Invacare Analysis Raises New Doubts about Bid Winners

ELYRIA, Ohio — Even as CMS moves resolutely toward the
Jan. 1 implementation of DMEPOS competitive bidding,
industry stakeholders are uncovering increasingly troubling hard
data about some of the project’s contract holders.

Nearly 21 percent — or 73 of the 356 bid winners —
have limited ability to purchase products from Invacare Corp., the
nation’s largest home medical equipment manufacturer, the company
said last week in its final report on the credit-worthiness of
suppliers awarded Round 1 contracts.

“This is real-life data. It really calls into question the
thoroughness of CMS’ review. I think there are legitimate
questions,” said Cara Bachenheimer, senior vice president of
government relations for Invacare.

According to the manufacturer’s analysis:

• 8.5 percent of the contract holders have credit limits with
  Invacare of less than $10,000 (meaning they can buy very little
  product from the company);
• 5.4 percent are on credit hold (meaning they cannot purchase
  any product from the company); and
• 6.7 percent are so far behind on their payments with Invacare
  that their accounts have been turned over for collection or legal
  process (meaning they cannot purchase any product from the
  company).

Another 50 of the firms — 14 percent — have no
account with Invacare, meaning that “they are either simply not
Invacare customers, or they are brand new firms in the industry,”
the company said.

In an effort to bolster the industry’s fight against the
“fundamentally flawed” program, Bachenheimer said, “We are sharing
this with folks on the Hill. This is the first realistic data we
have had … We’ve been hamstrung in the past because we’ve had
only predictions. They are based on good information, but we’ve not
had the data.”

The result, she said, has been that all that members of Congress
see “is CMS’ press releases on how wonderful this program is and
how much money they are going to save.”

Projecting $28 billion in savings from the program over 10
years, CMS said in November that it had awarded 1,217 Round 1
contracts to 356 providers in the nine competitive bidding areas.
In making the announcement, Jonathan Blum, deputy administrator and
director, Center for Medicare, said CMS had thoroughly vetted the
companies.

“All the contract suppliers are in good standing,” Blum said,
noting that every contract supplier met enrollment requirements,
quality standards and was accredited.

Bachenheimer said on Friday that it was “very difficult for us
to make any comparison” to what CMS looked at in establishing
financial solvency because, despite numerous calls from the
industry and Congress for release of the financial requirements to
which it held bidders, the agency refused to divulge that
information. However, she said, as the HME industry’s largest
creditor, Invacare “has to have assurance that we are not at undue
risk [in extending credit to providers]. You would think that
Medicare would have that exact same need.”

In its analysis, Invacare said it evaluated companies’ ability
to provide items under the three-year Medicare contract using a
variety of standards including two years of audited financial
statements, corporate and individual tax returns and other measures
such as net working capital, days sales outstanding and pretax
income to understand the “solvency, efficiency and profitability”
of a company.

The company also routinely uses credit reporting agencies such
as Dun & Bradstreet to verify information. In contrast,
Invacare said, CMS did not require bidders to submit any reports
from credit agencies and required only one year of unaudited
financial statements in order to submit a bid.

In announcing the results of its analysis, Invacare did not make
any projections. “I think the facts speak for themselves,” said
Bachenheimer.

Reps. Bruce Braley, D-Iowa, and Sue Myrick, R-N.C., think so,
too. In a Nov. 24 letter to CMS Administrator Donald Berwick, the
representatives said the Invacare study “casts serious doubt on the
new suppliers’ ability to fulfill their obligation of providing
necessary medical supplies.

“The competitive bidding program has a poor track record and we
are concerned that seniors will have difficultly obtaining the
supplies and services they need under this program,” the lawmakers
told Berwick. “The new system could drive out quality suppliers who
have reliably served seniors in the past.”

Despite such admonitions, CMS has been stalwart in its support
for the bid program.

According to a report from Inside Health Policy, a CMS
spokesperson said, “We are not allowing suppliers in the
competitive bidding program with ‘questionable’ finances. All
suppliers must meet the financial standards established for the
program — plus a number of additional standards and
regulations applicable under the program (e.g.
quality/accreditation, licensing, Medicare supplier standards,
etc.).”

The agency’s Blum also dismissed a letter from
166 world-renowned economists spelling out the program’s fatal
design flaws, among them that lowball bids resulting from
non-binding bids could mean winning providers take on contracts
they ultimately can’t service.

Bachenheimer said she couldn’t explain why CMS has paid no
attention to the cautions piling up against the bidding project.
“There is no rational explanation,” she said. “The points the
economists made are identical to what we and others have pointed
out going back several years. CMS has heard those arguments. CMS
has had the information to make better decisions. But for some
unexplained reason, [the agency] has chosen to ignore it.”

Now, with CMS moving inexorably toward the implementation of
competitive bidding, Bachenheimer said it is “very critical” that
the industry continues to collect data. “No matter how weary people
are, new things are coming out. We need to go beyond the anecdote.
There are going to be access issues, quality issues,” she said.

“Whatever happens on Jan. 1, we’re going to be documenting that
and feeding that to Congress,” she added. “I really believe that
Congress is our only way to make changes to the program.”

A number of industry organizations including AAHomecare,
NAIMES, CSI:HME, AMEPA and VGM are asking providers, referral
sources and patients to report problems related to the bidding
program. Fill out online forms under “What’s New” at
www.aahomecare.org and at www.competitivebiddingconcerns.com.

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