The Biggest Losers

Ironically, CMS marked the first anniversary of its short-lived competitive bidding run last year by proposing a claims process under which Round 1 bid winners could file for damages. As the program gears up for a rebid, CMS doesn’t exactly make the process appealing, as if anything connected with bidding for Medicare’s DMEPOS business ever was.

Buried deep within the agency’s 2010 physician fee schedule proposed rule — previewed on July 1, the date the bidding program was implemented in 2008 — a small section outlines the procedure. “Any aggrieved supplier that was awarded a contract in 2008 for the Round 1 DMEPOS competitive bidding program and believes it has suffered damages is eligible to submit a claim,” the agency said.

But then CMS lists a bunch of things for those bid winners to think about in deciding whether or not it’s worth it to file a claim: Winners should consider the fact the contracts they were given didn’t guarantee any profits from the bidding program. They won’t be paid for any work performed under the contract except for the Medicare claims they filed. They won’t be paid for the costs incurred in bid submission.

Besides, CMS pointed out, those winners got to keep any patients they may have gained as a result of the bid implementation.

Then there are the claims themselves. They must include a detailed explanation of the attempts to use, return or dispose of equipment or other assets purchased or rented for use in the two-week implementation, which Congress halted on July 15, 2008. By CMS’ calculations, it will take “approximately three hours at $34/hour (3 × $34 = $102) for an accountant and a company official to review and gather the necessary documents to file a claim.” Could it really be that easy?

And there’s the damage claim review, which will be handled by the agency’s Competitive Bidding Implementation Contractor, and we all know how the CBIC handled the bidding process last year. What’s more, the review would evaluate whatever actions the bid winner took to meet its obligation to mitigate damages after the contracts were terminated. “There is a required responsibility under contract law for a company to take action to mitigate expenses to any stop work order,” CMS points out on page 762 of the 1,128-page proposed fee schedule rule.

Granted, there are some companies that were all for competitive bidding the first time around, and they are hankering for the system to be put back in play. But the vast majority of this country’s HME providers fought the program and bid in Round 1 because they were forced to. Many of those who won beefed up infrastructure, added trucks and hired on staff, in some cases investing hundreds of thousands in preparing for business under bidding. After the program was delayed, one small provider who won a contract lamented he had put in a new phone system that, overnight, turned into “an $8,000 paperweight.”

Although it may be worth it to try for damages, with CMS’ disclaimers and the CBIC’s review — particularly if it is anything like the contractor’s review of the bids it disqualified in 2008 — it seems the winners in Round 1 could lose this skirmish.

But when the Round 1 rebid moves forward, if reimbursements are cut 26 percent as they were last year (more than 40 percent in some categories), if the number of providers left to serve patients is severely reduced (as in Miami where only 44 oxygen contracts were awarded), then it looks like we’ll all be the biggest losers.