CMS Rewinds Round One as Bid Delay Takes Effect

WASHINGTON–In a victory of landmark proportions for the home
medical equipment industry and the people it serves, the
two-week-old DMEPOS competitive bidding project came to a
screeching halt last week. But as of Friday, providers in round one
were still confused about exactly how to proceed.

The Centers for Medicare and Medicaid Services program was
suspended July 15 when the House of Representatives and the Senate
voted to override President Bush’s veto of the Medicare
package that includes a delay of the bidding program. It was the
first legislative success for HME in at least 20 years, according
to long-time industry stakeholders. (See
HomeCare Monday Special Alert, July 15.)

“It’s unbelievable,” said Cara Bachenheimer,
senior vice president of government relations for Elyria,
Ohio-based Invacare, about the vote, which was decided in the House
by a margin of 383 to 41 and in the Senate by 70 to 26.

The Medicare Improvements for Patients and Providers Act of 2008
(H.R. 6331) also eliminates the transfer of ownership of oxygen
equipment called for under the Deficit Reduction Act of 2005, and
carves out complex rehab from any future competitive bidding
project.

To pay for all of this, providers across the nation will take a
9.5 percent reimbursement cut in the 10 product categories included
in round one of bidding. The cut will become effective Jan. 1,
2009.

The law and its provisions are the result of an extraordinary
effort by providers, manufacturers, industry organizations and even
beneficiaries to educate legislators about the industry and the
devastating effects of competitive bidding, stakeholders said.

“It’s a good outcome, and everybody’s efforts
paid off. It was a good example of [how] if you pull everybody
together, you can certainly have some influence in
Washington,” said Don Clayback, vice president, government
relations, for Lubbock, Texas-based The MED Group.

“The industry should be extremely proud of its ability to
raise awareness and make such a significant policy change,”
echoed Walt Gorski, vice president of government relations for the
American Association for Homecare.

Legislators who had aligned themselves with the battle against
competitive bidding also heralded the new law.

“For months, I have worked to ensure CMS’
highly-flawed competitive bidding program would not limit
seniors’ access to the medical suppliers who can best meet
their needs,” Rep. Jason Altmire, D-Pa., said in a statement
immediately after the override vote. “With today’s
vote, we have won a significant victory for western
Pennsylvania’s seniors, the doctors who provide their care,
and home medical suppliers.”

Altmire, who as chairman of the House Small Business
Subcommittee early on recognized that competitive bidding would
eliminate huge numbers of small business owners, added: “Now
that Congress has sent competitive bidding back to the drawing
board, I hope that significant improvements will be made to ensure
this program reduces costs without jeopardizing patients’
access to quality care.”

As jubilant as Altmire and most of the industry are over the
delay, however, questions remain about exactly how the shutdown of
round one will play out.

Competitive Bidding Rewind The new law
terminated all contracts under the first round of bidding,
implemented July 1 in 10 of the nation’s largest cities, and
DMEPOS reimbursement will return to its pre-competitive bidding
status. But by the time the program was halted, it had been in
effect for two weeks, so questions about payment, claims handling,
beneficiary changes and an assortment of other concerns are
surfacing.

In bits and pieces since the Tuesday veto override, CMS has
begun addressing the issues. On Wednesday, the agency issued a
notice that beneficiaries could use any Medicare provider and said
it would send letters about the change to all Medicare households
in the 10 competitive bidding areas by the end of July.

On Friday, CMS cancelled accreditation deadlines that had been
set for round two of bidding (see more in this issue) and said it
would reprocess any HME claims submitted after July 1, thus saving
providers from having to re-file claims.

“There’s a lot of clean-up work to do,” said
Alan Morriss, marketing coordinator for Waterloo, Iowa-based VGM
Group. “Even those who are excited because they can bill
Medicare again certainly lost business over the [those] 15 days,
and it might be difficult to get it back. Loyal beneficiaries have
now changed providers.”

Both providers who won contracts and those who can now bill
Medicare again have lost money, Morriss said.

“No one is able to measure how much was lost by not being
a contract supplier for 15 days,” he said. “Contract
suppliers are concerned because they have a lot of money invested
and they are concerned about what the process is going to be to
claim damages.”

There may be some help for the bid winners, he said.

“It was written into this law that there were funds
available for those that can claim damages because of loss of
contract or in any way the delay of the competitive bidding
program,” Morriss noted. “It’s too early in the
process to know how easy it will be to make those
claims.”

Providers were also eager for information on another of the
law’s provisions: its repeal of the oxygen equipment transfer
to beneficiaries, which was to go into effect Jan. 1, 2009.

“The title transfer is another big issue, as well,”
said Gorski. “The legislation repeals transfer of ownership.
The [36-month] cap remains.” Providers, he said, will be paid
for contents after 36 months, but they will not be paid for
equipment after 36 months. And, Gorski said, “there is no
guidance yet on the maintenance and service issues.”

Don’t Quit Now, HME Leaders Say
Although questions remain on many details, most stakeholders said
they are relieved that competitive bidding has been suspended. But
industry leaders cautioned that this is not the time to sit back
and relax.

For one thing, the new law compels CMS to rewrite the
competitive bidding regulation so that it addresses complaints such
as access to quality of care and transparency in the bidding
process.

The industry needs to ensure it has a voice in that effort,
Bachenheimer said. “We want to work with them,” she
said, adding that “being involved in the political process is
critical.”

Clayback agreed. “I don’t think the work is
done,” he said. “We’ve got a much-needed delay in
a program that was severely flawed and the opportunity to work with
Congress and CMS on a program that will meet everybody’s
needs, but in a much different venue.

“Congress and CMS are very concerned with the value of the
dollars they are spending, about fraud and abuse and the quality of
service to Medicare beneficiaries,” he continued. “As
an industry, we have answers to every one of those
things.”

The challenge, he said, will be effectively demonstrating those
answers to Congress and CMS. “We want everybody to remember
that this is a delay of only 18 to 24 months,” added Morriss.
“We are not done yet … We’ll go back to the
drawing board and work to ensure that this program goes
away.”

Without concentrated industry effort, he added, in six months
providers will once again be grappling with timelines and gearing
up for another bid process.

It is incumbent upon the industry to make the most of the delay
and the advances already achieved, said Rose Schafhauser, executive
director of the Midwest Association of Medical Equipment Services.
“We need to use the opportunity to talk about what good work
this industry does. Every single one of us wants those bad guys to
go away. We do want to fight fraud.

“My hope,” she said, “is that … we use
this momentum, that we not give up, that we say we’re
serious. Let’s work together for programs that work for
everybody.”

AAHomecare’s Gorski, too, believes the industry cannot
flag in its efforts now. “I think that HME by no means has a
lack of issues to work on,” he said wryly. “Clearly,
how we address competitive bidding in the future is a crucial
decision. Oxygen and [the elimination of the first-month purchase
option for] power wheelchairs are still in the gun sights, and we
face the possibility of two health care bills next year.”

The authorization of a new SCHIP bill–the State
Children’s Health Insurance Program measure that was vetoed
by the president last year–will come before the new Congress in
March, he said, and it is likely that a much larger, comprehensive
Medicare bill will be put together later in 2009. Both bills could
have features relevant to HME.

The positive in all this, Gorski said, is that “we have
established better working relationships with Congress and we will
continue to build upon the efforts that we have made this
year.”

Seth Johnson, vice president of government relations for Pride
Mobility Products, Exeter, Pa., said there is another issue on the
table that demands the industry’s attention.

“Our primary concern is the application of the 9.5 percent
cut to complex rehab,” he said. “Clearly, we are very
pleased that complex rehab is exempt from round two of competitive
bidding and we’re very pleased that there were no changes to
other areas of DME, such as the first-month purchase option for
power wheelchairs. But the 9.5 percent cut to complex rehab is
going to have almost the same impact to access as inclusion in
competitive bidding would have. With either of those reductions,
[providers] are not going to be able to stay in
business.”

Since all power wheelchairs, including complex rehab, sustained
an average 27 percent cut in 2006, complex rehab providers are
working on a very small margin, he pointed out.

“Now this is almost another 10 percent cut,” Johnson
said. “It is not sustainable. Providers do not have another
10 percent to give. We need to do everything we can to address that
cut.”

Bachenheimer said the industry also must work to rid itself of
its image as a hotbed of fraud and abuse.

“Obviously, we’ve got a very good message out
there,” she said. “People could understand very clearly
the negative impact [of competitive bidding] on beneficiaries and
suppliers. We got [congressional] leadership and ranking minority
support for bills. This is huge … But the industry has a long
way to go because of fraud and abuse as its image. If we had a
better image, it would be easier for us.”

Even as stakeholders contemplated future action, however, they
were savoring the success at winning the delay.

“I think in general everybody is happy with the
delay,” said Clayback. “They’re happy with the
improvements [in the new law], happy with the exemption of complex
rehab. The unhappiness resides in round one bidders that invested
dollars.” (See “Bid Winners Wonder: Who Pays for
Their Costs?” in this issue.)

Georgie Blackburn, vice president of government relations for
Blackburn’s Pharmacy in Tarentum, Pa.–which won six
contracts–said she was thrilled with the delay, which she had
fought for along with thousands of others.

“This was not a partisan issue,” she said.
“This was for the welfare of America. It’s really
exciting to have been part of this movement. It was the right thing
to do–and the right thing happened.”

For a summary of provisions affecting HME in the new Medicare law,
click here.