House Members Question Competitive Bidding

WASHINGTON — Home medical equipment advocates fearing a
catastrophe at a Sept. 15 House hearing on competitive bidding instead said
they were heartened by much of what they heard — and “fired
up” to push even harder against the Medicare program.

“It fortified my spirit,” said Georgie Blackburn, vice president
of government affairs for Tarentum, Pa.-based Blackburn’s, who
attended the packed hearing in Washington. “With approximately 14
weeks until competitive bidding rolls out in nine MSAs, our
representatives recognize it may have flawed methodology, it may
have unintended consequences just as providers and various
economists have stated since the initial Round 1.”

“This is something that should fire up our industry to press
even harder,” said John Shirvinsky, executive director of the
Pennsylvania Association for Medical Services. “We have a big
fight, and in spite of everything that is working against us, we
came off pretty well.”

Providers were dreading the outcome of the hearing after seeing
the list of panelists scheduled to testify before the House Energy
and Commerce Subcommittee on Health. The committee called the
hearing to “examine the conception and implementation of the
competitive bidding program, the implementation of the Round 1
rebid and its potential effects on patients, providers and
suppliers.”

But of seven witnesses, only one industry representative was
invited: Karen A. Lerner, a registered nurse and wound care
specialist at HME provider Allcare Medical in Sayreville, N.J.

Witnesses for the government included Laurence Wilson, director,
Chronic Care Policy Group, CMS; Daniel Levinson, inspector general,
Office of the Inspector General, Department of Health and Human
Services; and Kathleen King, director, health care, Government
Accountability Office. In addition to Lerner, a second witness
panel included Alfred Chiplin, managing attorney, Center for
Medicare Advocacy; Nancy Schlichting, president and CEO, Henry Ford
Health System, Detroit; and William Scanlon, a health policy
consultant who has previously served as managing director of health
care issues at the GAO.

Lerner: ‘This Program Cannot Be Fixed’

Stakeholders were heartened, however, when representatives on
the committee largely displayed marked skepticism about competitive
bidding. Originally implemented in 2008, Congress delayed the
problem-plagued program after a 15-day run.

“Just about every legislator who spoke expressed some
reservations,” Shirvinsky observed. “This hearing had ‘set-up’
written all over it. And given the very small role we were given to
play as an industry in the panel presentations today, the amount of
hard work that AAHomecare, state associations and others did in
communicating with Congress and staffs clearly showed.”

“You only had one or two members of this committee — this
committee, which is really going to be deciding our fate —
that support the program as it stands,” observed Rob Brant, owner
of City Medical Services in Miami and president of the Accredited
Medical Equipment Providers of America. “The majority was vocal
against it.”

“It was not a one-sided hearing at all,” added Cara
Bachenheimer, senior vice president of government relations for
Elyria, Ohio-based Invacare, noting that CMS was “repeatedly
peppered” with questions about how it planned to assure that
beneficiary access to care and quality equipment were protected. “A
lot of people are keenly interested in the job CMS is doing. CMS
now knows there are a lot of people on Capitol Hill who are
scrutinizing their project.”

Hearing-watchers universally lauded Lerner for her poised,
precise presentation, saying she did a great job of stating the
industry’s concerns. Noting that Allcare is a member of the Jersey
Association of Medical Equipment Services and the American
Association for Homecare, Lerner began by saying she was
representing the home care community.

“My goal is to explain why this competitive bidding program
— as designed by CMS — will not achieve its desired
outcomes and will in fact reduce access to care for Medicare
beneficiaries, lower the quality of that care, increase costs and
kill jobs,” she said.

Lerner challenged the efficacy of the program on a number of
points. The program’s “fundamental flaw,” she said, was treating
HME and attendant services as a simple commodity rather than as “an
integral part of a continuum of care that helps move patients
swiftly from hospital to the home.”

As a wound care specialist, she said, “It scares me to think of
what will happen to these patients if this bidding program becomes
a reality.”

CMS’ position that it has quality assurance and measuring tools
in place is questionable, she said. “Patients and even most
physicians will not know if they are getting clinically appropriate
equipment and services until negative outcomes appear,” Lerner
said. “If every patient who needed a cushion or support surface
were placed on the least-expensive skin protection device, most of
those patients’ pressure ulcers would worsen and they would end up
in the emergency department or be admitted to hospitals for
surgical debridement.”

Lerner also noted that despite its assertions, “CMS failed to
make the necessary substantive changes to address the problems
[from the initial Round 1]. They did not change how the
single-payment amount was determined, nor did they listen to
industry experts on how many home care providers were necessary to
service the patient population.”

Said Lerner in closing, “This program cannot be fixed as
designed. Therefore, it is the recommendation of JAMES, AAHomecare
and a large number of patient organizations that Congress must
immediately stop the implementation of this bidding program and
work with the HME community to ensure accurate pricing, while at
the same time ensuring access to quality care for Medicare
beneficiaries.”

Access, Quality Concerns Ring a Bell

Committee members picked up Lerner’s theme, hammering away at
several issues including access to care and quality of products.
“We heard those two words countless times,” Bachenheimer said.

“Patients and suppliers have concerns that competitive bidding
will reduce access,” said Rep. Joseph R. Pitts, R-Pa.

Rep. Kathy Castor, D-Fla., wondered about contracts offered to
non-local companies with little experience.

“It is really going to save Medicare money and is it going to
preserve access for beneficiaries?” asked Rep. Ed Whitfield, R-Ky.
“Many of the experts I talk to believe this program is poorly
designed.”

Whitfield said he was particularly concerned about access to
providers in rural areas. Three-year bid contracts “combined with
the fact that relatively few providers are … winners, results
in fewer competitors the next time bidding occurs because there
will be a lot of people trying to get out of this business,” he
said.

CMS’ Wilson said the agency received 6,215 bids from 1,011
suppliers and made 1,300 contract offers to 364 suppliers in the
nine Round 1 areas. (The agency has said it will release the names
of the winning bidders this month.)

Subcommittee Chairman Rep. Frank Pallone, D-N.J., queried Wilson
specifically on the access issue. “What if there is an
accessibility problem?” he asked.

“We believe we have offered enough — more than enough
— contracts to suppliers in all these nine areas,” Wilson
responded. “If a supplier has a problem, maybe we lose one, we
certainly have enough providers. If we need one, we can certainly
go out and offer another one a contract.”

“What happens if CMS identifies a reduction in quality?” quizzed
Rep. Betty Sutton, D-Ohio.

“I guess that could take many forms, perhaps targeted
intervention. If it was a broad-based concern we’d have to take
swift action,” Wilson replied.

A skeptical Pitts also addressed Wilson on the quality issue,
saying, “You claim $17 billion [in
savings] over 10 years without compromising quality or
access.”

“We will have processes in place,” Wilson said, “underlying
features that address quality. One thing that is different from
2008 is active claim surveillance. [We can] see who is providing
the care, who is getting the care, whether there are any concerns,
more hospitalizations, greater utilization. We will be looking very
closely and we will have a plan in place to deal with problems as
they arise.”

That response concerned AAHomecare’s Walt Gorski, vice president
of government relations. “CMS appears to have a lot of programs in
place to ensure quality. It’s unfortunate, however, that we don’t
know how those programs will operate. What we heard was, ‘We will
have this in place, we will have that in place,’” Gorski said. “But
there are no assurances that those programs will function
properly.”

Enrollment ‘Flaw,’ Fraud Incentive?

Fraud and abuse was also a hearing topic, as Wilson,
King, Levinson and Scanlon each touted competitive bidding as
an anti-fraud measure.

Responding to a question about his assertion of vast
overpayments in the system, OIG’s Levinson said, “We’re talking
about 11 million patients at a cost of about $10 billion a year.
About half [the claims] are paid in error. It might not be fraud,
it might be lack of documentation. Documentation is really the
lifeblood of the program. When we are talking about an error rate
that high, that speaks to a systemic problem.

“The nexus of fraud with overpayment,” he continued, “is that if
you have too much of a disparity between the acquisition cost and
the prices, that does provide an incentive for those masquerading
as legitimate DME providers.”

That also bothered stakeholders.

“For the first time, the OIG explicitly said that when there are
items that are overpaid, that encourages fraud,” said Gorski. “That
statement baffles me. Scam artists are not providing the items,
they are just billing the code. And they shouldn’t have been able
to bill the code if CMS did its job by monitoring the people
allowed in the program.”

Levinson apparently agreed with that latter. “Enrollment has
been a fundamental flaw for many years,” he said. “When our
investigators went to Florida [some years ago] and banged on doors
— or tried to bang on doors because in some cases there were
no doors to bang on — they found that one-third of 1,600 DME
providers that had numbers didn’t meet the most basic standards
like having a physical location, having regular hours. So it is
quite clear that it is too easy to gain access. Solving that
enrollment issue would greatly deter fraud.”

There was no follow-up to Levinson’s comments. Blackburn felt
there should have been.

“I would have liked the testimony and the questioning to tear
that issue apart, noting that CMS is in charge of the contract
process with the National Supplier Clearinghouse, which admitted to
not having enough staff to complete their due diligence when
granting provider billing numbers,” she said. “I would have liked
to hear CMS’ reasons for contracting again with the NSC
after the admission.”

Gorski also took issue with that segment of the hearing.

“I think the biggest issue with fraud and abuse is that the
government witness panel took no responsibility for allowing these
providers into the program to begin with,” he said. “You don’t give
a broom closet a provider number if you adequately did a site
inspection. How does that happen if CMS and its contractors are
doing their job?”

Brant felt Levinson’s assertion did not reflect the new HME
world that now requires accreditation and surety bonds.

“There was a panel of people from CMS, OIG and GAO who had a lot
of old information prior to the implementation of the surety bond
and mandatory accreditation, which cut in half the number of oxygen
providers in Miami and Los Angeles,” he said. “They keep talking
about easy entry to this industry, but that no longer exists.

“I have CMS visiting my office every two to three weeks, which
is normal for South Florida these days,” Brant continued. “This
whole story of things that happened years ago with fake storefronts
is now irrelevant. It’s been almost a year since mandatory
accreditation and the surety bond were put in place.”

What’s with Oxygen Pricing?

Rep. Christopher Murphy, D-Conn., followed Levinson’s remark,
zeroing in on competitive bidding itself.

“What are the reasons to go to competitive bidding rather than
coming up with a more reasonable fee schedule?” he asked
Wilson.

Wilson gradually made his way to an answer. “The program is
pretty unique for Medicare,” he said, adding that there were
competitive bidding demonstration projects before the final
project. “There are not many other examples that would be even
close to this type of program. This program has a unique set of
challenges when it comes to fee schedules. There is a lack of
information on true costs.”

Legislators hit on numerous other issues, including the lack of
transparency in the program, what sort of feasibility studies CMS
had done on various subjects and, more pointedly, how CMS can
justify reimbursing a provider $21 for portable oxygen when the
cost to refill the system is at least $30 more than that.

Rep. Ralph Hall, R-Texas, directed that latter question to the
government panel. “Can we get back to you on that, sir?” asked
King.

“You have no opinion?” Hall queried.

“I would have a more considered opinion if I could get back to
you,” King replied.

Hall looked at Wilson.

“You can get oxygen for a lot less than that,” the CMS official
said, adding that he didn’t have the figures in front of him and
would respond after the hearing.

Throughout the discussion, legislators and panelists alike
compared prices paid to providers with Internet and Veteran’s
Administration prices.

“It’s infuriating to have unfair comparisons in pricing
continually touted,” said Blackburn. “One model has no patient
intervention, education or other services and the model we operate
under is mandated by a myriad of standards of care and
documentation requirements — all costly and all
service-intensive!”

“They clearly have no understanding of not just service but what
the infrastructure costs,” said Bachenheimer. “It’s not free.
Nobody seems to understand this.”

Reps Ask for Answers

Overall, Blackburn said, “The questioning gave the definite
impression that our legislators are cognizant that something must
be done to lower the cost of DMEPOS as the demographic grows
… but that they harbor reservations about the bid process,
that quality of care is ensured and that this program is the
definitive answer.”

Several questions to the government panel went unanswered. That
prompted legislators to say they would send in written questions to
those witnesses.

“We have an unusual number of [committee] members saying they
are submitting written questions,” Rep. Pallone said to the
government panel. “We will try to get them to you within 10 days
and ask that you respond as soon as possible.”

In the end, while stakeholders said they wished more industry
representatives — particularly those from Round 1 MSAs
— had been invited to testify, many said the hearing was a
good foundation to build on for another: Rep. Pete Stark, D-Calif.,
chairman of the House Ways and Means Committee, is tentatively
scheduled to hold a hearing on the issue later this month but is
waiting until CMS releases the names of the competitive bidding
contract-holders, Bachenheimer said.

“We’re going to have to do our homework [for the next hearing],”
Bachenheimer said. “But I think it sort of builds the momentum and
the noise level.”

Shirvinsky echoed that. “A lot of very good, very strong
arguments were made,” he said about Wednesday’s hearing. “We
clearly have a steep hurdle to get over, but this is not over by a
long shot. We have clearly made enough noise — strong points,
strong arguments — that this program is going to cause untold
and unjustified damage to this industry sector.”

“The dialog fueled our mission to stop this program and possibly
replace it with a more effective way of lowering costs while
protecting our patients and our businesses,” Blackburn said. “I
hope this helps to show our industry has made progress in its
education of Congress. Now, we need to creatively give options to
competitive bidding before it starts.”

Opening statements from Reps. Pallone and Energy and Commerce
Chairman Henry Waxman, along with a briefing memo and written
testimony from all hearing witnesses, are available on the House Energy and Commerce website.

View an archived streaming version of the hearing or
download the full video of the hearing.

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stories.