What if CMS Threw a Party and Nobody Came?

ATLANTA–According to HME industry-watchers, one of the most
surprising circumstances that has come to light in round one of
competitive bidding is the situation in San Juan, Puerto Rico.

Officially described as “San Juan-Caguas-Guaynabo,”
the MSA fit all the criteria CMS said it was looking for in the 10
pilot areas selected for rollout of the program. The agency even
included a tenth product category–support surfaces–to be bid in
only the San Juan and Miami competitive bidding areas.

But in the San Juan CBA, things apparently didn’t go as CMS had
planned.

According to a tiny asterisk on the agency’s posted chart of
contract offers for round one, in San Juan, there were not “a
sufficient number of qualified, bidding suppliers to meet projected
demand for the length of the contract period” in five of the
10 product categories. That means in the San Juan CBA, there will
be no reimbursement reductions–at least not set through round one
of bidding–for oxygen equipment and supplies, complex rehab,
enteral nutrition, hospital beds or support surfaces.

“It seems to me that one plausible explanation is that the
providers decided they were just going to tell Medicare to stuff
it, because if Medicare doesn’t have a sufficient supply, they
can’t proceed,” said industry consultant Wallace Weeks of
Weeks Group, Melbourne, Fla., adding he knows of “no shortage
of providers” in Puerto Rico.

When round one of the bidding program was announced, a CMS fact
sheet detailing the 10 target CBAs listed 402 suppliers in the San
Juan area in 2005, with total Medicare spending for medical
equipment and supplies at $60 million. The agency had anticipated
$9.6 mllion in savings for the first full year of the program in
San Juan, and beneficiary out-of-pocket costs were projected to
decrease by an estimated $2.4 million.

“[Competitive bidding] didn’t accomplish anything in that
market,” said Mary Ellen Conway, president of Capital
Healthcare Group, Bethesda, Md. “That’s amazing to me. It’s
like having a party where nobody comes. It’s a mandatory program
where no one participates.”

Pondered Weeks, “Why can’t all DME providers do that? The
way to stop competitive bidding is to not participate.”

Weeks pointed to the substantial payment cuts across product
categories in all round one CBAs, which CMS has said averages 26
percent.

“The reason we have the enormous discounts that we have
[from round one] is not because they are necessary or, even moreso,
not because they are affordable,” he continued. “It is
because people are looking over their shoulder saying, ‘There is
somebody out there that is going to be crazy [and bid really low],
and I am going to be sure I am more crazy than they are so that I
get a contract.’”

According to Weeks, “it wouldn’t take a whole lot of
providers to reduce the supply sufficiently that Medicare couldn’t
proceed” in any of the MSAs targeted for expansion of the
bidding program in round two. Based on the Final Rule, he pointed
out, “even if you said you could double what you supply next
year, CMS said they were only going to consider that you could
increase by 20 percent.

“So, if providers who hold 20 percent of the supply said,
‘We will not bid,’ then Medicare could not go forward no matter
what all the rest of them did.”

However, Weeks continued, “I know people won’t boycott
competitive bidding. Medicare played our industry beautifully. They
knew our industry would not stand aside like [providers] appear to
have done in San Juan.”

Neither CMS nor several providers operating in Puerto Rico
responded to requests for comment.

Download a PDF of CMS’ chart of contract offers for
round one.