PAMS’ Shirvinsky: Oxygen Rates are Foul Business

HARRISBURG, Pa. — John Shirvinsky thinks something stinks about the Round 1 competitive bidding rates for oxygen.

“We’ve got a big problem with these [rates],” said the executive director of the Pennsylvania Association of Medical Suppliers about the reimbursement rates announced July 1. “There is seriously something wrong with these numbers.”

The rates resulting from CMS’ rebid of Round 1 averaged 31 percent less than the current Medicare allowable for oxygen supplies and equipment. Of average single-payment amounts for an oxygen concentrator (E1390) in the nine Round 1 competitive bidding areas, Pittsburgh’s payment came in the lowest at $102.84, or a 37 percent reduction.

That caused Shirvinsky so much concern that he has been polling PAMS members individually to find out if they bid and, if so, what their bid was.

His findings have been worrisome, he said.

“What we are looking at now is a median bid — and the numbers will change as we get more bid rates — of $132 versus the $102 that CMS put out,” Shirvinsky said. “I am not seeing bids that really came anywhere near what CMS is reporting.”

While the majority of bidders aren’t members of PAMS, he said, its members service the majority of patients that are covered in the Pittsburgh area.

“I am getting the sense that the responsible companies, long-standing, good providers, have submitted steep cuts and responsible bids, but nothing approaching the number that CMS threw out there as the median bid.”

It makes him wonder, he said, who made those lowball bids. Other providers using desperate measures to try and save their businesses? Outside companies with no knowledge of the oxygen service components? Or did CMS make an error in calculation, or worse?

“It’s disturbing as to what might be going on,” Shirvinsky said. “There is no reason to trust these bid numbers. They are unsustainable. I don’t trust them and I don’t see why CMS trusts them.”

He is troubled, he said, that CMS, against the industry’s pleas, shortened the requirement for financial data required of bidders from three years to one. And he questions whether CMS analyzed the financial data it did receive. How can analysts reasonably believe that companies operating on such low net margins could suffer a 37 percent cut in a key category and stay in business, he asks?

Shirvinsky pointed out that the 9.5 percent Medicare cut that providers took to pay for the delay of the aborted Round 1 in 2008, added to the 36-month oxygen rental cap implemented in 2009, has already resulted in a 27 percent oxygen reimbursement cut for Pittsburgh.

“Having dealt with that cut … we came in and said take another 37 percent away? Where does that make any sense?” Shirvinsky asked, adding that in his view, the new rates are the result of either fraud or an error. It’s impossible to determine whether the rates are in error, though, because “I don’t know what the numbers are, I don’t know how they were calculated, ” said Shirvinsky.

“This has not been a transparent process,” he said, noting that CMS has “refused congressional requests, Freedom of Information requests, public requests” to be transparent.

“Typically, when there is a bid opening, everybody knows everybody’s bid,” he continued. “CMS has done this under the cloak of darkness … These numbers won’t stand; they are not defensible.

“The fact that this process is so secretive should raise red flags everywhere.”

Shirvinsky said he is further concerned that legitimate providers in the industry will be unable to get any form of credit.

“If you go to a bank to get a line of credit based on these figures, you are going to be turned down,” he said. “Two years ago, an upstanding, solid company was turned down for a line of credit. They were told there were red flags all over the industry and [the lender] feared a takeover.”

That doesn’t seem so far-fetched now to Shirvinsky.

“The more I think of it, this could be an attempt by the federal government to take over the entire industry,” he said. “They are setting this industry up for failure, this program up for failure and what’s worse, they are setting Medicare beneficiaries, some of whom are on life-supporting equipment, up for a terrible failure.”

Shirvinsky said an injunction to stop competitive bidding was “not out of the question.”

“It may need to come out of this,” he said. “We need to take this seriously. We’ve got to be able to turn this around and use this as motivation. We don’t deserve this fate. The work our industry does is good work, it is honorable work and it is the most cost-effective work that anyone in health care does.

“This industry needs to be motivated and needs to step up” to stop the bidding program, he said. “Whatever we’ve been doing over the last couple of years, it needs to be amplified and stepped up more than ever.”

View a chart of the single-payment amounts for oxygen supplies and equipment in the nine Round 1 CBAs on CBIC’s website.

View more competitive bidding stories.