Capacity, Timeline Hefty Issues for February PAOC Meeting

ATLANTA — Members of the Program Advisory and Oversight
Committee will be carrying hefty concerns to an in-person meeting
on competitive bidding
in February.

The 17-member PAOC is scheduled to meet Feb. 23 in Baltimore to
discuss outreach and education, monitoring of contract suppliers
and implementation plans for future bidding rounds.

“The announced purpose is to talk about education,” said PAOC
member Tom Milam, general manager and COO of AmMed Direct, a
diabetic supply company in Antioch, Tenn. “But there are still
issues on the table.”

“It’s not that CMS hasn’t listened to us, because they have. But
some of the really important things I feel they haven’t been as
responsive to or forthcoming with information,” said committee
member Esta Willman, owner of Medi-Source Equipment and Supply in
Yucca Valley, Calif. “So there are big concerns … such as how
capacity will be assigned to bidders.”

Willman said after a PAOC conference call with CMS late last
year, she was expecting additional details on the capacity issue.
“However, the information that was forthcoming was totally
inadequate and did not address our concerns,” she said.

Like other providers, Willman is troubled by how capacity
is assigned. For example, she said, winning bidders relying on
subcontractors to expand their capacity could discover that no
contractors will work for the amount of money dictated by the
lowered reimbursement.

“Is there any obligation for the company to follow through on
that plan?” she asked. “What assurance is there that they are going
to be able to handle the patient load?”

Willman said she would assign no capacity to companies using
subcontractors, thus allowing more winning companies and ensuring
that the overall capacity level of 110 percent is truly
achieved.

“I am very concerned that there is no mechanism for CMS to
require a supplier to have an alternate plan,” she said.

Milam, too, said he is concerned about the capacity issue,
although from a slightly different angle. “I am concerned about the
providers with no or very limited experience who say, ‘I can buy a
cheaper product and sell it for very little’ without understanding
the complexities of the daily service that is required,” he
said.

He noted that winning bidders in 2008’s aborted Round 1 included
providers who had never supplied the product for which they won the
bid as well as providers who needed to expand greatly to achieve
appropriate capacity. It appears that CMS will allow such entities
to win in the rebid of Round 1 if they submitted appropriate
bids.

Milam said both scenarios “lead to service issues and, more than
likely, compliance issues. How much are you putting the
beneficiaries and the program at risk?” he questioned.

In addition, Willman believes the Round 1
timeline will be an issue. “There is quite a gap between the
announcement of the payment amounts [in June] and the announcement
of the winners [in September],” she noted.

She recognizes that CMS needs time to contract with the winning
bidders and that is, she said, exactly the point. “The
single-payment [reimbursement] amount is set by the absolute lowest
bidders, but there is no requirement that they accept these
contracts.”

If some winning bidders refuse to sign, those next in line with
the lowest bids would be offered contracts. That means, Willman
said, “the median bid would be higher and ought to be adjusted
accordingly. But there is no adjustment. That’s not the way it was
done last time, and I don’t believe it will be that way this
time.”

Milam thinks the selected bids need to be announced as soon as
possible. With a Jan. 1, 2011, implementation date, the current
timeline doesn’t allow a provider much ramp-up time, he said.
“Preparation, from product acquisition to employee recruitment,
training, compliance, takes many months,” he said.

That is especially true for those companies dealing with, say,
patients on oxygen or even diabetic supplies.

“If you are switched over to a product you can’t read or
properly use, you could wake up one day and you’re in the
[emergency room],” he said.

Milam said the PAOC is also concerned about the financial
information that CMS sought from providers. The agency has required
providers to base their bids on financial data that is, Milam said,
“from 2008, before the 9.5 percent reimbursement reduction, before
full accreditation and the surety bond and before the [36-month]
oxygen cap,” each of which has had a major impact on providers’ net
profits.

Willman said she is eager to talk about another of CMS’ agenda
items: beneficiary education. “I have a lot of thoughts on that,”
she said. “They didn’t really accomplish beneficiary education the
last time.”

Willman, who was not a winning bidder in the initial Round 1,
recalled telling former CMS Acting Administrator Kerry Weems,
“You’ve left the lion’s share of the beneficiary education to the
people who didn’t even win a bid.” She is hoping the PAOC can
convince CMS to change that this time around.

The PAOC was initially established to provide CMS with advice on
the implementation of competitive bidding, but previous committee
members have said agency officials seldom took their advice.

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