Round 2 Pricing Commentary: Wayne Stanfield, NAIMES

HALIFAX, Va., Feb. 1, 2013—As predicted by this writer, the Round 2 bid rate came in worse than Round 1. No secret as to why. Suppliers, petrified by this flawed process, bid for survival. The only way to do that was to bid low enough to be sure of a contract offer. The CMS program, designed by bureaucrats using no science at all, forced suppliers to submit these suicide bids. Couple this with the total lack of government transparency, which allowed CMS to artificially manipulate the capacity to achieve the rate reduction they wanted, and you have a recipe for disaster. With the rates averaging 45 percent less than the current fee schedule, it appears there were a lot of low bidders. Despite that, no one I spoke to bid below the published median price.

Are these prices sustainable? Not even close, in my book. In looking at all the fees, it is not possible for a supplier to remain financially viable at these rates. Had I been offered contracts, I would have to refuse them, preferring a quick death to my business and future rather than the slow alternative. Still, the same fear that drove the low bids will also drive the contract signing. Faced with no options, suppliers will sign these ridiculous contracts out of desperation with little regard to the long term consequences.

We are told that just 867 companies are being offered contracts. That’s just 15 percent of the current suppliers billing Medicare in these 91 areas. So what will happen to the other 85 percent? It’s a rhetorical question by the way; we know the answer to that. Just ask the more than 450 who went out of business in Round 1, and that’s the ones we know about.

The frenzy leading up to the July 1 start date will leave bid winners and losers exhausted and drained. Those winning will be gearing up to serve what they hope will be a flood of new patients; making decisions without knowing what the future will bring. Those not winning a bid will spend the next few months deciding whether to grandfather their patients, or tell them they will have to go to a new supplier, possibly to one far away.

There is no one in the DME industry that has margins of 45 percent, not even the national companies. This arbitrary price setting by CMS manipulation of capacity in a total non-transparent manner is something that no one would tolerate in the private sector. How can our own government to that?

To Congress
Congress, you got this one wrong. In 2003 you started a process, then lost control of it in the dark years from 2003 to 2008, and CMS ran amok. The current bid process is not even close to what was envisioned in 2003; just ask some of your colleagues that were a part of that Congress.

Congress, you have refused the best advice of auction experts who have told you the CMS design is flawed and sure to fail. Yet, you listen to the propaganda from CMS that purports high savings for Medicare without looking at the real world costs associated with bad program design.

Congress, you refuse to address this issue, as you do many others, all because you can’t pass laws that cost money. We understood, but CMS has knowingly and willfully misguided your 2003 directives. Is this insubordination, defiance or simple disobedience? You asked for competition—you got none. What are you going to do about it?

To Suppliers
As has been the case for years, the ball in in your court. Only your outcry can fix this problem. If you, like me, are mad as hell, then don’t take it anymore. Call your Representative and both Senators and tell them. By now you know what to say. Tell them from the heart and don’t take no for an answer. Not only for you, but for your patients, this is now a matter of survival. This is Congress taking away our American dream. This is a government forced consolidation and the systematic dismantling of our industry. This is an intentional broadside shot by CMS that will cause thousands of small business to fail.

If we are not aggressive and proactive in reaching Congress on this matter, we will not win. Out of over 20,000 supplier numbers billing Medicare in 2011, there will be less than 1000 left when the dust clears.

Call the number below and express your fears and concerns to the only three people who can change this path.  Our worst nightmare has been realized and Congress must understand and stop this program before great harm is done. Call the Capitol switchboard at 202-224-3121 to be connected to your Representative. Learn more at www.dmehelp.org.