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| June 20, 2011 | Volume 17, Number 23 |
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ADVERTISEMENT The Right Fit As the challenges of providing home oxygen therapy continue to mount, we are right there with you, so you can do right by your patients and your business. That’s why we have developed the Right Fit Oxygen Business Tools. Click here for free access. Table of Contents - Cramton Calls for Presidential Action on Competitive Bidding - Medicare Turns to Tech to Get Ahead of Fraud - Think Tank Doesn't Think Much of NCB - Canada's Bio-Solutions Likes U.S. HME Market - NHIC Continues Oxygen Prepay Review - Congressional Briefing on Rehab This Week; Q2 Form C Deadline Delayed; More News in Brief For more industry news, features and highlights from our latest issue, please visit our Web site at www.homecaremag.com. - Headline News Cramton Calls for Presidential Action on Competitive Bidding This time 244 auction experts sign letter addressed to Obama COLLEGE PARK, Md.—In what one stakeholder termed “the strongest case yet” against competitive bidding, economist Peter Cramton wrote a letter to President Barack Obama underscoring the fatal flaws in CMS’ bidding design and asking for presidential involvement in getting the program redrawn. The letter, sent Friday, was signed by 244 auction design experts. “Given the disregard by [the Centers for Medicare and Medicaid Services] of the market design recommendations received from recognized experts, we call upon the executive branch to direct CMS to proceed otherwise,” read the letter, which was copied to Health and Human Services Secretary Kathleen Sebelius, the White House Office of Information and Regulatory Affairs and the President’s Council of Economic Advisors. “We also ask that you consider supporting new legislation that requires the Secretary of Health and Human Services to conduct efficient Medicare auctions, consistent with the best practice and the best science,” the letter added. The letter is the latest volley in Cramton’s battle to get CMS to address the major defects in its competitive bidding design. Those efforts began in September, when Cramton, an economics professor at the University of Maryland, sent a letter signed by 166 other renowned auction experts to Congress detailing the program’s deficiencies and calling for its implementation to be halted. CMS brushed aside concerns expressed by members of Congress, implementing the program—as designed—in January in nine competitive bidding areas across the country. Cramton and the scores of other economists continued their crusade, holding meetings with powerbrokers, congressional briefings and a mock auction attended by home medical equipment providers, economists and even some CMS officials. Earlier this month, Cramton drafted legislative language calling for the current program to be halted and redesigned according to accepted auction practices, not by CMS but by an independent market monitor. According to his plan, the new auction would be implemented in 2013. His hope is that the language can be turned into a bill and ultimately passed by Congress. Cramton said the letter to the president is yet another attempt to get some action. “Today’s letter from many distinguished economists, computer scientists, and engineers, including four Nobel Prize winners in economics, is sent as a result of CMS’ failure to reform the flawed auctions,” Cramton told HomeCare Friday. “I directed the letter to President Obama because I believe that support of the administration is important to speed reform of the Medicare auctions,” he added, noting he believes the design work must be led by HHS, not CMS. “Of course, the letter also went to leaders in both the Senate and the House. I remain convinced that we need a legislative solution. CMS needs strong guidance from Congress. “My hope,” Cramton continued, “is that when 244 distinguished experts, including four Nobel Laureates, present such a strong letter in favor of reform, both the administration and the Congress will take notice and do what is right, especially since everyone benefits from reform (except those engaged in fraud and corruption).” In spite of the fact that the industry has been largely against any type of competitive bidding for HME, advocates applauded the newest letter. “This is the strongest case yet made for CMS and Congress to take action to end the current program,” Wayne Stanfield, president and CEO of the National Association of Independent Medical Equipment Suppliers, told members in a NAIMES news bulletin. “It’s important to keep the pressure up,” said Cara Bachenheimer, senior vice president of government relations for Elyria, Ohio-based Invacare. “The new message is that he is frustrated that he has been stonewalled by CMS and is appealing to a higher order to step in and get this fixed. It’s absolutely a good thing. He is a very credible spokesperson.” Whether or not providers support Cramton’s idea of reforming the design and re-implementing competitive bidding, Bachenheimer said, “he does a great job of pointing out how flawed the program is and how immune CMS is to [efforts to change it]. This is the most useful thing—we need to use it to amplify the noise level.” That’s imperative because so much is clamoring for attention on Capital Hill—the economy, the budget deficit, health reform—that it’s hard for the competitive bidding issue to gain attention, she said. Does she think in the end the president will respond to amped up noise level and step in? “He is the president, he is the head of the executive branch. He would certainly have the power to make significant changes for Round 2,” Bachenheimer said. “That could be done through regulation. He could tell CMS they need to fix this program according to these economists’ recommendations. Theoretically, yes, the president’s office could do something, but I am not holding my breath on that.” Still, she said, it is crucial for the industry to add its voice to those of the economists in underscoring the disastrous effects of the fatally flawed project. “The noise level is so critical,” said Bachenheimer. “Don’t under estimate CMS’ PR capabilities. They keep littering the Hill with the message that everything is great. When Congress doesn’t hear anything else, that’s what they believe. “Grassroots has proven successful for us in the past, and it could be successful for us in the future,” she added. The full text of Cramton’s letter to the president follows: Dear President Obama, We are economists, computer scientists and engineers with expertise in the theory and practice of auctions. In September 2010, many of us signed a letter to Congressional leaders pointing out the numerous fatal flaws in the current Medicare competitive bidding program for durable medical equipment (DME). We also emphasized that the flaws could easily be fixed by adopting modern auction methods that have been developed over the last fifteen years and are now well understood. The flaws in the auctions administered by the Centers for Medicare and Medicaid Services (CMS) are numerous. The use of non-binding bids together with setting the price equal to the median of the winning bids provides a strong incentive for low-ball bids-submitting bids dramatically below actual cost. This leads to complete market failure in theory and partial market failure in the lab. Another problem is the lack of transparency. For example, bidder quantities are chosen arbitrarily by CMS, enabling a wide range of prices to emerge that have no relation to competitive market prices. We write today, nine months later, to report that—much to our dismay—there are to date no signs that CMS has responded to the professional opinions of auction experts or taken any serious steps to fix the obvious flaws to the competitive bidding program. Rather CMS continues to recite the mantra that all is well and that CMS does not plan to make any changes to the program as it expands from nine pilots to the entire United States. We find this especially distressing and unreasonable given your Executive Order of 18 January 2011 on regulation. In that order, you lay out numerous sensible principles of regulation that administrative agencies must follow. The CMS competitive bidding program violates all of the principles, especially the principles of transparency and of basing regulations on the best available science. Indeed, the current program is the antithesis of science and contradicts all that is known about proper market design. Since the writing of our letter in September, several of us have done further detailed scientific study to explore the properties of the CMS design and contrast it to modern efficient auctions. The findings are dramatic and illustrate the power of science to inform auction design. Specifically, auction theory was used to demonstrate the poor incentive properties of the CMS design and how these lead to poor outcomes. Laboratory experiments were conducted at Caltech and the University of Maryland that demonstrate that these poor theoretical properties are observed in the lab. Moreover, simple efficient auctions perform extremely well in both theory and in the economic laboratory. Finally, some of us have studied extensively the Medicare setting, speaking with hundreds of DME providers and beneficiaries, and have developed a modern auction design for the setting that is consistent with the best practice and market design methodologies. This design step was far from a theoretical exercise. On 1 April 2011, a Medicare auction conference was conducted at the University of Maryland to show how the modern auction methods work and to conduct a nearly full-scale demonstration of an efficient auction. Over 100 leaders in government and the DME industry attended the event. The results are documented at www.cramton.umd.edu/health-care, including a complete video and transcript of the event. The mock auction achieved an auction efficiency of 97%. In sharp contrast, the CMS auction exhibited efficiencies well below 50 in the laboratory, even in simplified environments. Despite these sharp results, CMS continues to assert that all is well and that no significant changes are required. The problems with the CMS auction grow worse upon closer inspection. The complete lack of transparency is inappropriate for a government auction. For example, we now know that CMS has almost complete discretion with respect to setting prices in a nontransparent way. CMS can and did manipulate the quantities reported by bidders during qualification. These quantities are essential to forming the supply curve, which ultimately sets the price in each product-region. To this date we know little about what quantities were used in the price determination. As a result of this lack of transparency, it is now clear that the CMS design is not an auction at all but an arbitrary pricing process. Given that nine months have passed and given the disregard by CMS of the market design recommendations received from recognized experts, we call upon the executive branch to direct CMS to proceed otherwise. We also ask that you consider supporting new legislation that requires the Secretary of Health and Human Services to conduct efficient Medicare auctions, consistent with the best practice and the best science. There is much at stake. Unfunded Medicare expenses are estimated to be in the tens of trillions of dollars going forward. Medicare is unsustainable without the introduction of innovative market methods and other fundamental reforms. The DME auction program represents an important first step, especially since failures in homecare will inevitably lead to much more expensive care at the hospital. We believe that proper design and implementation of market methods can bring gains to all interested parties: Medicare beneficiaries benefit from receiving the quality goods and services they need, Medicare providers benefit from being paid sustainable competitive prices for the quality goods and services they deliver, taxpayers benefit by paying the least-cost sustainable prices for these products, and CMS benefits from the numerous efficiencies that result from conducting an effective program, largely free of complaint, fraud, and corruption. We believe that government plays an important role in establishing effective market rules. For the Medicare auctions, the impediments to reform are not special interests or a lack of knowledge, but bureaucratic inertia. This is an important setting and change of the prior administration's regulations is required to contain Medicare costs and assure quality services for Medicare beneficiaries. We are counting on your leadership to bring effective reform. Many thanks for your thoughtful consideration of our concerns. Sincerely, (Followed by 244 signatures) Download a PDF of the letter and signatures. How would you fix Medicare? To vote in HomeCare's monthly Web poll, visit www.HomeCareMag.com. Medicare Turns to Tech to Get Ahead of Fraud PHILADELPHIA—On July 1, CMS will begin using predictive modeling technology to help fight Medicare fraud, Health and Human Services Secretary Kathleen Sebelius and agency officials announced Friday. By analyzing the 4.5 million claims that pass through its systems daily, Medicare’s new state-of-the-art analytics will be able to identify potential fraud on a nationwide basis instead of evaluating one claim at a time, Sebelius said. Similar to that used by credit card companies to spot fraud, the technology should move CMS beyond a “pay and chase” approach, she said, by helping to stop fraudulent claims before they are paid. "Medical data is in lots of different pots," Sebelius told reporters at a summit on health care fraud in Philadelphia. "We wanted to be able to spot the doctor claiming to be in six cities billing for the same procedure on the 16th of June." Funds for the project came from the Small Business Jobs Act of 2010, which provided $100 million for the implementation of a predictive model approach, according to Peter Budetti, director of the CMS Center for Program Integrity. CMS awarded the contract for developing the system to Northrop Grumman, which partnered with National Government Services (NGS) and Federal Network Systems, owned by Verizon. The technology will allow CMS to check Medicare’s data mass across claims and a wealth of other information such as enrollment records and stolen provider and beneficiary identification numbers. The system algorithms will check original claims when they are submitted—by beneficiary, provider, service origin or other patterns—to identify billing patterns and evaluate the validity of each claim, according to the agency. Potential problems will be flagged, and an “alert” and “risk scores” for those claims will be assigned. The alerts will allow CMS to prioritize claims for additional review and investigative or other enforcement actions. The risk-scoring process will build over time as additional factors are added in, Budetti said. Sebelius said that in a pilot for the new program, CMS linked public information available from court records, addresses, medical licenses and lists of providers and suppliers excluded from federal health care programs. “Today's contract represents the greatest scrutiny ever applied to Medicare's payments,” she said. “Suddenly, it's a lot harder for the rotten apple to blend in with the bunch.” Read a press release from CMS. Think Tank Doesn't Think Much of NCB SAN FRANCISCO—Adding its thumbs down to a growing list of studies and commentaries that slam national competitive bidding, the Pacific Research Institute weighed in last week with another damning review of the process, saying it “yields prices for equipment that are substantially lower than those that would emerge in a competitive market.” In a study titled “Medicare Auctions for Durable Medical Equipment,” Benjamin Zycher, PhD, a senior policy fellow at PRI, wrote that under the “flawed auction system, prices for medical devices and equipment are likely to be about one-third to two-thirds below the competitive price. “Accordingly, market incentives to invest in new medical technologies will be reduced as well,” Zycher said. “Investment would be reduced by 12-15 percent or approximately $2.1-$3.1 billion annually from 2011 through 2020.” According to Zycher, “This investment loss would cause, conservatively, a loss of about 500,000 expected life-years each year, the economic cost of which would be about $50 billion per year, which is substantially greater than the entire U.S. market for medical devices and equipment.” A June 13 statement from PRI said CMS has “powerful incentives to pursue budget savings rather than economic efficiency, or patient wellbeing, in resource use.” The California-based think tank, which champions free-market policies, said the study demonstrates that the magnitude of such an adverse economic effect should make reform of CMS’ bidding program “a high priority for policymakers.” Download a PDF of the full report. In addition to PRI, the American Consumer Institute, Galen Institute and Heartland Institute have also published reports criticizing the CMS bidding program. Canada's Bio-Solutions Likes U.S. HME Market MONTREAL—On Wednesday, Canada’s Bio-Solutions Corp. announced that it plans to enter the U.S. HME market. “Recently, after having multiple organically built ‘mom and pop’ operations approach us, our board and management have decided this would be a beneficial direction to grow and expand our company,” Dr. Gilles Chaumillon, CEO and president, said in a release. It’s no wonder. The company estimates the market at $26 billion a year and said it is growing at 6 percent annually. Market entry shouldn’t be hard, the company’s June 15 release stated: “There are literally hundreds of small American made companies in this arena. A lot of them were built by Baby Boomers themselves looking for an exit strategy as private equity has dried up for what the market deems as smaller players.” While many of those smaller companies are thinking about the downside of competitive bidding, Bio-Solutions sees it as an opportunity, Chaumillon said. “We at Bio see a vast opportunity with Round 2 of Medicare DMEPOS competitive bidding being initiated before 2013. Recent changes will dictate that DME companies must transition away from the traditional fee schedule and enter competitive bidding … As a company, our goal is to align ourselves with those in the competitive bidding process, as well as those working with various Medicare reimbursement programs. The product lines are endless,” Chaumillon stated. Incorporated in Nevada, the company, which makes an organic insecticide and dietary supplements for livestock, said it has hired U.S. consultants to get its new move going. Said Chaumillon, “Nothing would make me happier than to grow our business, at the same time trying to put Americans back to work. Is that not what it’s all about?” NHIC Continues Oxygen Prepay Review HINGHAM, Mass.—On Friday, NHIC released its latest quarterly findings in an ongoing widespread prepayment review of oxygen claims (HCPCS E1390, E0431 and E0439) in DME MAC Jurisdiction A. Covering claims with service dates from January through March, the complex medical review involved 297 claims submitted by 199 suppliers. The results showed responses to the Additional Documentation Request (ADR) were not received for 124, or 42 percent, of the claims. For the remaining 173 claims, 70 claims were allowed and 103 were denied, resulting in a claim denial rate of 60 percent. According to the DME MAC, the total denied allowance amount (dollar amount of allowable charges for services determined to be billed in error) divided by the total allowance amount of services medically reviewed resulted in an overall Charge Denial Rate (CDR) of 55.9 percent. Based on the review, NHIC said the primary reason for denial was missing documentation for treating physician visits: • 42.7 percent of the denied claims were missing documentation for the treating physician visits (both 30 days prior to initial CMN and 90 days prior to recertification CMN); • 24.3 percent of the denied claims were missing documentation for the treating physician visit (30 days prior to initial CMN); and • 1.9 percent of the denied claims were missing documentation for the treating physician visit (90 days prior to recertification CMN). NHIC’s previous findings covered the quarter from October through December 2010 and resulted in a 71.5 percent CDR. While the error rate has improved, the DME MAC said, the review will continue. For a full report on the review, which includes reasons for all claim denials and examples of actual claims that were denied, download a PDF from the NHIC website. In Brief Congressional Briefing on Rehab This Week; Q2 Form C Deadline Delayed; More News in Brief WASHINGTON—There will be a congressional briefing on “The Importance of Rehabilitation in America’s Healthcare System” June 23 (Thursday) from noon to 1:30 p.m. in Room HVC-200 at the U.S. Capitol Visitor Center, including a presentation by Dr. Gerard Francisco, the attending rehab physician for recovering Rep. Gabrielle Giffords, D-Ariz. According to a notice from NRRTS, the briefing is an opportunity to spread the word about creation of a separate benefit category for complex rehab technology and “to make sure that DME and CRT are included in the definition of ‘essential health benefits’ as health care reform moves forward.” Both NRRTS and NCART urged stakeholders to let congressional staff know about the briefing. “They’ll not only hear some very important and helpful information, they’ll also get a free lunch!” NRRTS reported. Q2 Form C Deadline Delayed BALTIMORE—Last week the CBIC announced it would delay the second-quarter deadline for competitive bidding winners’ requirement to submit Form C until July 29. Read the June 14 post on the CBIC website. MedForce, VGM Renew Partnership WATERLOO, Iowa—Business process and paperless solutions specialist MedForce Technologies and member services group VGM have renewed their years-long partnership, the companies announced June 13. “Efficiency is critical to building and maintaining a business,” MedForce CEO Esther Apter said in a release, and the companies’ goal is to continue to make HME companies “as efficient—and profitable—as possible.” Roscoe Taps Guth STRONGSVILLE, Ohio—Roscoe Medical announced June 8 that Paul J. Guth has been appointed president and CEO. Guth, who joins the company as it continues to expand operations, most recently served as CEO of Artromick International, which provides medication management and mobile computer carts for the long-term and acute care markets. The current executive team at the HME manufacturer and distributor, including Richard Keirn and Jesse Keirn, brothers who served as co-presidents of the company for the past six years, will remain in place. Richard Keirn is senior vice president of sales operations, and Jesse Keirn is senior vice president of product management. ActiveCare’s Wildcat 450 Hits the Big Screen COLUMBIA, S.C.—It’s only a few more days until this summer’s blockbuster movie Transformers: Dark of the Moon hits theaters June 29. But you can sneak a peek of ActiveCare Medical’s Wildcat 450 Hollywood debut in the online trailer. “The Transformers 3 script called for a major character to be confined to a wheelchair for a good portion of the film,” said ActiveCare Director of Marketing Mike Wahrmund. “The prop master did some research online, found us and decided that the Wildcat 450 was a perfect fit for what the director had in mind.” The chair-bound character, Agent Simmons, is played by award-winning actor and Transformers veteran John Turturro. In the trailer, Turturro can be seen sitting in the chair just behind the film’s star, Shia LaBeouf. The Wildcat 450 was introduced in 2010 as ActiveCare’s first heavy duty PWC. To revisit this news anytime during the week, check www.HomeCareMag.com. We welcome your comments. Drop a line to HomeCare Editor-in-Chief Gail Walker at gwalker@homecaremag.com. ADVERTISEMENT 
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