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.