PAOC Speakers Give CMS Another View of Competitive Bidding

BALTIMORE—HME advocates at Tuesday’s meeting of the
Program Advisory and Oversight Committee said CMS officials
characterized the Round 1 implementation of competitive bidding as
successful and smooth.

But speakers during the public comment period gave a different
view of the program, which rolled out in nine cities Jan. 1.

• Jim Tozzi of the Center for Regulatory Effectiveness
repeated his call for the release of financial standards to which
bidders were held, and he called on members of the PAOC to ask the
HHS Inspector General to advise CMS it must do so. That, Tozzi
said, would help in the regulatory watchdog group’s ongoing
litigation over release of the standards, which Tozzi noted CMS has
said “would crater the program.”

“It should be noted that CMS has a history of outlasting
its legal opposition; CRE has no intention of walking away from
this issue,” Tozzi told the gathering.

Read Tozzi’s statement in full.

• University of Maryland economist Peter Cramton said
CMS’ design of the bidding program is “fatally
flawed,” including use of the median bid to set pricing and
“near-zero transparency” in the process. Using
“non-binding, low-ball” bids is wrong, Cramton said,
adding, “No expert thinks that CMS is doing this
right.”

Last fall, Cramton spearheaded a letter
from 167 economists who warned Congress that the bid program
was designed to fail. On April 1, he staged a mock HME auction so
government officials and industry stakeholders could see how a
“well-run auction” would work. To watch Cramton’s
opening remarks at the event, see the video.

• Florida provider Rob Brant’s statement also belied
the bidding program’s “success.” He told the PAOC
that, after 14 years, he will be closing his company’s doors
on April 30—and that’s after winning an oxygen
contract. Brant, who serves as president of the Accredited Medical
Equipment Providers of America, runs North Miami Beach-based City
Medical Services, which he started with partner Ron Bibace in 1997.
Following is a portion of Brant’s statement to the
committee:

“In July [2010], I accepted the contract as a bid
winner for oxygen in the Miami CBA, even though I was not awarded
contracts in other areas I am experienced and bid in: hospital
beds, CPAP and respiratory assist devices, walkers, enteral tube
feeding supplies and support surfaces.

“Last week I decided to close my business after a call
from an oxygen patient, Jean.

“Jean requires continuous oxygen and uses an average of
six large tanks a week. The previous portable oxygen rate was
$28.77 per month for suppliers to provide as many oxygen tanks as
the patient needs. I did not bid a penny below that number because
I did not want to violate the ‘bona fide bid’
requirement. That is the program’s guarantee that bids are not
accepted below the manufacturer’s cost.

“I can’t even make one trip to the patient’s home, honk
my horn and drive away for $28.77, let alone the bid rate of $21.66
per month and provide an average of 24 oxygen tanks per month to
Jean; and she called to tell me that she needed more tanks
…

“It is impossible for me to operate my business, pay
for rent, vehicles, a licensed respiratory therapist and other
staff under this model and still take care of Jean and the hundreds
of other patients like her.”

Brant said over the past several years because of reimbursement
cuts, new compliance regulations and documentation requirements,
City Medical’s revenue had dropped from an annual $1 million
to $600,000 in 2010. Without being able to serve beneficiaries in
the product categories he lost, Brant said, he’s now
incurring losses of $25,000 a month.

Contacted after the meeting, Brant said he had let half of his
employees go in December. “We just can’t make it
work,” he said. “We are getting further and further in
the hole, and with no relief in sight, we can’t continue to
incur this debt.”

Brant said he is trying to get his patients to a bid winner, but
that’s another thing he told CMS officials he is angry
about:

“The one flaw in this program that angers me more than
any other is the fact that in January, I tried to send over 150
existing CPAP patients to a local bid winner. This bid winner was
not one of the many located out of state or hundreds of miles away
in Central Florida. This company is located about 10 miles from my
office and they refused to provide new CPAP masks to my existing
patients.

“They explained to me that they have never provided
CPAP devices or supplies before and they were not about to start.
The fact that I was not awarded a contract and yet out-of-state,
out-of-area, inexperienced and financially bankrupt companies were
awarded contracts is very difficult to accept, and I pray that this
program is stopped before more patients and more companies are
affected.”

After “hours of listening to one person after the other at
CMS give a such a one-sided view of competitive bidding and trying
to make it seem like it is working so smoothly, I was numb,”
Brant said of the April 5 PAOC meeting. “CMS is trying to
make it sound like this program is so wonderful and that companies
are flourishing, but that’s just not true.”

Back in his office yesterday, Brant said he is still looking for
someone to take Jean. He is making plans to sell off inventory and
vehicles. In an ironic twist, he had just gotten a call from the
local hospital asking him to supply a walker. Brant said he finds
it “amazing” that three months into the implementation
of Round 1, referral sources still don’t seem to understand
what has happened. “The same case manager is calling me to
supply a product that I’ve tried to explain I
can’t,” he said.

“I built a business and I invested in it, and now I am
walking away,” Brant told HomeCare. “I
don’t know any other way to do it but to take care of the
patients and give them the service that they need. I can’t
just all of a sudden tell them ‘no.’”

(Brant, who continues as a strong supporter of H.R.
1041 to repeal the bidding program, will be speaking on a
Medtrade
Spring panel of bid winners and non-winners called “Round
1 Lessons Learned” on Tuesday, April 12, at the Sands Expo
and Convention Center in Las Vegas.)

There was a bit of good news for providers at the PAOC meeting,
where CMS announced it would delay Round 2 of competitive bidding.
Under its tentative timeline, the agency will announce contract
winners in the spring of 2013 with implementation to follow in the
summer.

For more, see “Round 2 of
Competitive Bidding Delayed.”