In My View: My Medtrade Revelation

While at Medtrade, I had a sad revelation
that has now made me capable of predicting a likely future for our
industry and the customers that rely upon us.

When you’ve been in this industry as long as I have, you’ve
developed a lot of relationships, and Medtrade is a great place to
reconnect. Now, I pride myself on being an ethical individual and
believe that the folks I refer to as colleagues are quite ethical
and reputable as well. I was able to chat with several of these
colleagues at Medtrade, and their thoughts on competitive bidding both
frightened me, and opened my eyes.

Here is a summary of some key comments I heard:

• We’re certainly going to claim that we can service at least 20
  percent of the bid capacity on the bid application. Whether we have
  serviced this level of demand, or even intend to, is immaterial.
  Even if we win, we have no obligation to service 20 percent. By
  claiming that we can service 20 percent, we guarantee that we’ve
  done everything we can to reduce the number of competitors we will
  have to deal with if we win.

• We plan to bid in as many CBAs as possible, and for as many
  product categories as we can. Why shouldn’t we? Whether we have
  ever serviced that CBA or provided those products isn’t required in
  order to bid and, if we do win a bid, we’re not obligated to accept
  the contract. That’s exactly what a lot of other people did in the
  original Round 1 of bidding. If we do win a bid, we can look at
  what the winning bid rates are by HCPCS code and determine whether
  it makes sense for us to accept the contract in the CBA for those
  products. What is our risk?

• We didn’t win in the first round of bidding in our core CBA
  and/or for a core product category. If competitive bidding hadn’t
  been stopped by MIPPA, we would have been in real trouble. We’ve
  got to win the bid this time, and we know that we’re going to have
  to bid lower than the original winning bid rates (the medians) to
  have a chance. However, if we do win and the pricing comes back
  like it did last time, we’re going to have to cut our goods and
  services to survive.

So what is my revelation, and what do these comments mean?

Claiming that you can service at least 20 percent of the
projected bid demand capacity: For DMEPOS competitive
bidding, a bidder is required to indicate what percentage of the
total demand for a specific product category within the CBA the
company can services (their “capacity”). A bidder can claim any
capacity, but CMS caps the capacity it will consider at 20 percent.
Once all bids have been qualified and sorted by composite bid (from
lowest to highest), CMS and its Competitive Bidding Implementation
Contractor will select enough bid winners to service 100 percent of
the historic capacity. But if the five lowest qualifying composite
bidders all claimed that they could handle 20 percent of the
historic capacity or more, then CMS could select only those five
bidders as winners.

I certainly can’t argue with my colleagues’ logic. Bidding at
the maximum capacity of 20 percent will certainly ensure that you
are doing all you can to limit your competitors, and you don’t have
any obligation to service this volume. Unfortunately, the folks
who are going to suffer from this bidding strategy are the patients
and their caregivers, with reduced service and access.

Bid in as many CBAs, for as many product categories as
you can: Under the current bidding rules there is no risk
to a provider for bidding in CBAs they don’t currently service
and/or for products they don’t currently offer. Bottom line, if
they don’t win a bid, they didn’t have any of the business in the
first place. If the winning bid rates are too low, a bid winner can
still refuse the contract. However, if a company wins a bid and the
winning bid rates are attractive, it can accept the contract and
has just gotten a license to hunt in a very exclusive game
reserve.

Following this logic really only guarantees one thing: The
providers that do win and accept a contract will be providing goods
and services at a rate lower than should be, lower than they would
be if restrictions had been placed in the bidding rules that
required a bidder to:

• Already have an existing infrastructure in a CBA.
• Already have a history of providing the goods included in the
  bid.
• Accept the contract if they are selected as a bid winner.

As a result, winners that do accept the contract will be forced
to cut back on the goods and services they offer; they can’t afford
not to. Unfortunately the folks who are going to suffer from
this bidding strategy are the patients and their caregivers, with
reduced service and access.

We have to bid lower than the winning bids from last
time in our core product categories/metropolitan areas because we
can risk losing: I wish I had some insight to challenge
this logic. I wish that we could reduce the fear and risk by
requiring everyone to submit capacities that really represent what
they can and will service, which would allow for more bid winners.
I wish we could restrict people from bidding in CBAs where they
aren’t currently doing business, or for product categories that
they aren’t currently providing. I wish there was some way to show
that in the long run, the results of winning under such a strategy
may be worse than losing.

Another colleague told me that Medicare competitive bidding
wasn’t his biggest problem; a large portion of his customers are
insured via Medicaid.

While MIPPA stopped the first round of competitive bidding from
going forward, it also resulted in a cut of 9.5 percent to the 2009
Medicare allowable for all of the products that were included in
Round 1 across the entire U.S. While my colleague wasn’t in Round
1, his Medicare allowables still went down, and he is already
seeing Medicaid cuts as well. Some Medicaids have taken the 2009
Medicare allowables (with the 9.5 percent cuts) and cut their
allowables an additional 20 percent.

As a result, all providers may be forced to cut back on the
goods and services they offer; they won’t be able to afford not to.
Unfortunately the folks who are going to suffer from this
bidding strategy are the patients and their caregivers, with
reduced service and access.

Here are my predictions:

• Bidders will claim larger capacities than they actually intend
  to service. As a result, we will see fewer bid winners awarded than
  are probably necessary to service the market effectively.

• We will see a lot of bidding by providers that have no vested
  interest or experience in a specific metropolitan area and/or for a
  specific product category. The winners that are just fishing for
  new business will refuse any contracts they don’t like. As a
  result, the winners (and I use that term loosely) that “must”
  accept a contract because it’s in their core business will do so at
  a much lower price than they should have to and will reduce the
  quality and variety of goods and services they offer to make ends
  meet.

• Fear will produce even lower bids in the Round 1 rebid and, as a
  result, only the lowest cost products and absolutely mandated
  services will be provided.

• Medicaid and other payers will embrace the bid rates and cut
  their allowables even further.

As a result, beneficiaries and caregivers will have less access
to lower quality goods and services. The number of DME providers
will decline, and competition based on quality will be a thing of
the past. The decline in goods and services provided in the home,
and the reduction in access to the goods and services patients
need, will result in longer acute and long-term care stays and more
re-admittances.

Subsequently, the overall costs to the health care system,
Medicare and beneficiaries will go up. Yet, due to the poor
quality, the limited service and decline in access, the amount paid
for DME will be identified as too high. In addition, the poor
quality goods and services will be used as a scapegoat for rising
health care costs. Once again, the blame will be placed on the DME
industry.

Is this the fate of our customers and our industry? Can we avoid
this end? I am reminded of the lessons taught to Scrooge in Charles
Dickens’ “A Christmas Carol:”

“Are these the shadows of the things that will be, or are
they shadows of things that may be, only?”

“Men’s courses will foreshadow certain ends, to which, if
persevered in, they must lead,” said Scrooge. “But if the courses
be departed from, the ends will change …”

I sincerely hope that we depart from this course before it is
too late, that we avoid being our own worst enemy. And so, as Tiny
Tim observed, “God bless us, every one!”

View more competitive bidding
stories.

Dave McCausland is senior vice president of The Roho Group,
Belleville, Ill. You can reach him at [email protected].