Loaded Letter: CRE Takes New Aim at Competitive Bidding

WASHINGTON — The Center for Regulatory Effectiveness fired
another shot against competitive bidding last month,
sending a letter to the Department of Health and Human
Services that asks for a retrospective review of the CMS
program.

In the Feb. 15 letter, addressed to HHS acting General Counsel
Sally Howard, the CRE, a regulatory watchdog organization, cited
President Obama’s Jan. 18 executive order calling for a new
regulatory strategy as the catalyst for such a review. In his
order, the president directed federal agencies to submit plans for
review
of existing regulations to the Office of Information and
Regulatory Affairs (OIRA) within 120 days.

“The Retrospective Review Plan developed by HHS needs to provide
highest priority to conducting a retrospective review of CMS’
durable medical equipment (DME) competitive bidding regulations
because they are poorly designed, contradicting the president’s
regulatory goals by needlessly sacrificing thousands of small
businesses and tens of thousands of jobs,” read the letter, which
was copied to Cass Sunstein, OIRA administrator.

“We have three guns pointed at CMS’ head,” said the CRE’s Jim
Tozzi, the letter’s author and a former regulatory official in the
White House Office of Management and Budget. “One gun is the
litigation, the second gun is the letter on the executive order and
the third gun is the [auction design] theory.”

Last year, the
CRE sued CMS for refusing to release the financial standards to
which it was holding bidders in its DMEPOS bidding project. The
case is still before the courts, Tozzi said.

President Obama’s executive order, he said, provides a
foundation for more immediate action.

“Every president I knew — and I worked for five presidents
— always went out and said we have to get rid of all the bad
regulations,” Tozzi recalled. “The thing that is different now from
other administrations is that there is this huge jobs issue. If
there is anything that is going to lose jobs, it is [competitive
bidding].”

According to the CRE letter, “Protecting jobs is the focal point
of the president’s new regulatory strategy. CMS’ competitive
bidding rule stands squarely in the way of saving tens of thousands
of small business and their jobs” and is “antithetical to the
president’s regulatory and economic agenda.”

The letter said the program “imposes needless burdens on
Medicare beneficiaries and on companies that have a proven track
record of reliably, efficiently and honestly meeting beneficiary
needs,” in addition to denying beneficiaries’ freedom of choice
since it forces them to find new providers.

Tozzi also brought up CMS’ program design and its violation
of accepted auction principles, challenging the agency’s
refusal to either seek or accept advice from experts in the
field.

“Competitive bidding is an extensively analyzed academic
discipline. When agencies have had questions and concerns regarding
current or planned auctions, they have sought expert advice from
scientists and other academicians,” he wrote. “For example, the
Federal Communications Commission held a series of conferences on
combinatorial auctions in conjunction with the National Science
Foundation and other outside experts.

“CMS, by contrast, has refused outside advice on how to improve
their competitive bidding system.”

Tozzi said that is another violation of the president’s order,
which requires that agencies “ensure the objectivity of any
scientific and technological information and processes used to
support the agency’s regulatory actions.”

A retrospective review would allow HHS the opportunity —
“and duty,” he said — to correct those mistakes.

Tozzi said he purposely did not send the letter to CMS
Administrator Donald Berwick. “If I had sent it to CMS, it would
never have seen the light of day,” he said. “They would toss that
in a minute.” Tozzi added he believes the letter will make its way
to Congress.

“The letter has a weight of its own,” he said. “They are going
to pick that up with hot tongs. That’s one they aren’t going to
just toss away.”

Read the entire letter on the CRE website.

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