to press, the industry is working overtime to attach H.R. 6490, a bill that would replace competitive bidding with the industry’s Market Pricing Program (MPP), to legislation being passed by the Lame Duck session of Congress, which will have come to a close Jan. 1. The MPP takes into account various recommendations made by the more than 240 economic experts in auction models — including Nobel laureates — who have been led by Prof. Peter Cramton of the University of Maryland. The MPP creates an auction structure that gives CMS the price competitiveness it seeks, while not forcing HME providers to go out of business by awarding contracts to single providers.

How that legislation will progress if it does not make it out of the Lame Duck Congress will remain to be seen, but providers must plan for the worst case in the meantime. With Round Two contracts getting announced in Spring, and the program slated for July implementation, they must have a plan in place.

Provider concerns

What to do next is heavily influenced by the particular concerns competitive bidding has instilled in providers. And on most providers’ minds is the ability to provide patients with a high standard of care.

“I believe that patients are unaware of what is coming,” says Robyn Parrott, RRT, president of Sleep Solutions Inc. “We have been trying to educate them over the last two years but I believe they will be caught blind-sided. Competitive bidding will have ill-effects and I hope this doesn’t impact my staff in regards to having to make employee cut backs. We will have to do more and get paid less.”

Georgie Blackburn, vice president of Government Relations and Legislative Affairs for HME provider business BLACKBURN’S, says that provider choice has always been a treasured option for patients and that it is what drives excellent service. When patient choice is severely diminished, the patient loses. She also has concerns regarding the expanded areas and expanded list of products for Round Two.

“We’ve had access issues and more than 400 business closings in Round One with only nine MSAs involved,” she says. “We’re adding 91 more to that in Round Two. The expansion is massive in all respects. This will lead to more consolidation, more business closings. With the Medicare demographic greatly expanding over the next decade and beyond, having fewer providers to service more patients will result in continuity of care and access problems for patients.”

As a result of competitive bidding, Parrott has been diversifying Sleep Solutions’ offerings along more non-CMS-involved lines. They have solidified their current accounts so that if they are not awarded the bid their accounts will still use their services.

“The HME community has to face reality,” Parrott says. “Competitive bidding is on the horizon and if by some chance, MPP would pass instead, it still means cut backs. It still means the way we do business will forever change. You will either embrace the change and hopefully be a survivor or possibly end up closing your doors. What’s the saying? ‘When one door closes, another one opens.’ It is your choice whether to walk through it. Companies needed to be proactive some time ago, not reactive now. It’s too late if you haven’t been taking this seriously.”

One of the problems Parrott points out is that it’s hard to tell how Sleep Solutions will be affected if it doesn’t win a bid. She says they might have more referrals but at a much reduced rate. She is unsure if her company can provide the same level of service as it provides today and wonders how all the competitive bidding requirements can be met at a reduced rate. Parrott employs two full-time staff members to monitor compliance and hopes that in a post-Round Two world, her company will be able to afford this.

Blackburn suggests that for providers winning a contract, and with median pricing in place, the first step is to carefully analyze if the bid award is below what was bid. If not, she says to give serious consideration to accepting it. If a provider doesn’t win a bid, Blackburn calls it “a limbo situation.” She believes companies must adopt a pro-active framework with respect to new areas of business, new ways of doing business and reducing dependency on third-party payers. Niche areas should be on the drawing board.

MPP: A glimmer of hope

The industry’s attempt to improve the way that Medicare pays for DMEPOS benefits is called the Market Pricing program (MPP), a bill (H.R. 6490) now in committee.

According to John Shirvinsky, executive director of the Pennsylvania Association of Medical Suppliers, MPP creates a state-of-the-art auction system that addresses concerns that have been raised by economists who say that the existing program is fl awed because it creates fundamentally anti-competitive markets. It also addresses concerns of auction experts who say the CMS design is fl awed and violates every rule of auction design. Finally, it addresses the concerns of the ultimate experts on the HME industry — patients and industry practitioners — and addresses the problems with markets that are just too large to ensure proper patient care and low-ball bids that result in unsustainable pricing.

Key components of MPP, as described by Jay Witter IV, vice president of Legislative Affairs for the American Association for Homecare, include:

• MPP includes the same DME items as the current bidding program and is implemented across the country in the same timeframe.
• In market areas subject to auctions, two product categories are auctioned per geographic area.
• Eight additional product categories in those same areas would have prices adjusted based on auctions conducted simultaneously in comparable geographic areas.
• In areas not subject to auction, prices will be adjusted for all 10 product
  categories, and any qualified supplier may provide those items.
• Bid areas are smaller than metropolitan statistical areas (MSAs) and more homogeneous.
• Bids are binding and cash deposits are required to ensure only serious bidders participate.
• The bid price is based on the clearing price, not the median price of winners.
• The same areas that are exempted under the current bidding program will be exempted under MPP.
• MPP was designed to be budget neutral.

Where the bill sits

“The chances of MPP legislation being passed in the lame-duck session is very low, 10 percent,” says Wayne Stanfield, president and CEO of the National Association of Independent Medical Equipment Suppliers (NAIMES). “The chances of MPP passing next year before the go live date is also slim, 25 percent. Unless we can get 218 co-sponsors.

“The bill is in Committee and will remain there unless we have a groundswell of co-sponsors. The ability to get it passed has little to do with the so-called ‘fiscal cliff,’ the budget, the national debt. It has almost everything to do with the size of our lobby and our lobby efforts.”

John Gallagher, Vice President of Government Relations, VGM Group, says the chances for MPP to be passed before Round Two is implemented are good, but like Stanfield, Gallagher says it needs providers’ help.

“We need all providers out there contacting their members of Congress to get maximum support of H.R. 6490,” he says. “The best chances for this to happen this year is if the language of H.R. 6490 is included in a larger bill during the lame duck. One of those bills could include the ‘fiscal cliff’ agreement, the ‘doc fix,’ or an omnibus bill. If Congress is bipartisan support and enough noise is created about the MPP, the chances of it passing this year are greater.”

According to Gallagher, the bill currently has 31 co-sponsors. Senate members have indicated that they are watching this bill very closely to see how much support it gains in the House. Gallagher says that Rep. Tom Price, M.D., who introduced the bill, has indicated that the industry needs at least 100 co-sponsors signed on to get any movement of this bill.

“Providers need to persist and urge their representatives to sign on,” says Gallagher. “We especially need to focus on the Congressmen who signed on to H.R. 1041, the bill that would have repealed competitive bidding, to sign on to H.R. 6490. We have heard from several providers that many of the Congressmen who had signed on to H.R. 1041 are waiting to see if other H.R. 1041 co-sponsors will support H.R. 6490. This is an unacceptable answer. Once again, providers need to insist their representatives support this bill.”

This article originally appeared in the January 2013 issue of HME Business.