PAOC Meeting Short on Answers; Slice-and-Dice in Chicago, LA, NY

BALTIMORE — While they heard plans for subdividing the
Chicago, Los Angeles and New York City CBAs in Round 2, attendees
at a March 17 meeting of the Program Advisory and Oversight
Committee were stonewalled when it came to information about the
Round 1 rebid of competitive
bidding.

“They said they haven’t analyzed the data, they are not prepared
to release anything,” said John Shirvinsky, executive director of
the Pennsylvania Association of Medical Suppliers. “We’re still
saying, ‘Be transparent. Tell us how you are going to analyze the
data. Tell us how you are going to put all of this stuff together.’
And they aren’t saying anything.”

“I’d say most people were more interested in information related
to the current Round 1 bid,” said Cara Bachenheimer, senior vice
president of government relations for Elyria, Ohio-based Invacare,
“but CMS was unwilling to address any of the questions that PAOC
members and the public asked about the current round of
bidding.”

Among those unanswered questions, “the financial standards
remain a big sticking point,” said Walt Gorski, vice president of
government affairs for the American Association for Homecare and a
member of the PAOC.

CMS has not released the financial standards that bidders must
meet in order to win a contract, a stance that puzzles Gorski and
others on the 17-member PAOC, which is charged with advising the
agency on the bidding program.

“We clearly need to know how CMS is going to use the standards,
otherwise there will always be the appearance of subjectivity,”
Gorski said. He noted that CMS has outlined quality and
accreditation standards for bidding providers. “It therefore
surprises us that they won’t share the financial standards.

“We do worry that CMS has a perception problem as long as they
keep these issues hidden from public scrutiny,” Gorski added. “The
public has to have confidence that CMS is abiding by one set of
standards for the HME sector.”

Although CMS’ Round 1 timeline sets out announcement of contract
winners in September, another PAOC member asked whether CMS might
release the names of the winners when it releases the Round 1 bid
payments in June.

The answer, according to Rob Brant of City Medical Services in
North Miami Beach, Fla., was no.

“”They are going to hold the industry hostage by not letting it
know who these winners are until September,” said Brant, who also
serves as president of the Accredited Medical Equipment Providers
of America.

When CMS released bid winners in the initial Round 1, industry
stakeholders were outraged to discover that a number had no
experience in providing the product, did not have locations within
the bidding area, were in financial difficulty and/or had recently
paid CMS millions of dollars in fines for improper claims.

In order to prevent that from happening again, Brant said, CMS
could delay the release of contract winners even after September.
“They might wait until later,” he suggested, adding that “later”
might be until Congress goes out on recess for the fall elections
— and that could stymie industry efforts to get competitive
bidding derailed.

Stakeholders also have questions about CMS’ plans for Round
2.

“I am concerned about the fact that they are looking to issue a
proposed rule and a final rule for changes they want to make in
Round 2 before Round 1 is even rolled out. It’s very
counterintuitive,” observed Seth Johnson, vice president for
government affairs for Pride Mobility Products in Exeter, Pa. “One
would think you would wait until the [Round 1] program is in place
for some period of time before you finalized what any modified
structure would look like.”

Subdivision of the Big Three

CMS did present a plan for what one staff member called a “slice
and dice” of Chicago, Los Angeles and Chicago into smaller
competitive bidding areas:

• The Chicago area would be divided into four CBAs: Lake, Jasper,
  Newton and Porter counties in Indiana; Will, Grundy, Kendall,
  DeKalb, and Kane counties in Illinois; Cook and DuPage counties in
  Illinois; and the counties of Lake and McHenry in Illinois and
  Kenosha in Wisconsin.

• Los Angeles would be split into two CBAs: Los Angeles County and
  Orange County.

• The New York City bid area, which includes 23 counties in New
  York, New Jersey and Pennsylvania, would be subdivided into five
  CBAs: Nassau, Kings (Brooklyn) and Queens; Suffolk; Bronx and New
  York (Manhattan); Hudson, Bergen, Passaic, Essex, Morris and Sussex
  in New Jersey plus Putnam, Rockland and Westchester in New York and
  Pike in Pennsylvania; and Richmond in New York and Hunterdon,
  Union, Middlesex, Monmouth, Ocean and Somerset in New Jersey.

PAMS’ Shirvinsky pointed out an oddity in the NYC subdivision.
“They managed to throw one of Pennsylvania’s most rural counties in
with New York City,” he said. “It’s just bizarre.”

Johnson agreed. “The population in [Pike County] includes only
60,000 people,” he said, noting that such rural areas are, under
existing regulations, to be exempt from competitive bidding.

“If you want to include Pike County, which shouldn’t be included
anyway, then why have [people] go to a provider in a different
state when they are currently receiving these services from a
provider in Scranton, which is only 30 miles down the road compared
to 100 miles away in another state?”

As Shirvinsky sees it, that’s just more evidence of the
irrationality of the entire competitive bidding program.
Beneficiaries, he said, “are looking for quality service and they
are looking for proximity, and this is a program that is designed
to eliminate both of those. It is not a consumer-friendly
program.

“It’s an auction of franchises,” he continued. “This is designed
to eliminate the playing field, to get rid of the network of
providers that has developed over the years.”

AAHomecare has estimated the bid program could eliminate 90
percent of HME providers, and CMS, Shirvinsky said, “still cannot
answer the question, ‘How are you going to eliminate 90 percent of
the competitors and get a competitive result? The presence of
competitors is what makes it competitive. This is a thinning of the
herd.”

He also asked CMS officials if they had considered the fact that
few providers have even a 10 percent profit margin; Round 1 rates
averaged a 26 percent reimbursement cut. He said he got no response
to his question.

“It was a typical PAOC meeting, three-quarters filibuster by the
folks at CMS, Shirvinsky said. “You had industry folks and
consumers trying to work some common sense in and you had folks in
the audience asking, ‘Why is this disaster still with us?’”

“[CMS] continues to think it’s a good thing, we continue to
think it’s a bad thing and the only thing that’s going to stop it
is congressional action.”

In other information from the meeting:

• Plans for a national bid for mail-order diabetic supplies will
  be addressed in a notice of proposed rulemaking this summer.
  Responding to a question about the program from AAHomecare’s
  Gorski, CMS’ Joel Kaiser noted the supplies included may not be
  limited to diabetes.

• A final rule for Round 2, which will add 70 cities to the
  bidding program, is tentatively scheduled to be published this
  fall. At that time, CMS will announce product categories and begin
  a pre-bidding supplier awareness program.

• Round 2 bidding will take place in the spring and summer of
  2011. The covered document review process, in which CMS
  alerts bidders to any missing documentation, will be twice as long
  — 90 days — in Round 2 as in Round 1.

• Round 2 payment amounts will be announced in spring 2012 and
  winning bidders in summer 2012. Implementation will be on Jan. 1,
  2013.

For a complete Round 2 timeline, see Round 2
Details Coming, CMS Says.

Presentation materials from the PAOC meeting are expected to be
posted on the CMS Web site at www.cms.hhs.gov/DMEPOSCompetitiveBid/. (Choose
“Program Advisory and Oversight Committee” on the left side).

Comments on the items discussed at the March 17 meeting can be
emailed to CMS at [email protected].

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