CMS Contract Chart Sparks Blaze of Questions

ATLANTA–Hoping for a helpful tool to evaluate competitive
bidding contract offers, providers instead reaped a load of
troubling questions when CMS revealed the number of contracts it
had offered for round one, HME stakeholders said last week.

At the prodding of the American Association for Homecare and
others, on March 28 CMS issued a chart showing the number of
contracts it had offered in each product category and CBA. It also
issued a disclaimer.

“The information in this chart represents the number of
contract offers, NOT the actual number of contracts that will be
awarded,” CMS said. “In addition, this information does
not represent the number of supplier locations for each supplier
entity/organization. Some supplier entities have a number of
locations throughout a CBA that would be servicing the area if a
contract is awarded.”

Providers had until April 3 to accept the contracts; CMS had
said the list of those who accepted will be released in May.

While it didn’t say a lot of things, what the chart did reveal
was troubling, HME advocates said. Over all product categories in
the 10 CBAs, only 1,335 contracts were offered.

“We can take guesstimates as to how many providers that
is,” said Walt Gorski, vice president of government relations
for AAHomecare. “The number of suppliers is probably 700,
800, 900. That’s a significant reduction from the number of current
suppliers.”

And it will likely be fewer than that, some asserted, because
numerous suppliers have already said they cannot accept contracts
at the rates CMS is offering.

Robert Arado of Caremed Respiratory Services in Tampa, Fla., and
administrator of a network that was not offered any contracts for
the Miami area, questioned whether the number of providers that did
get contract offers would be enough to service the area.

“We have 600 companies there doing oxygen and now we have
44,” he said, referring to the number of contracts CMS
offered in the oxygen category in the Miami CBA. “I don’t
think we are going to have enough providers to service such a large
area.”

John Shirvinsky, executive director of the Pennsylvania
Association of Medical Equipment Suppliers, said he thought the 21
providers offered oxygen contracts in the Pittsburgh CBA would
likely be able to service the area. “I would feel more
comfortable knowing that 21 are serving the area than five or
six,” he said.

But Shirvinsky said the chart numbers, and all the other numbers
CMS has released, are questionable.

“No one knows what form of voodoo they used to arrive at
these numbers,” he said, noting: “As you look at what
they have released … I continue to be concerned about the
integrity of the entire bidding process and the viability of the
numbers that are out there.”

If providers based their bids, acceptance of contracts and
anything else on the numbers CMS has provided, they could be
placing their businesses in jeopardy, according to Shirvinsky. As a
case in point, he referenced Pittsburgh’s 21 oxygen contracts.

“Most companies were looking at this from the standpoint
that there were probably going to be five or six providers that
were selected in the CBA,” he said, “so companies were
doing their pricing based on having 20 percent of the market. But
you get 21 companies, and all of a sudden it’s 5 percent of the
market … I don’t understand how any of the numbers provided
for competitive bidding can be valid.”

In addition to the numbers themselves and what they represent,
stakeholders also expressed serious concerns about which providers
were offered contracts. Through communication with other local
providers, sales representatives and others, some providers said
they had been able to ascertain who had been offered contracts.

“Most of us know our competition,” said Georgie
Blackburn, vice president of government relations for Blackburn’s
Pharmacy in Tarentum, Pa., whose company bid on all nine product
categories for Pittsburgh and was offered five contracts. “We
went into this knowing that [CMS] hoped to have five providers in
each product category. We know our CBA, and we envisioned those
that might take part.”

But she said several of the providers offered contracts in
Pittsburgh are not from the area, and some of those who are have no
experience in providing certain equipment and services.

“It’s those outside the bidding area and those who have
never done this sector before [that are worrisome],” she
said. “How can you bid on an area you don’t know well? That’s
troublesome … I take real issue with the fact that we are
having players coming into the market without having any track
records.”

Danny Waller, co-owner of Carolina Med Plus in Charlotte, N.C.,
agreed. “Eleven [providers got contracts] in my area for
respiratory,” he said. “We know who the players are.
Some of these people were not even from our area. They [are] from
out of state, and some of them have never even done it before. I
can’t believe that [CMS] is offering a contract to someone to do
respiratory and they have never done it before.

“I have been doing this for 25 years,” he continued,
“and I’ve had as many as 500 oxygen patients at one time. I
know what it takes to handle 500. Can you imagine those that won
this bid–and lowballed it–trying to handle this area? They don’t
have a clue.”

Rose Schafhauser, executive director of the Midwestern
Association of Medical Equipment Services, pointed out another
concern: Providers who had hoped to gain some insight into exactly
how much they needed to build up their businesses to service
contracts didn’t get much help.

“The issue is,” Schafhauser said, “it could be
five providers, but it could be several locations.” Since the
chart doesn’t specify the number of locations, she said,
“there’s no way to know how you are going to need to ramp
up.”

And in the short period of time before implementation on July 1,
that could be a real problem in servicing patients.

Gorski has little doubt that could happen. “I think if you
look at the information that CMS has put out, this is a drastic
reduction in the number of suppliers providing service to
beneficiaries,” he said. “These providers are going to
have to handle a significant amount of new business, and Medicare
is still not providing enough guidance. There doesn’t seem to be a
recognition that there will be a disruption in care and that
patient relationships are going to be severed.”

In the end, stakeholders predicted, there will be a severe
erosion of quality and service.

“By allowing providers to bid on things they never did
before and never were credentialed in … that leads to less
quality,” said Blackburn.

Waller, whose company bid in five categories in the Charlotte
CBA and didn’t win any, also said he is concerned about the quality
of service. Already, he said, he is getting frantic phone calls
from suppliers that were offered contracts and are seeking
subcontractors to help cover the area. They are discovering, he
said, that no one wants to subcontract at the prices they are
offering.

“They can’t do it for what they submitted the bid
for,” Waller said. “People that underbid had no clue
what they were bidding. They didn’t have a [real grasp] on what the
costs were. They hurt us; they hurt the industry. And here they
are, scrambling now. The patient will suffer in the end.”

Arado expects a vastly different and lesser industry to
emerge.

“I don’t think that the numbers are going to be able to
provide you with a choice of vendor in order to make a competitive
market … Service is what makes a difference. We’re going to
see things happen that I never thought I would in this
business,” he said sadly.

View CMS’ round one contract chart.