Discrepancies, Worries Surface with Bid Winner Announcement

ATLANTA — Two days after CMS released the long-awaited
list of DMEPOS
competitive bidding contract holders, HME stakeholders were
sifting through the Round 1 competitive bidding data —
and what they find could be crucial to the future of the
industry.

“We need to be doing what we and a lot of folks are doing:
analyzing how good a job [the Centers for Medicare an Medicaid
Services] did,” said Cara Bachenheimer, senior vice president of
government relations for Elyria, Ohio-based Invacare Corp, on
Friday. “And we need to be broadcasting it to Capitol Hill.”

Already, Bachenheimer said, legislators have heard from CMS.

“At 4:30 Wednesday afternoon, every office on Capitol Hill got
an e-mail blast with this incredibly optimistic e-mail … CMS
is moving to the next stage, contract holders are announced, they
are all accredited and life is great.”

But is it?

“For lack of any other information, that’s the truth,”
Bachenheimer said. “They [legislators] need to hear the entire
story.”

While Bachenheimer said Invacare was still in the throes of its
analysis and she could not say CMS “did it better or worse or the
same job [as in the original Round 1],” the real story is starting
to emerge, and it doesn’t appear to be the one CMS is telling.

John Shirvinsky, executive director of the Pennsylvania
Association of Medical Suppliers, was outraged at what he found in
analyzing the Pittsburgh CBA contract holders.

“The biggest surprise was the degree to which CMS has exported
the care of western Pennsylvania Medicare beneficiaries to
out-of-state firms with no presence in the Pittsburgh market,” he
said. “Fifty-eight percent of Pittsburgh [metropolitan statistical
area] bid winners are from out of state with no current base of
operations in the entire 5,700 square miles of the Pittsburgh MSA.
Fifty-eight percent!”

CMS said that 76
percent of contract suppliers already had a presence in the
service areas and 90 percent had experience in the product
category.

“CMS made a big point of stressing that the bid winners they had
selected have multiple locations to adequately serve
beneficiaries,” Shirvinsky continued. “This may be true of the
current Pittsburgh area bid winners, but not out-of-state
interlopers. Consider: 73 percent of standard power wheelchair and
scooter winners listed out-of-state locations; 43 percent of CPAP
locations are located outside Pennsylvania; 44 percent of enteral
providers; 37 percent of oxygen providers and 44 percent of
hospital bed suppliers. This is an outrage and a clear detriment to
our vulnerable Medicare beneficiaries.”

Rose Schafhauser, executive director of the Midwest Association
of Medical Equipment Suppliers, also analyzed the Kansas City
CBA.

“I was surprised by the number of national companies that were
awarded several contracts versus the first failed round,” she said.
“I was also surprised at the number of contractors in states
… that do not have current locations in the Kansas City MSA.”
For example, she said, of the 10 contract holders for standard
power wheelchairs, scooters and related accessories, only three are
in Kansas City.

Schafhauser said such figures are worrisome to MAMES
members.

“[Those] who have been offered a few contracts are concerned
about the amount of national companies that received multiple
contracts and are now worried if they will be able to compete for
the referral,” she said. “There is such a small window to educate
the Medicare beneficiaries of who they can use for their medical
equipment — there will be mass confusion.”

In Florida, the surprises were equally concerning, if not more
so. CMS said repeatedly that all contract holders were in good
standing with Medicare. However, Sean Schwinghamer, executive
director of the Accredited Medical Equipment Providers of America,
said his organization discovered “companies out of business,
companies under audit, companies that previously lost their
licenses due to fraud and companies on the verge of bankruptcy due
to audits and who, at the last minute, were removed from audit with
no explanation.”

Schwinghammer said his main concern about the bid winners is a
lack of experience in the category.

“Some companies have never done CPAP for example, and they won,”
he noted, adding, “So many are not in the area [and] they will need
to subcontract, but there is almost no time to do that.”

In its notification to contract holders on Wednesday, CMS said
that they must disclose any subcontractors to the agency by Nov.
18.

Shirvinsky said providers are rightly furious about the program,
which is, despite the late announcement of contract holders and
delayed education of providers, beneficiaries and referral sources,
still scheduled to go into effect Jan. 1, 2011.

“There is a lot of anger and frustration at a government that is
so willing to stomp out the hard work of so many small business
owners who have toiled for so many years to take care of the needs
of the elderly, the disabled and the infirm,” he said. “[Providers]
are incredulous that a program that is so clearly and irretrievably
flawed could actually be within a few weeks of enactment.”

In a press call about the bid winners, CMS brushed aside
questions about the design of the program, which has been
challenged by 166
economists who detailed its shortcomings in a letter to Rep.
Pete Stark, D-Calif., that was passed on to CMS. Stark, chairman of
the House Ways and Means Subcommittee on Health, had tentatively
scheduled a hearing on the bid program after Congress returns to
Washington Nov. 15.

Jonathan Blum, deputy administrator and director, Center for
Medicare, told reporters that he had met with two of the
economists, but he dismissed their concerns.

“I believe our model is superior to other recommendations that
are out there,” he told reporters.

That also shocked stakeholders.

“I was astounded by CMS’s response to the reporter’s question
regarding the recent letters from the economists and auction
experts that the competitive bidding program is fatally flawed,”
Shirvinsky said. “To dismiss the concerns of [166] accomplished
experts as little more than a misplaced concern that bidders would
refuse to sign contracts was unbelievable. Either CMS is incredibly
dense in understanding what was communicated to them or they were
brazenly dishonest in spinning the reporters away from the very
serious misgivings that were actually expressed.”

Schwinghamer noted wryly that CMS “never admits to mistakes and
greater mistakes result. There are no bidding experts at CMS, the
national experts reject CMS’ efforts soundly, yet CMS refuses to
even consider that the program is flawed and even destructive.

“It is,” he continued, “an insult to the intelligence of
providers and Congress. Someone needs to lose their job over
this.”

In the wake of the revelation of bid winners, CMS sent other
information to providers who did not win contracts giving the
reasons for their elimination. Via a FedEx communication from CMS,
non-winning providers heard a lot of reasons, according to
AMEPA.

“We have received much feedback,” AMEPA officials said in a
communication to members. “Some were told they did not meet
undisclosed standards and [had] missing documents, others were told
there were problems with financials, still others were told it was
simply price.”

Yet there were discrepancies, AMEPA said.

“Companies were told by CMS that they did not meet certain
standards. However, these companies won bid contracts two years ago
using the identical information on the applications that was
disqualified in the rebid,” AMEPA officials reported. “Companies
were disqualified because they were missing documents. However,
during the early review period, they were told their applications
were complete.”

As well, according to AMEPA, “Companies were not chosen because
their bids were too high. However, they now have proof that their
bids were the same or lower than less experienced and less viable
companies.”

The organization suggested that providers noticing such
discrepancies draft a one-page letter to their legislator
explaining the situation and forward it to AMEPA ([email protected]), which will take that
information to Washington.

With time draining away before implementation of competitive
bidding, stakeholders are clinging to hope that something positive
can happen to thwart the rollout in Congress’ lame duck
session.

“It is unclear how long they will be back for the lame duck
session. It is unclear if [Rep. Stark] will have a hearing. It is
unclear if we have time to push for the Meek bill,” said
Bachenheimer.

However, she added, “They have to fund the government with
continuing resolutions and they have to do the doc fix — it
expires Nov. 30.”

The doc fix, which would remedy a scheduled percent
reimbursement cut for physicians, could be the legislative vehicle
on which to hang H.R. 3790, the bill that would eliminate
competitive bidding. Introduced by Rep. Kendrick Meek, D-Fla., the
bill has 257 cosponsors — 60 of whom are not in the new
legislature that takes its seat on Jan. 1. Meek himself lost his
bid for a Florida Senate seat to Republican Marco Rubio.

“The Meek bill lives in the lame duck session, and we will see
what kind of movement we get,” Schwinghamer said. “We have people
ready to sponsor a new bill in the new Congress if necessary. We
still have 197 [congressmen], a majority from the Republican party,
who agree with the concept of repealing a bad program, which is a
fantastic start if you need it.”

In any case, HME providers must continue to fight because there
is too much to lose, industry advocates said.

“The trickle-down effect of this program is bad for small
business, bad for the patient’s freedom of choice and bad for local
communities who lose their local companies,” said Schafhauser,
adding that once those companies are gone, they are gone forever.
“We can only hope that Congress will have the foresight to see that
this program has devastating effects that will be very difficult to
fix and therefore it must be eliminated.”

Shirvinsky said that “everyone with a half a lick of sense now
understands that this was a poorly designed and fatally flawed
program — everyone except CMS.

“Congress needs to take ownership of this outrage and stop it
before it does any actual harm — whether physical harm to
Medicare patients or economic harm to our providers and their
employees,” he said.

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