Competitive Bidding: The PAOC Perspective

When President Bush signed the Medicare Modernization Act (MMA) in December 2003, the nation focused on the law’s unprecedented prescription drug benefit for Medicare. But buried in the mammoth legal document is a provision mandating competitive bidding for DME. Bidding will begin in 10 top metropolitan statistical areas (MSAs) in 2007 and move to 80 MSAs in 2009, after which the program could expand nationwide.

The government isn’t doing this in a vacuum. The law requires the Centers for Medicare and Medicaid Services (CMS) to form a Program Advisory and Oversight Committee (PAOC) to advise the agency on implementing the competitive bidding program, along with quality standards that providers will eventually need to meet in order to maintain their Medicare supplier numbers. The committee held its first meeting in the fall and will meet periodically through 2009.

Observers have argued the group is ill-named: Some members say they’re playing a purely “advisory” role and have no “oversight” over CMS. Other critics have said the committee’s supplier delegation is light: Only a few out of 22 people chosen for the panel represent DME providers. But no one doubts the insight many committee members have. They come from both public and private sectors, including providers and manufacturers, state government and federal agencies.

Industry advocates are hoping CMS uses this insight to its advantage, so HomeCare contacted PAOC’s members to ask what each personally hopes to bring to the table. A few didn’t respond. But 16 committee members did have something to say, and their answers — some surprisingly candid — follow.

HomeCare’s Question:

What is the main message you hope to convey to CMS about competitive bidding and its implementation?

“We obviously don’t support competitive bidding, but CMS has no choice.

“Our objective is to make sure CMS understands as many details as possible to make sure this does not dramatically alter the marketplace. That’s why the issue of quality standards is so important. [Those standards] are the only thing that will ensure that a beneficiary will have continued access to quality items. When you sit through these committee meetings, you realize the task is huge.”
— Cara C. Bachenheimer, JD, vice president, government relations, Invacare, Elyria, Ohio

“The whole reason for my being on the committee is to give some insight into the competitive bidding process, a process in which we have extensive experience, both on the administrative and clinical side.

“[The VA has] been successful, but that doesn’t mean CMS has to do the exact same thing. We have clinicians, and clinicians make up the basis [of our process]. We don’t necessarily go to the lowest bidder; quality is a higher priority. Once we develop technical specifications [for a product], clinicians test [sample products] based on criteria we set up originally.

“With the purchasing power the VA has across the country, we still get a good price. CMS can learn from that … They can save money for the taxpayers and people on Medicare. If the price of the products goes down, the price of the copay goes down, too.”
— Robert Baum, program manager for the Prosthetic and Sensory Aids Service, Strategic Healthcare Group, Veterans Health Administration Central Office, Washington, D.C.

“It’s important not to go to the largest models, such as New York City. If there are downfalls and if there are negative changes [with competitive bidding], there are huge populations of people that could possibly be hurt.

“[CMS is] not going to realize the level of savings they did in the demonstration model. Since the demonstration projects, there have been cuts in reimbursements, which reduce the savings. Do they want to talk to Congress about the competitive bidding model, and is it truly going to modernize the Medicare process?”
— Mary Benhardus, founder and controlling owner, Handi Medical Supply, St. Paul, Minn.

Note: Between 1999 and 2002, CMS conducted two DME competitive bidding demonstration projects in Polk County, Fla., and San Antonio.

“Quality standards have to be the driver here … It’s all theoretical until the standards are developed. Those standards are going to define the scope of what gets competitively bid.

“CMS needs to go back and really look at what the projected savings from competitive bidding can possibly be. Congress enacted it assuming a certain baseline of savings. Now we have a [Consumer Price Index] freeze through 2008. In addition to that, starting January 1 there were additional cuts … On top of that, suppliers are going to have to meet certain standards. When you add all those things into the mix … you really beg the question of whether it is realistic to expect any more savings.”
— Asela Cuervo, JD, Law Offices of Asela Cuervo, representing the American Association for Homecare, Alexandria, Va.

“‘Think simple’ is the important thing to remember. If [CMS makes the program] big and complex, they could change the marketplace significantly — and change the DME world forever. When [Utah Medicaid has] bid DME, we’ve done it by single codes and simple products that were very easily defined — no broad categories.

“Another thing [involves] practicality. Whatever we do needs to be practical, doable and provide a service to the patient. [CMS] needs to have [beneficiary] access on their minds.”
— Dr. Don Hawley, program director, Utah Department of Health, Division of Utah Health Care Financing, Salt Lake City

“What I hope to convey is that there need to be specific standards and qualifications for anybody who’s going to compete in the competitive bidding process, and those should be outlined and understood before the program is implemented.

“Second, I think it’s important that the whole process be run by an independent organization, not one tied to an insurance company or other health care provider. They were considering the DMERCs, but clearly the DMERCs have conflicts. Plus, it’s not really their jobs. They’re not operations people.

“Finally, we need to take a look at what [CMS’] real incremental savings will be. Considering [cuts on respiratory drug reimbursement] along with the FEHBP-based cuts, [CMS] may find that, within the biggest areas where they could save money, they have already made cuts. [CMS] needs to do a study of what additional savings they’re going to find in the midst of [competitive bidding’s] administration costs.”
— Lawrence Higby, president and CEO, Apria Healthcare, Lake Forest, Calif.

Note: For 2005, CMS cut reimbursement for certain high-volume items based on the percentage difference between 2002 Medicare rates and the median pricing of Federal Employees Health Benefits Plans (FEHBPs).

“Our challenge as a committee is to recognize that competitive bidding has been mandated by Congress. CMS has been given the directive to implement competitive bidding, and our responsibility is to assist CMS by highlighting the positives and negatives that exist today in competitive bidding in the government and private sector. We need to find a way to implement this within the timeframe that CMS has been mandated that will not impede access and maintain the quality that beneficiaries deserve.

“It’s not as much about influencing CMS’ decisions but about helping them uncover information, seek the right information and analyze things from a perspective that allows them to see the impact — not only on the operational side inside CMS but also the quality, choice and clinical outcomes for beneficiaries.”
— Rita Hostak, vice president, government relations, Sunrise Medical, Longmont, Colo.

“I really want to convey that we need to work toward the development of good quality standards to elevate the industry in the eyes of legislators and beneficiaries. I’m a strong supporter of quality standards and mandatory accreditation, and I look forward to developing that criteria moving forward. One of the ideas being discussed is to include minimum quality standards for individuals associated with specific products. I predict standards will come out in a general form for all DMEPOS providers, then there will be individual criteria for specific items, such as oxygen or wheelchairs.

“[Regarding competitive bidding], the highest-cost, highest-volume items always seem to be on the chopping block for reductions. I don’t think that when CMS figures out how to implement competitive bidding that they will be able to do it and save any real money to make it worthwhile, taking into account the significant administrative costs that will go into running such a program.”
— Seth Johnson, director, government affairs, Pride Mobility Products, Exeter, Pa.

“Two things need to be addressed: One is that with the FEHBP cuts that went into place the first of this year, we need to ask, ‘Are the savings from the demonstration project still valid?’ You’re not going to get the same savings because the cuts may have taken care of that.

“If they’re going to continue with competitive bidding, they’re going to have to develop standards prior to implementation. It doesn’t appear the law gives them enough time to do that. Developing standards for this industry is a difficult task.”
— Dave Kazynski, president, Van G. Miller & Associates’ Homelink division, Waterloo, Iowa

“My message will be: If you’re going to set up a system of continuity of care, make sure you look at the total picture, not just the Medicare picture. Competitive bidding is going to change the industry. [If certain] providers [in an area] receive a contract, Medicare business will go to those contractors — and what isn’t Medicare business will also go to those contractors because of [the appeal of] one-stop shopping. No one likes to go to several places to meet their needs when they could go to one place. [This trend may] reflect on Medicaid and private insurance business as well. You have to watch that you don’t swallow up the competition and have a monopoly.”
— Alan McMullen, cost reimbursement analyst, Medical Assistance Administration, Department of Social & Health Services, State of Washington, Olympia, Wash.

“My overriding message to CMS is: You have an amazing brain trust in this committee. Tap into it by truly being involved in a collaboration to develop the best program, making the best use of CMS resources to provide beneficiaries good access to DMEPOS supplies and services. The variety and quality of people on the committee is amazing.

“While CMS has presented and requested feedback, I haven’t felt they have really made best use of individual talents of the committee members. There are people on the committee who’ve been involved in competitive acquisition in the private sector who have huge resources of the actual cost savings. These guys know when they’re spending good money — and when they’re not. Committee members could give [CMS] a really good, hard-number analysis.”
— Jean Minkel, founder and president, Minkel Consulting, New Windsor, N.Y.

“We’d like the transition to be seamless for the beneficiaries and suppliers [to participate], and to position the program in a way that would allow the objectives to be met and still allow small businesses to be part of the program — not just in the bidding but [to be able to succeed] in being a winning bidder.

“Community pharmacists are a varied group. Many provide complementary services [to HME], such as long-term and home health care in the community where they practice. [The bidding program will] have a significant impact, especially in the area of diabetes management. In many instances, people will come to their community pharmacies to pick up their medications and, at the same time, pick up testing strips, lancets and glucose meters. Those items will potentially be discussed for bidding, so we’re concerned about [beneficiary] access.”
— William Popomaronis, P.D., vice president, long-term/home health care pharmacy services, National Community Pharmacists Association (NCPA), Alexandria, Va.

“My primary objective is to assure that quality standards are realistic and appropriate and that the way that standards are evaluated is equitable for all providers. When people are developing standards, they can set the goals for the standards too high for the reality of the situation.

“[Also], one complete set of standards will not be appropriate for all. For example, ventilation support [providers] have additional standards that are important — it’s a life-sustaining service. There’s a great range, and to think that one size fits all is really not going to be the case.

“I am hopeful that CMS will have the quality standards and the methodology for evaluations in place no later than May of this year. It is essential to give providers the opportunity to see what the standards are. [JCHAO] will need time [to prepare for standards implementation], but providers are the ones who will really need the time. It will be a great disservice the longer and longer we wait before we know what the standards will be.”
— Maryanne Popovich, executive director, Joint Commission on Accreditation of Healthcare Organizations (JCAHO), Oakbrook Terrace, Ill.

“Although a lot of factors need to be taken into consideration, competitive bidding can work. It can save money to the program if the contracting is done well. If there is consideration of quality measurements in the contract … and the contract can be well-managed — which is the other piece — I think there can be savings in a number of areas. For wheelchairs, [Minnesota Medicaid] had contracts with manufacturers, not suppliers [though the state has since stopped such contracting]. I think moving toward a supplier-directed contract would have fewer problems.”
— Chris Reisdorf, manager, Benefit Policy Unit, Minnesota Health Care Programs: Medical Assistance, General Assistance Medical Care, and Minnesota Care Programs, St. Paul, Minn.

“The Department of Veterans Affairs brings to the table a combination of clinical management expertise and experience in the competitive bidding process on all levels. This enables our patients to get the best-quality product or service at a reasonable price.

“By sharing our experience and listening to the experience of other organizations at the table, CMS will be able to take away elements for a successful program.”
— David Van Sleet, VISN 1 prosthetics manager, Department of Veterans Affairs, New England Healthcare System, Bedford, Mass.

“The main message that the committee is trying to convey is [for] CMS to continue to focus on the quality initiative … The number one focus is getting a quality provider.

“The second [goal] is to identify Congress’ intent in mandating competitive bidding … We should carefully examine each item we consider for competitive bidding. The law gives the [HHS] Secretary the right to exempt items [that won’t yield significant savings]. My message is that, for each item, we consider and carefully analyze the latest data, know we will not affect quality, affect [beneficiary] access and will, in fact, achieve savings …

“Using [only] the government’s own data, bidding [power wheelchairs] might save Medicare money. But if we identify someone who needs a power wheelchair, and they can achieve their independence [with that chair], we might prevent a fall that would have led to a $100,000 hospital bill. We need a ‘big-picture’ look at the situation.”
— Dr. Don Vliegenthart, medical director, Hoveround, Sarasota, Fla.

Additional PAOC members include Henry Claypool, expert to Social Security Administration’s Deputy Commissioner to advise on Interim Medical Benefits, Washington, D.C.; Anthony Filippis, president and CEO, Wright & Filippis, Rochester Hills, Mich., and practicing certified prosthetist/orthotist; David Gray, associate professor of neurology and associate professor of occupational therapy, Washington University School of Medicine, St. Louis; John Prassas, director, corporate provider development & contracting, PacifiCare Health Plans, Cypress, Calif.; Dr. Ken Viste, medical director, physical rehabilitation unit, Mercy Medical Center, and staff physician, St. Agnes Hospital, Fond du Lac, Wis.; and Daniel Waldmann, director of federal affairs, Johnson & Johnson, Washington, D.C.