Don’t Knock The Mock

As this issue went to press, economist Peter Cramton had invited home medical equipment stakeholders to an industry shindig of sorts — a Medicare conference that has as its centerpiece a mock HME auction. He also invited congressional staff, CMS, HHS, representatives of the White House and the OMB.

The idea, he says, is to show “what a well-run auction would be like” vs. CMS’ current competitive bidding program. After running similar events in other industries, he believes a mock auction is a great way to learn by doing.

Cramton, you’ll remember, is the University of Maryland economics professor who spearheaded a letter to Congress last fall warning that CMS’ bidding system was designed to fail. The letter was also signed by 166 other renowned economists.

“This is a critical opportunity to debate the basic issues, as well as learn about the latest auction methods that could simplify and improve the effectiveness and sustainability of the auction program,” the conference invitation reads. “In addition, the conference provides a forum to debate whether auctions are feasible in the Medicare setting and how they can best be structured.”

Cramton wrote a letter to HME providers about the conference. He thinks participation from knowledgeable and experienced HME companies would help to make sure that service and quality are properly considered. Now there’s a concept.

Cramton’s auction process is 180 degrees from CMS’ bidding system in other aspects, too. Detailed last month in Senior Editor Susanne Hopkins’ cover story (“Could You Live With It?,” February 2011), the auction he describes is transparent and efficient, and bidders leave knowing whether they won or lost — and at what prices — without having to wait months. All of that is a definite improvement over CMS’ crazy-bad program setup.

The thing is, most providers I’ve talked to don’t think any HME auction, no matter how good its design, belongs in health care. They want competitive bidding repealed, not redesigned. Me, too. Who wants Mom’s oxygen service going to the lowest bidder, maybe even one with no experience in the area?

CMS officials, on the other hand, seem firmly convinced that the current bidding system is sound — “superior,” in fact, Deputy Administrator Jonathan Blum told reporters last year. Plans for Round 2, which will add another 91 cities to the program, are moving right along.

With both sides at the conference, the mock auction could be something of an historic event. At the least, it’s an opportunity for all the parties involved in this thing to meet and greet in a non-legislative, no-regulatory arena.

I’m not saying it’s going to be a party. Competitive bidding is a serious subject with grave consequences, and we’re seeing that with Round 1. But the auction certainly won’t be dull. Cramton says participants will be broken into two-person bidding teams, and it is conceivable that a provider could be paired with someone from CMS. Even he admits that’s quite a stretch.

Ultimately, he says, “CMS and providers are going to have to work together, and this sort of thing makes perfect sense even though it is challenging. The nice thing about it is that they both are pretty much coming from the same place. Neither of them is familiar with how auctions should be done, so they both have a lot to learn.”

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