BALTIMORE--CMS is likely grappling with far fewer bids for the first round of competitive bidding than it anticipated--about 90 percent fewer, according to attendees at Thursday's meeting of the Program Advisory and Oversight Committee.
CMS had projected it would receive about 16,000 bids in its initial round of DMEPOS bidding; in reality, it has probably received fewer than 1,500, according to PAOC member Cara Bachenheimer, vice president of government relations for Elyria, Ohio-based Invacare Corp.
And of those bids, she continued, there is no way of knowing how many are valid.
CMS convened the PAOC, formed to advise the agency on competitive bidding, for the Oct. 11 meeting, its first since May of 2006.
While the agency has remained mum about the number of bids it received by the Sept. 25 deadline, only 2,200 provider locations are accredited across the first 10 competitive bidding areas, officials said during the meeting.
Those bidders remaining in the accreditation pipeline won't push the number much higher. Some 100 are still pending accreditation by the Oct. 31 deadline, Sandra Bastinelli, division director for medical review and education in CMS' Program Integrity Group, told committee members.
That means the maximum possible universe of sites in the first round is approximately 2,300.
Whether competitive bidding can work with that number of providers is up for debate.
Bachenheimer said maybe a greater percentage of bidders would win contracts, but that would depend on the capacity that bidders state and that CMS and Palmetto GBA, its Competitive Bidding Implementation Contractor, believe is possible. She surmised that CMS was surprised by the low figure. "I think the number of 'real' suppliers is much smaller than CMS expects--or there are a lot of numbers that shouldn't be out there."
If that's the case, Bachenheimer said, it might demonstrate that CMS' system of giving out numbers needs to be scrutinized.
However, Herb Kuhn, recently named CMS deputy administrator, said he was "very pleased by the number of suppliers who responded" to the bidding process. Kuhn added that he was confident "we'll have a pretty robust offering" of suppliers for beneficiaries in the first 10 CBAs.
Others at the meeting, attended by an estimated 150 to 200 HME stakeholders, weren't so sure.
Based on calculations from Waterloo, Iowa-based VGM, Vice President of Development Mark Higley told CMS during public comments that the buying group has about 3,000 member locations owned by approximately 2,000 companies. Using that ratio, he said, the 2,200 locations that are accredited so far probably represent 1,500 to 1,600 companies.
Higley also confirmed the highest sequential bidder number the buying group could find among its members was about 1350.
"They have eight percent of eligible providers and they're happy with that?" asked VGM's John Gallagher, vice president of government relations. "It doesn't make sense." If there aren't enough winning suppliers, he added, beneficiaries' access to care will be limited where there are shortfalls. "I don't understand how that would be a positive," he said.
"It's very troublesome that their estimates in the final rule exceed [the number of bidders] by about 10 times," said meeting attendee Dave McCausland, senior vice president of planning and government affairs for The Roho Group, Belleville, Ill.
"If they so dramatically overestimated the number of bidders, what does that do to quality, access and choice? If you have 10 times fewer providers offering these products in any [CBA], some of which are quite expansive geographically, how close is the nearest product for the patient and caregiver?" McCausland wondered.
"If there are 10 times fewer suppliers," he continued, "... the winners will have fewer competitors, and both referral sources and beneficiaries will have fewer choices."
Under its bid evaluation structure, CMS will determine how many suppliers bidding below its "pivotal" bid are needed to meet beneficiary demand for each product category in each CBA. If it doesn't get enough suppliers from below the pivotal bid, CMS will move up to higher bids until it has enough suppliers to meet the capacity it needs.
But the final rule doesn't address the scenario of "running out" of bidders eligible to win contracts, Bachenheimer pointed out.
"What's not addressed at all is what happens if you don't have enough bidders, period, or if you get into those that don't meet financial or other criteria," Bachenheimer said.
Limited meeting agenda
While those questions and others--such as why CMS' estimates were
so high and why so few providers bid--were the issues committee
members wanted to discuss, Bachenheimer said, the PAOC session
lasted just one day and focused mainly on technical bidding
problems in Round One and updates on Round Two, when bidding will
expand to 70 more metro areas across the U.S.
"Maybe that's why a number of members didn't show," Bachenheimer said, noting that the committee was given the agenda only a week ahead of time. Five of the PAOC's 21 members were absent from the meeting.
Bachenheimer also voiced strong concerns with CMS' lack of transparency regarding competitive bidding. "We've made repeated requests for substantive answers" to problems but can't get them, Bachenheimer said. Even though competitive bidding will determine the fate of thousands of providers, she added, "the whole process has so many unknowns ... There should be an open dialogue on something that's so crucial" to so many.
"The meeting was pretty much what I expected: CMS saying, 'We had software problems, they were fixed or will be fixed before the next round,'" said attendee Mike Hamilton of Association Services, Hoover, Ala., director of the Alabama Durable Medical Equipment Association.
But Kuhn told HomeCare Monday the meeting was set for one day because that's what many PAOC members wanted, noting "they're all busy, too." As for the agenda, he said, policy issues surrounding competitive bidding had largely been dealt with, and CMS' main task now is focusing on its implementation in Round Two.
Regarding any "unintended consequences" of competitive bidding, such as possible hits on beneficiary access, Kuhn said, "that's what the PAOC is about. If there are problems, we'll address them. The key is to make sure beneficiaries are served appropriately."
In other information given at the meeting, officials said CMS plans to pick the first-round winners in December but will not announce them until March or April of 2008. The gap is intended to give the winners time to decide whether they want to sign contracts; if not, additional suppliers will have to be chosen.
The agency said it would also unveil "very soon" the next 70 CBAs in which the bidding project will be rolled out. Bidding for Round Two will begin next year, and reimbursement based on that round is expected to start in 2009.
In addition, officials announced steps intended to smooth the bidding process in the second round, including:
--Simplification of the registration process while keeping the
bidding system secure.
--An "intensive" campaign to educate suppliers on National Supplier
Clearinghouse requirements to make sure they're correct and don't
snag bidders during registration.
--Implementing controls to keep multiple users from accessing the
system with the same user ID.
--Preparing "a comprehensive and user-friendly guide" to the
bidding process.
--Home page status indicators with hotlinks to incomplete
information and pointers to incomplete bid data.
--Letting bidders copy and paste identical bid data from one bid
sheet to another, rather than having to re-enter it.
--Changing the verbiage in error messages to provide "clear and
user-friendly language, free of technical jargon."
Some PAOC members, as well as some public commenters, urged CMS to take these additional steps:
--Reveal the actual financial ratios used to determine the
financial viability of bidders. So far, the agency has refused to
do so, citing fear that some would use the data to gain an unfair
advantage.
--Announce the date by which all Medicare suppliers must be
accredited. This is a key step that some PAOC members said would
prompt suppliers outside current bidding areas to get accredited as
soon as possible.
--Drop complex rehab as a bidding category. "Of all power mobility
device users, at least 60 percent, and perhaps 80 percent, have
requested customizing from manufacturers or others to configure
systems that meet individual needs," said PAOC member Jean Minkel,
rehab services consultant for Independence Care System, New York.
"I don't see the bid process meeting these needs for people who are
already functionally limited."
--Create some kind of bid appeals mechanism, which Congress didn't
authorize when it wrote the bidding law. The rejection of a bid "is
a death sentence without any ability to appeal," said committee
member Michael Tootell of MGFT Decisions.
Just 'a bad idea'
"It's a train wreck," Roho's McCausland summed up after the
meeting, adding that competitive bidding will "absolutely" harm
both beneficiaries and providers. "Unfortunately, this is so
obvious to anyone in the industry. If you know a cataclysmic event
is about to occur, you need to do everything possible to stop it,
but we [have been] helpless to do so," he said.
The purpose of competitive bidding "has shifted from purely saving costs to eliminating suppliers," ADMEA's Hamilton said. He pointed out that many of the nation's small suppliers are providing service where no one else will.
Large national suppliers, he said, which are likely to dominate competitive bidding, "will be the same as HMOs, where you have to wait three or four days for a hospital bed." He noted that Part A (hospital) costs could be raised by poorer DME service.
A comment from John Shirvinsky, executive director of the Pennsylvania Association of Medical Equipment Suppliers, seemed to represent the industry's most widely held view of competitive bidding. Perhaps fittingly the last speaker of the day, Shrivinsky told CMS officials that "competitive bidding is a bad idea and ridiculous process."
To comment on CMS' bidding system, e-mail dbids@cms.hhs.gov by Nov. 9.
To comment on competitive bidding overall, e-mail Ralph.Goldberg@cms.hhs.gov.