Caught in the Storm

Lincare CFO Paul Gabos doesn’t think much of CMS’ handling of competitive bidding.

At a mock auction held by economist Peter Cramton in early April, Gabos pointed to the lowball bids in Round 1. Lincare is pretty savvy about costs, he said, so following the 9.5 percent cut and the 36-month oxygen cap the industry had just dealt with in 2009, the company put in bids that were 15 to 18 percent under the reimbursement rate. But of the 73 bids it submitted, the giant provider won only two contracts.

“You know, when we see prices down 25 to 40 percent and then understanding that those prices are based on median prices so that half of the winning bidders actually bid less than that,” Gabos told the auction attendees, “you really start to question the integrity of the bid process.”

That’s not all he had to say. “We have been inundated with requests by winning contract providers to purchase their companies,” Gabos said. “I can tell you that we have confidential information from over 30 companies that have won bids, and we’ve been contacted by at least twice as many as that.

“I can tell you that these companies are broke,” he went on. “They were broke before Jan. 1, and they’re even more broke now. Some of these companies are not able to take new patients until an existing patient comes off service because they can’t buy a new piece of equipment.”

Gabos also said he was concerned about CMS’ comments that it hasn’t received many complaints about the bidding program.

“Many of these beneficiaries don’t know what to expect, particularly patients that are being prescribed these therapies for the first time,” he said. “They don’t know what the expectation of proper care should be in many of these markets. And I’m concerned that … a lack of complaints by beneficiaries and measuring them against some control group is somehow some indication that this market didn’t fail and that everything is OK.

“I can tell you that everything is not OK, and it’s going to get worse with each month that passes in these nine markets.”

Later in April, providers across the country were slammed by a number of disastrous weather events. After severe storms hit North Carolina and Virginia in the middle of the month, a series of tornadoes ripped through seven states April 27. In Alabama alone, there were 53 tornadoes that day. Then in May there was the massive tornado that leveled sections of Joplin, Mo., and another June 1 that tore up Springfield, Mass.

You can read stories from some of the HME companies that were affected in “Stormy Weather.” For some, the power was out for weeks, and others’ locations, not to mention the towns that surrounded them, were gone. Despite the conditions, these providers were back up and running quickly, using every means possible to take care of their patients.

The providers we interviewed weren’t sitting around figuring out which patients they were allowed to serve or whether they could provide a piece of equipment to a Medicare beneficiary, or even if they would get paid. They simply started helping people. I’ll guarantee they would have done exactly the same thing if they had been in a competitive bidding area when the spring storms struck.

It’s that caring that has been providers’ greatest attribute, and some believe now, their biggest downfall in coming up against competitive bidding.

It’s evident there are a lot of problems with CMS’ bidding program; Paul Gabos is only one in a long line of HME executives to point them out. It’s also evident that Peter Cramton’s auction design works much better than the one CMS is ramming forward.

But it’s a provider’s care — good, or maybe not so good as we’ve seen with some of the winners in Round 1 — that bidding programs can’t reflect, and never will.

View more competitive bidding stories.