[House Hearing, 110 Congress]
[From the U.S. Government Publishing Office]
MEDICARE'S DMEPOS COMPETITIVE
BIDDING PROGRAM
=======================================================================
HEARING
before the
SUBCOMMITTEE ON HEALTH
of the
COMMITTEE ON WAYS AND MEANS
U.S. HOUSE OF REPRESENTATIVES
ONE HUNDRED TENTH CONGRESS
SECOND SESSION
__________
MAY 6, 2008
__________
Serial No. 110-82
__________
Printed for the use of the Committee on Ways and Means
U.S. GOVERNMENT PRINTING OFFICE
47-175 PDF WASHINGTON : 2009
----------------------------------------------------------------------
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COMMITTEE ON WAYS AND MEANS
CHARLES B. RANGEL, New York, Chairman
FORTNEY PETE STARK, California JIM MCCRERY, Louisiana
SANDER M. LEVIN, Michigan WALLY HERGER, California
JIM MCDERMOTT, Washington DAVE CAMP, Michigan
JOHN LEWIS, Georgia JIM RAMSTAD, Minnesota
RICHARD E. NEAL, Massachusetts SAM JOHNSON, Texas
MICHAEL R. MCNULTY, New York PHIL ENGLISH, Pennsylvania
JOHN S. TANNER, Tennessee JERRY WELLER, Illinois
XAVIER BECERRA, California KENNY HULSHOF, Missouri
LLOYD DOGGETT, Texas RON LEWIS, Kentucky
EARL POMEROY, North Dakota KEVIN BRADY, Texas
STEPHANIE TUBBS JONES, Ohio THOMAS M. REYNOLDS, New York
MIKE THOMPSON, California PAUL RYAN, Wisconsin
JOHN B. LARSON, Connecticut ERIC CANTOR, Virginia
RAHM EMANUEL, Illinois JOHN LINDER, Georgia
EARL BLUMENAUER, Oregon DEVIN NUNES, California
RON KIND, Wisconsin PAT TIBERI, Ohio
BILL PASCRELL, JR., New Jersey JON PORTER, Nevada
SHELLEY BERKLEY, Nevada
JOSEPH CROWLEY, New York
CHRIS VAN HOLLEN, Maryland
KENDRICK MEEK, Florida
ALLYSON Y. SCHWARTZ, Pennsylvania
ARTUR DAVIS, Alabama
Janice Mays, Chief Counsel and Staff Director
Brett Loper, Minority Staff Director
______
SUBCOMMITTEE ON HEALTH
FORTNEY PETE STARK, California, Chairman
LLOYD DOGGETT, Texas DAVE CAMP, Michigan
MIKE THOMPSON, California SAM JOHNSON, Texas
RAHM EMANUEL, Illinois JIM RAMSTAD, Minnesota
XAVIER BECERRA, California PHIL ENGLISH, Pennsylvania
EARL POMEROY, North Dakota KENNY HULSHOF, Missouri
STEPHANIE TUBBS JONES, Ohio
RON KIND, Wisconsin
Pursuant to clause 2(e)(4) of Rule XI of the Rules of the House, public
hearing records of the Committee on Ways and Means are also published
in electronic form. The printed hearing record remains the official
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unintentional errors or omissions. Such occurrences are inherent in the
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C O N T E N T S
__________
Page
Advisory of May 6, 2008, announcing the hearing.................. 2
WITNESSES
Kerry Weems, Acting Administrator, Centers for Medicare and
Medicaid Services.............................................. 6
Kathleen M. King, Director, Health Care, U.S. Government
Accountability Office (GAO).................................... 32
Tom Ryan, American Association for Homecare...................... 50
Peter W. Thomas, Health Task Force Co-Chair, Consortium for
Citizens with Disabilities..................................... 57
Thomas J. Hoerger, Ph.D., Senior Fellow, Research Triangle
Institute (RTI) International.................................. 63
SUBMISSIONS FOR THE RECORD
Accredited Medical Equipment Providers of America, Letter........ 87
American Council on International Personnel, Letter.............. 88
American Hospital Association (AHA), Statement................... 90
American Medical Association, Letter............................. 91
Andrea Logan, Letter............................................. 93
Angelene Adler, Letter........................................... 94
Annie Nation, Statement.......................................... 97
Capital Medical and Surgical, Inc., Statement.................... 98
Cara C. Bachenheimer, Statement.................................. 98
David Carey, Statement........................................... 104
David Soblick, Statement......................................... 86
Douglas T. Harrison, Statement................................... 104
Ellen S. Durrence, Letter........................................ 106
Eric Sokol and Stephen Azia, Letter.............................. 107
Ford C. Greene, Statement........................................ 109
Freeman H. Smith, Letter......................................... 109
Greg Butchko, Letter............................................. 110
Henry Ford Health System, Statement.............................. 111
Hugh D. Durrence, R.Ph, M.D., Letter............................. 113
James T. Bragiel, Letter......................................... 114
Jann Sherin, BS, RRT, RCP, Letter................................ 114
Jim Buteyn, Letter............................................... 115
Joe Fernandez, Letter............................................ 117
Joel Israel, Letter.............................................. 117
Laura Cohen PhD, PT, ATP, and Barbara Crane, PhD, PT, ATP, Letter 118
Manyvone Champavannarath, Statement.............................. 120
Matthew J. Rowan, Letter......................................... 121
National Association for the Support of Long Term Care (NASL),
Statement...................................................... 123
National Association of Chain Drug Stores, Statement............. 126
National Coalition for Assistive and Rehab Technology, Statement. 131
National Competitive Bidding, Statement.......................... 133
National Home Oxygen Patients Association, Statement............. 134
Pennsylvania Association of Medical Suppliers, Statement......... 135
Robert Brant, Statement.......................................... 140
Robert Brant, Statement.......................................... 141
Ryan Stevenson, Statement........................................ 142
Tennessee Association for Home Care, Statement................... 142
Wayne E. Stanfield, Statement.................................... 145
Zachary A. Schiffman, Statement.................................. 146
MEDICARE'S DMEPOS COMPETITIVE
BIDDING PROGRAM
----------
TUESDAY, MAY 6, 2008
U.S. House of Representatives,
Committee on Ways and Means,
Subcommittee on Health,
Washington, DC.
The Subcommittee met, pursuant to notice, at 1:00 p.m. in
room 1100, Longworth House Office Building; Hon. Fortney Pete
Stark (Chairman of the Subcommittee) presiding.
[The advisory announcing the hearing follows:]
ADVISORY
FROM THE
COMMITTEE
ON WAYS
AND
MEANS
SUBCOMMITTEE ON HEALTH
CONTACT: (202) 225-3943
FOR IMMEDIATE RELEASE
April 29, 2008
HL-24
Hearing on Medicare's Durable Medical Equipment, Prosthetics,
Orthotics, and Supplies (DMEPOS) Competitive Bidding Program
House Ways and Means Health Subcommittee Chairman Pete Stark (D-CA)
announced today that the Subcommittee on Health will hold a hearing on
the DMEPOS Competitive Bidding Program. The hearing will take place at
1:00 p.m. on Tuesday, May 6, 2008, in the main committee hearing room,
1100 Longworth House Office Building. In view of the limited time
available to hear witnesses, oral testimony at this hearing will be
from invited witnesses only. However, any individual or organization
not scheduled for an oral appearance may submit a written statement for
consideration by the Committee and for inclusion in the printed record
of the hearing.
BACKGROUND:
Currently, Medicare payment rates for most types of medical
equipment and supplies are based on fee schedules. The Medicare
Modernization Act of 2003 (MMA) required that the Centers for Medicare
& Medicaid Services (CMS) use a competitive bidding process to contract
with suppliers and other providers for certain types of equipment and
supplies. The Competitive Bidding Program will be phased in over time,
starting with 10 of the largest Metropolitan Statistical Areas (MSAs)
in 2008 and expanded into another 70 MSAs--including New York, Chicago,
and Los Angeles--in 2009. MMA gives CMS the authority to expand the
program beyond those 80 areas starting in 2010 and allows the agency to
adjust DMEPOS payment rates in areas of the country that do not fall
under the Competitive Bidding Program.
In early May, CMS announced preliminary results of the first round
of the bidding program. Based on contract offers, payment rates will be
reduced by an average of 26 percent in the ten areas covered by round
one. However, concerns have been raised that some suppliers were
improperly excluded from the bidding process and beneficiary access to
certain types of equipment could be reduced in areas affected by the
program.
In announcing the hearing Chairman Stark said, ``We have heard from
both suppliers and beneficiary advocates that the DMEPOS competitive
bidding program is not working as well as it is supposed to. I look
forward to hearing their concerns, as well as from CMS, as we consider
whether changes need to be made before the program is further
expanded.''
FOCUS OF THE HEARING:
The hearing will focus on implementation of the administration of
Medicare's DMEPOS Competitive Bidding Program.
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Chairman STARK. I apologize to our witnesses and guests,
but Health and Human Services has been calling procedural votes
on the floor of the House in an effort to prevent this hearing
from going forward. We're pleased that we're here at any rate
to review the development and execution of the ``Durable
Medical Equipment Competitive Bidding Program'' mandated in MMA
of 2003, and the program was to be phased-in over time. It
started in ten of the largest metropolitan areas already and
scheduled to move rapidly to another 70 areas in 2009 and may
then be taken nationwide.
While durable medical expenditures are a very small part of
the overall Medicare spending, we think about 2 percent, all of
us are well aware the changes to this benefit will have a
significant impact on suppliers and beneficiaries in each of
our districts all over the country. Spending has been growing
rapidly in this area, and that provides good cause for review
of how we pay for durable medical equipment.
This hearing was called because of the concern from
colleagues who are hearing from the suppliers in their
communities and this is something that affects every district;
and, as this change would, it's vital that we perform
oversight. We've learned, so far, not much from this program.
CMS will update us on their thoughts in a few minutes, but
there are a few points that I'd make first.
The good news from this demonstration is it's apparent that
companies that are willing to take Medicare's business at a far
lower price than the current fee schedule rates. The estimate
is that Medicare would save 26 percent over the current fee
schedule.
That's a big savings. The accreditation process is also
important. The DME industry has been a service industry and
it's had excessive fraud and abuse, mostly because it's not
very expensive to start up a line of business and there's been
little oversight to ensure that the businesses are legitimate
and the accreditation process is a positive step and I applaud
it.
There are many questions about the process used by CMS to
implement this first round demonstration. Preliminary numbers
presented to the Congressional staff at a recent briefing
indicate that out of 1,005 applications, 630 were rejected for
lack of proper documentation.
That's more than 60 percent of the applicants. A refusal
rate of that percentage does not show the market working. They
weren't excluded because they failed to meet the standards,
they were excluded because they didn't understand the rules or
couldn't follow the directions and fill out the paperwork
properly.
I will wait for CMS to provide their testimony, and we can
discuss their thoughts on this first round process. At a
minimum, it seems there should be strong lessons learned, and
how we can do it better. If this process is going to be
repeated hundreds of times around the country, my question is
whether there is value added to repeating this process again
and again in each and every community.
Might Medicare be better served and significant
administrative costs saved by requiring all suppliers to meet
the new accreditation standards and then taking what we learned
in this first round to change the fee schedule by which we now
pay for DME. Those improvements can be done once and will
immediately be in effect nationwide. That for one idea seems
simpler and much fairer and less disruptive to suppliers and
beneficiaries.
We can continue this discussion after we have heard the
testimony, and I would like to yield now, if I may, to the
distinguished ranking Member of the full Committee for comment.
Mr. MCCRERY. Thank you, Mr. Chairman.
I wanted to come by the hearing today for a few minutes,
because I think this is a very important subject. The
Subcommittee and some in Congress are contemplating taking what
I think would be a step that ought to be taken with great
caution, because I believe that this program is outlined in
legislation that we passed a few years ago does hold out some
hope for hoping to control costs in this portion of the
Medicare Program.
I think the Chairman just outlined very well the
considerations of the Subcommittee ought to take up and
examine, and I have thought about the solution that the
Chairman just suggested, which would be to require some sort of
certification for all vendors of durable medical equipment and
then reset the reimbursement rates for the various devices at a
more appropriate level. But I think, Mr. Chairman, what we have
found through the years with Medicare is that it's very
difficult for us to keep pace with the reality of the market in
terms of setting prices; and, inevitably we are behind the
curve. I just hesitate as a single Member of the House and
Member of this Committee that has jurisdiction over this
matter, I hesitate to take action which would possibly threaten
the existence of this new competitive bidding approach. I hope
that we can arrive at some solution that gets at the particular
problems that the Chairman pointed out in his opening remarks
without throwing the whole thing over the side, and give it a
chance to work. Let's see what happens.
I would prefer that, Mr. Chairman, to junking the whole
thing and then trying to reset the prices at the appropriate
level. I just think particularly in this segment of Medicare
it's going to be very difficult for us to do. It seems that the
pilot project is in place now and soon to be expanded to only
ten regions, only ten in the whole country.
We have a chance to learn from the mistakes of this round
and employ some better procedures in the next round. That's
why, if the Chairman will recall we did phase-in this program
slowly over time so we could learn as we go along.
So, I just wanted to come and urge the Subcommittee, Mr.
Chairman, to delve into this and be very careful about actions
that the Subcommittee suggests for fear in my view of
jettisoning this approach before we even get a chance to see
how well it works. I appreciate the Chairman letting me speak.
Chairman STARK. I'd like to associate myself with your
remarks. If no other reason, we're faced with a budget dilemma.
If, in fact, we cancel the program, there are projected savings
of millions of dollars, and how do you get that. So, I don't
think that the idea of just wiping the slate clean is an
alternative and I certainly wouldn't want my remarks to be
construed, and I know yours weren't. The question is what can
we learn and how could the system be improved.
Mr. Camp, do you have?
Mr. CAMP. Thank you, Mr. Chairman.
Chairman STARK. Thank you.
Mr. CAMP. Well, thank you, Mr. Chairman. I thank you for
convening this hearing on this issue of the competitive bidding
of durable medical equipment and Medicare.
I think we need to examine Medicare's payments for these
types of supplies to ensure that beneficiaries get the best
quality care and the best equipment at the best price.
We have heard a number of complaints about how this program
is being implemented, and I think it's important to remember
however how we got here, because Medicare does use its
negotiating power to administratively set prices for durable
medical equipment along with a number of other goods and
services that it covers. I think if there's one lesson we
should all take from this situation it's that the government
often does a lousy job when it comes to setting prices.
We've had a number of government audits and reports that
have highlighted how Medicare was overpaying for certain types
of equipment, and these reports by GAO and the HHS Inspector
General compared Medicare's payments rates to other purchasers
found that Medicare paid more than all other payers for certain
durable medical equipment. These reports triggered the mandate
by Congress for the demonstration projects to develop an
alternative to the government setting prices for DME.
CMS conducted competitive bidding demonstrations in Florida
and Texas and I know we'll here testimony about how that
resulted in savings of nearly 20 percent overall on each site,
and, obviously, the access and quality remained unchanged
there. But, even though CMS has made a tremendous effort in
getting this program successfully underway, there are problems.
We've all heard about those problems, particularly relating to
the submission of bids and questions about whether the bid
winners will have the ability or the capacity to serve existing
Medicare populations.
While suppliers argue these issues will limit access for
beneficiaries living in certain areas and will decrease the
quality of services they receive in the short term, I am
concerned how these issues could ultimately reduce the number
of providers that supply these items and actually increase
costs in the long run. So, I believe we need a way to resolve
these implementation issues as quickly as possible.
If the government continues to set inaccurate prices or
fails to truly create a competitive environment, and I frankly
think competitive bidding as it's currently structured is not
an accurate description of what's going on. But I don't think
we'll see any winners if we don't fix that, so we need to
refocus, I think, on the overall goal of this program. Use the
market to drive down costs to make Medicare more financial
stable and secure; and, it's a lesson I think we would be wise
to use in the entire health system.
I think we are going to hear some comments about
accreditation and I think that would be a good way to move
ahead in terms of making sure that those providers are doing a
good job. So, I look forward to the testimony today. I thank
the Chairman for this hearing and I yield back my time.
Chairman STARK. We will now hear from the acting
administrator of the Centers for Medicare and Medicaid
Services, Mr. Kerry Weems.
Kerry, welcome back to the Committee, and we have your
prepared testimony and your colorful exhibits. Why don't you
proceed to enlighten us or expand on your testimony any way
you'd prefer.
STATEMENT OF KERRY WEEMS, ACTING ADMINISTRATOR, CENTERS FOR
MEDICARE AND MEDICAID SERVICES
Mr. WEEMS. Thank you.
Good afternoon, Mr. Chairman. It's a pleasure to see you
again, Mr. Camp.
I am very pleased to be here today to discuss the durable
medical equipment prosthetics, orthotics and supplies
competitive bidding program. I think this will be an excellent
opportunity to dispel some of the rumors and talk about some of
the facts.
This major initiative will reduce beneficiary out-of-pocket
costs and improve the accuracy of Medicare's payments, help
combat fraud, and ensure beneficiary access to high quality
items and services. The initial round of competitive bidding is
now complete, the bidding window officially closing on
September 25, 2007.
We received a total of 6,209 bids; and, of the bids
received, 1,335 were winning bids. We exceeded our target on
small supplier participation and offered 64 percent of the
contracts to small suppliers. As of April 18, 2008, 1,254
contracts have been signed out of those offered, translating to
a 96 percent acceptance rate. We expect to be able to announce
the contract awardees next week.
When the new payment rates take effect on July 1st for
Round I bidding areas, the beneficiaries will begin saving
money on ten of the most commonly used durable, medical
equipment supplies such as power wheel chairs, oxygen, and
diabetic testing strips.
Let me give you an example of these savings. This is a box
of blood, glucose test strips with 100 in the box. In
Cleveland, under the current fee schedule, the price of this
exact box is $73.86, of which Medicare pays $59.09, and the
beneficiary pays $14.77. Due to a successful, competitive
bidding program, on July 1st, this same box in Cleveland will
drop to $42.00. That's a 43 percent savings, and it's worth $6
and $37, per box, to the beneficiary, or $70 a year.
Let's take another example. Power wheelchairs, as you can
see on the chart to my right, beneficiaries in Miami currently
pay $805 for this particular wheelchair. Medicare pays 80
percent of the cost or $3,219. Now, after competitive bidding,
the beneficiary in Miami will pay $563; and, Medicare's payment
will drop to $22.53. It's a clear example of how the program is
going to save both the beneficiary and the government money.
CMS is conducting an aggressive, education and outreach
campaign to ensure that every beneficiary, partner, provider,
and supplier knows how to use the program and to ensure a
smooth transition on July 1st. As you can see from the second
chart in front of you, CMS has begun a significant outreach
campaign.
We started with several education activities ranging in
activities with various media outlets to list serve
announcements and training. Later this month, we will be
announcing Round I suppliers, and we will be posting them to
Medicare.gov, Our website. Will feature a supplier finder tool
with contract supplier location information as well as a list
of the products a particular supplier will offer. This will not
only assist the beneficiaries, but also the providers.
In June we will conduct a direct mailing to all Medicare
beneficiaries in the Round I area. This mailing will contain a
letter, a brochure that outlines a new program and list of all
contract suppliers in their area. Medicare has developed the
beneficiary fact sheet; and, this will be not only available on
our Web site but through partner groups and through physicians.
Our partner groups are crucial to a smooth transition and we
will be relying heavily on them to assist us. My staff and I
have been in contact and will continue to be in contact with
our partner groups to educate them on this program.
CMS will monitor the performance of contract providers
through beneficiary satisfaction surveys, tracking the volume
of questions and complaints that SHIPs and 1-800-Medicare
receive will track the shift from non-contract to contract
suppliers for competitively bid products comparing before and
after July 1st.
We will track the number of advance beneficiary notices
issued by non-contract suppliers and competitive bid areas for
competitively bid items to gain insight into where the
beneficiaries are obtaining their products. All of these
activities will help us keep current on what's taking place on
the frontlines.
Once our program begins, our regional offices will respond
to general inquiries from beneficiaries. They may also refer
questions and complaints to 1-800-Medicare, which will be the
primary point of contact for beneficiaries. Questions or
complaints can also be referred to the claims processing
contractor or the local Ombudsmen. All questions and complaints
will be tracked for internal reporting purposes.
CMS is committed to the success of this program. We set out
to provide the beneficiaries with quality items and services;
and at a lower price from reliable suppliers in their
communities. We have the lower price. We have reliable
suppliers, and we are in the process of educating beneficiaries
on this new program. Our extensive monitoring network will
signal any issues that arise and allow us to move to correct
them quickly and efficiently.
I appreciate your time and the invitation to testify before
you today. I'd be happy to answer any questions you have at
this time or address any concerns you have about the process to
date.
[The prepared statement of Kerry Weems follows:]
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Chairman STARK. Well, thank you.
I think our concerns are legion; and I guess I will just
pick on what I think the process, I have no quarrel with
bidding, is one that causes a great deal of unnecessary
concern. I would just point out to you that the Federal
Government goes to a lot of extremes.
I mean, we do have no bid contracts with Bechtel and other
companies like that where we just award it to our friends.
Then, GSA on the other hand buys 10s, if not hundreds of
thousands of vehicles. They do not give the Chevy dealer in
Washington, D.C. an exclusive, if that Chevy dealer bids lower.
They happen to have the manufacturer's bid, and then the
manufacturer ca determine where the car is delivered, through
what dealer.
In the case of automobiles, if there's some preparation
required by the dealer or added equipment, the manufacturer
pays the dealer. But there they're principally dealing with
three or four major suppliers to bid, major manufacturers to
bid, and the suppliers are all still allowed the dealers to
continue.
You have a picture here of a wheelchair in Miami where, I
guess, we've saved a thousand bucks, the Federal Government;
but is it not correct that in Miami there will be only one
dealer that will provide these wheelchairs?
Mr. WEEMS. That's not correct. No.
Chairman STARK. Well, how does that happen to be?
Mr. WEEMS. The way the bid process worked was we asked for
bids.
Chairman STARK. Yeah?
Mr. WEEMS. We also estimated we knew historically the
number of wheelchairs that were provided in that area.
Chairman STARK. Okay?
Mr. WEEMS. We asked suppliers for an estimate of their
capacity, but we'd let no supplier go above 20 percent of the
market.
Chairman STARK. So, it's got to be five dealers, minimum.
How many were there before the bidding process do you suppose,
100?
Mr. WEEMS. I would not speculate, sir.
Chairman STARK. Whoa, wait a minute. You ought to know. I
don't want you to speculate. How can you be doing this if you
don't know?
Mr. WEEMS. I can provide it for the record, if you like.
Chairman Stark. Okay, well, let's suggest that there were
50. So, you just put 45 of them out of business. What good does
that do you?
Mr. WEEMS. Well, 19 were successful in that area.
Chairman STARK. Yeah, but you told me you are only going to
take five.
Mr. WEEMS. No. No. No, if they said they could take 20
percent of the market, then we would count it.
Chairman STARK. And 19 had the same bid?
Mr. WEEMS. No. That's not the way the bidding process
works. Sorry. We took their estimates of capacity up to market
clearing up to the point where all the capacity in the market
would be taken. They had each bid a price; and, at that point,
we took the median bid from that successful group. That's the
way the price was determined.
Chairman STARK. Why didn't you take the low bid?
Mr. WEEMS. We took a look at it. We wanted to make sure we
would have enough suppliers in the market. The median bid was
the place that we chose.
Chairman STARK. But basically you just set the price,
didn't you?
Mr. WEEMS. We chose the medium price of the prices bid.
Chairman STARK. That sounds like price setting to me. You
may want to call it something else, but I think Boeing would
like to have you arrange for taker bids, but my point is that
sometimes you're bidding and sometimes you're not. When it
suits your convenience and you manage to get an awful lot of
suppliers all steamed up, one would think that you could find
the savings and still allow many of these businesses to
continue.
In your testimony you didn't suggest any changes that you
might make in the program. Are there none that you can think of
that would improve the program?
Mr. WEEMS. I think the change we would make for Round II is
to make it very, very clear to bidders that the responsibility
lies with them for supplying complete documentation for a bid.
Chairman STARK. So, it's not your fault; it's theirs. What
you're really saying is you want to make it clear to the
bidders that if they can't understand your instructions,
they're out of the game.
Mr. WEEMS. If they're unable to provide adequate
documentation, yes.
Chairman STARK. What if you're unable to provide
instructions that are intelligible. Did you ever think of that?
Mr. WEEMS. Well, we did think of that and we had a number
of suppliers who were able to provide us with completely
documented, successful bids.
Chairman STARK. So, that absolves CMS of any, in other
words, what you're saying to this Committee is there's nothing
that you think is wrong with this system.
Mr. WEEMS. I can't think of anything that I would trade it
for.
Chairman STARK. That's all right. Thanks. That shows your
usefulness as a witness.
Mr. Camp.
Mr. CAMP. Well, I would just have to say that Mr. Weems,
this is process where some people were not allowed to bid; and,
so what's happened is there's an exclusive group of providers
that are now going to be providing this equipment; and, I think
we both agree that we've had a decade of testimony from GAO
that Medicare is paying higher than market rates for DME.
But, what I would like to hear from you is a way to reform
what you've been doing, because I would agree with Mr. Stark
that I don't think this process has been one that stands
scrutiny. So, if you could help us with a way to move forward,
and this is not competitive bidding. I mean that may be the
term it has, but it is a structured price setting and I think
there's another way to design this to get the result where
there's, you know, more competition brought into this system.
Yet, there's still choice of providers.
I know that there'll be at least five providers from your
testimony. No one can have more than 20 percent of the market,
but I don't see any problem with having more than five
providers, or more than 10 or 15 providers in an area.
Particularly what I am concerned about is information I have
been hearing that some providers are going to parachute into
areas of the country that they have not had any history; no
infrastructure.
I do think that not all this equipment is just dropped off.
There is a service aspect to durable, medical equipment.
Sometimes you get it and it doesn't work and you need to get
another one. So I think the goals that you are trying to
achieve are laudable. I understand those and I appreciate
those.
What I would like to hear from you is not that everything
is okay and we are just going to move forward with this system
that we have designed, but is there some way that we can
improve upon this, because I think the contractor who was hired
to implement this has not done you a good service.
So, if we could find a way to move forward and accomplish
the goals that we have been hearing about for more than a
decade before this Committee, but, so, I guess I'd like to hear
from you some ideas on how to move forward with that. I think
the comment on accreditation and why not have more bids and in
the structured bid setting I just have some problems. So, I
guess I would like to hear your comments on that.
Mr. WEEMS. Well, first of all, we had to be obedient to the
statute for competitive bidding; and that statute clearly
contemplated that there would be unsuccessful bidders. That the
statute contemplated people would bid a price that would be
competitive, where they could go and achieve a market share.
Now, like you, when I heard reports that a large number of
bidders had been disqualified for reasons of documentation, I
was very concerned about t hat. So, I sent a team of Federal
officials down to where the documents were actually received;
and, for bidders who said they were wrongly excluded, we look
through 100 of the bids and we found that the contractor was
correct, that items were missing. In fact, in several of them
there was a cover note that told us there were items missing.
Mr. CAMP. I know my time is about to expire, but let me
suggest something.
If you were to provide a 60-day window to re-examine the
bids that were disqualified due to lack of information, do you
believe a six-month delay would be necessary? Do you think a
rebid would still be necessary if you could re-examine those
folks that were disqualified?
Mr. WEEMS. Well, a rebid would be costly. We have looked at
those that were disqualified, two-thirds of them would not have
made it on price, anyway. So, only one-third of them were.
Mr. CAMP. Is that based on a sample? Or, is that based on
looking at all of the bids that were disqualified?
Mr. WEEMS. I believe that is based on looking at all of
them. So, you know, two-thirds of them were not even in the
competitive range.
You know, there are improvements we could make in the on-
line bidding system. That did not work particularly well in the
fall of this year, actually, in the summer. So, we extended the
bidding window for 60 days to be able to allow suppliers to
come in. We obviously will need to work a little bit more on
supplier education. But, actually, I think the results of this
round will provide substantial education.
Mr. CAMP. Well--and I realize my time has expired--I just
want to say quickly is first these bidders were told if they
didn't have sufficient information they'd be contacted. I
realized that changed twelve days before the bids closed; but,
if you could re-examine those bids in a 60-day window that
didn't have adequate information and give them a chance to
submit that. That's my proposal, if you'd think about that.
Thank you, Mr. Chairman, and I yield back.
Chairman STARK. Thank you.
Mr. Thompson, would you like to inquire?
Mr. THOMPSON. Thank you, Mr. Chairman. I do.
Mr. Weems, I just want to pick up on something that the
gentleman from Michigan mentioned. Your answer, you said
something along the lines of this round will tell us a lot
about are we going to the next round.
Is there any discussion or consideration being given to
delaying the second round 'til we find out what we learned from
Round I?
Mr. WEEMS. We haven't announced a full schedule yet for the
second round. The statute requires that.
Mr. THOMPSON. Are you considering delaying it to learn
from?
Mr. WEEMS. We are considering the schedule that we would
lay out given what we have learned here.
Mr. THOMPSON. That will give us time to take away some
lessons learned from Round I?
Mr. WEEMS. Of course. The statute requires that we do the
competition in 2009.
Mr. THOMPSON. I'd like to ask you about this proposal and
how it affects an area that is near and dear to me. That's
rural American.
Mr. WEEMS. Yes?
Mr. THOMPSON. About 30 percent of the suppliers are in
rural areas and it takes you longer to get from one spot to
another. There's greater distance to travel, gasoline at $4
plus a gallon. The costs all start to tack up. What are your
plans for dealing with the disparity that the folks in rural
areas are going to find themselves slapped with?
Mr. WEEMS. Well, in the first and second rounds that we
have announced so far, those were required to be in MSA. So,
they are not in rural areas. We have a decision in front of us
that is still quite distant and will likely be made in future
administration about exactly what we do in rural areas. So,
right now, we are not contemplating competitive bidding in
rural areas at this point. Though I think that the
beneficiaries in rural areas who look at the price savings that
those in urban areas have might want those prices.
Mr. THOMPSON. Might have what?
Mr. WEEMS. Might want those prices.
Mr. THOMPSON. Well, they may want the prices, but it's a
distinctly different area and there's different costs that are
associated with it. There's access questions that have to be
asked. If you have to drive three hours in order to get your
equipment or to have it serviced, repaired or have warranty
worked on it, these are all problems that folks in rural areas
experience that folks in the city who oftentimes make these
policies have no idea what life in the rural area is like. I'd
like some assurances that rural issues, concerns and access for
these folks are in fact taken into consideration.
Mr. WEEMS. But they are, and we have exempted them.
Mr. THOMPSON. I guess I'd like more than just your nod and
word that they are. I'd like to better understand how this is
being dealt with.
Did you guys take into consideration a supplier's
experience or lack of experience with a given type of equipment
before you made these awards?
Mr. WEEMS. We took into account a supplier's ability to
supply the market. We took into account whether or not they
were an accredited entity.
Mr. THOMPSON. But how about their actual experience with
providing a certain type of equipment; providing a service for
that certain type of equipment? How do you determine if one is
qualified to do that at the same level that beneficiaries were
experiencing before?
Mr. WEEMS. Well, unlike the current program, we actually
require our bidders to be accredited.
Mr. THOMPSON. Accredited by whom?
Mr. WEEMS. We picked various accrediting bodies for whom
they could go to accreditation. Currently, suppliers are not
required to be accredited. We do expect that all of them will
be accredited by September of 2009, but under the current
regimen, they are not accredited.
Mr. THOMPSON. I'd like to know what that accreditation
takes in in regard to the standards that they have to meet. I
want to know what it is. I think there's some basic problems
that I think we all need to understand.
Mr. WEEMS. General provider accreditation requires we have
standards for set up and delivery, training and instruction.
Mr. THOMPSON. Whose standards? What are the standards? Who
sets them? Who reviews it? Is there a process by which folks
can wage complaints and get redress on those complaints?
Mr. WEEMS. Of course, and I can provide you in writing the
various standards that we have. But we have more beneficiary
protections now under competitive bidding than there are in the
previous program, and we added additional protections for
quality standards for oxygen and for complex rehab chairs.
Mr. THOMPSON. Mr. Chairman, I would hope that through the
Committee you would re1quire that they submit this so we have
an understanding of how in fact they are accrediting these
people to make sure that they are qualified and able to provide
the services that all of our constituents are going to be
dependent on. Thank you.
Chairman STARK. I appreciate the gentleman.
My concern, for example, how the scooter store, some
hundreds of miles away, gets to be an oxygen provider. That
stretches the imagination of accreditation. But maybe it's
because they have those horns on the scooters, and that squeeze
the bulb and you get oxygen.
Would the gentleman from Texas, Mr. Johnson, like to
inquire?
Mr. JOHNSON. Thank you, Mr. Chairman. I appreciate you
having this hearing.
I know you're not a doctor, but do you have any medical
experience at all?
Mr. WEEMS. No.
Mr. JOHNSON. How can you run an organization like this
without medical experience?
Mr. WEEMS. A number of my predecessors have not been
clinicians.
Mr. JOHNSON. I know. I've griped about that too.
Have you ever done any work other than for the government?
Mr. WEEMS. My entire professional career has been as a
civil servant.
Mr. JOHNSON. How many years is that?
Mr. WEEMS. I mark 27 years with the government this month;
25 with HHS this month.
Mr. JOHNSON. Okay, thank you. You know, you set the price
for the medical equipment. We've already determined that. On
hearing from suppliers in the third district--it's Dallas
essentially--and how the implementation is affecting them, I
become concerned.
You know, Congress can have all the good intentions in the
world, but the agency in charge is putting Congress' ideas into
practice missing some mark, it puts us in a difficult position.
The number one issue I've heard about is the same all these
other questioners have heard about. How many suppliers
submitted bids to CMS for Round I out of the Dallas area?
Mr. WEEMS. Let me see.
Mr. JOHNSON. I'll help you, about a thousand.
Of those totals, how many of those suppliers were initially
rejected for some reason other than the actual amount of the
bid?
Mr. WEEMS. About 508.
Mr. JOHNSON. 600 is the number I've got, but that's close.
Of those suppliers, how many filed a 30-day review of their
bid package with a contractor to look at insufficient financial
disclosure?
Mr. WEEMS. I don't have the Dallas area, but 346 filed
total.
Mr. JOHNSON. About 300. Now, it seems to me that these
numbers suggest more of a systemic problem rather than a
supplier here or there forgetting to include a piece of paper
with their bid package.
Would you not agree with that?
Mr. WEEMS. I would say that there is a problem with the
fact that certain financial documentation was not supplied.
Mr. JOHNSON. Yeah, but you had no cross-talk between the
guys submitting bids to tell them that they didn't have all the
information there; and, according to what I'm hearing from you,
the contractor was not telling you whether they got all the
paperwork or not. Is that true or false?
Mr. WEEMS. I was informed of that after the bid window
closed.
Mr. JOHNSON. Okay. You know, would the premise of
competitive bidding program being you will only get a contract
if you bid low enough, and then you set a higher number,
there's some concerns that massive consolidation may negatively
impact the competition in bid years to come.
How do you see this process unfolding in the next year or
within the next 3 years let's say?
Mr. WEEMS. I see substantially more competition, especially
as we move to Round II, the other 70 MSAs. I think that we'll
have more companies come in to the market to try and capture
market share. We will have lower prices and drive down the cost
for the government and for beneficiaries.
Mr. JOHNSON. Well, as my friend here pointed out, I think a
reduction in suppliers ultimately could lead to less
competition and higher prices.
You don't agree with that statement?
Mr. WEEMS. I'm not sure that I accept the premise. There'll
be a reduction in suppliers.
Mr. JOHNSON. Well, if you keep setting limits on them and
putting people out of business, I don't know how you could help
but understand that.
Did you do anything to ensure that contracted suppliers
have a sufficient capacity to supply the products?
Mr. WEEMS. We looked at their bids, looked at their
business plan; their capacity to supply and as I said we only
let any individual supplier say that they could supply up to 20
percent of the market even if they made claims being able to
supply more than that. If indeed the company was expanding
beyond their current capacity and had a business plan to do
that, we required stronger financial assurances from the
company before we would allow that bid to come in at that
capacity.
Mr. JOHNSON. Well, how did you determine whether the
financial capability was strong or not?
Mr. WEEMS. Well, the financial documentation required in
the bid allowed us to do that because we were able to compute
certain financial rations that would tell us the financial
strength of that company.
Mr. JOHNSON. Okay. Thank you, Mr. Chairman. I appreciate
the time.
Chairman STARK. Mr. Becerra, would you like to inquire?
Mr. BECERRA. Thank you, Mr. Chairman.
Mr. Weems, thank you very much for being here.
Mr. WEEMS. It's good to see you, sir.
Mr. BECERRA. Let's see if I can continue along the lines of
my friend Mr. Johnson's questioning. First, let me ask this.
Is a contractor who wins a contract from CMS able to
subcontract some of those services based on that awarded
contract?
Mr. WEEMS. Absolutely, and that's indeed what I expect to
happen when we announce the winning suppliers next week, that
many will want to subcontract.
Mr. BECERRA. So, are the qualifications of a subcontractor
taken into account by CMS in the process of awarding a bid to a
prime contract?
Mr. WEEMS. Not in the process of award, because those
contracts don't exist yet. So, the liability and responsibility
remains with the prime contractor to make sure that the
services are rendered as provided for in the contract.
Mr. WEEMS. That's correct. We will hold that contractor
responsible for the services they contracted for.
Mr. BECERRA. So, is a prime contractor able to subcontract
with someone who may not have any experience in their
particular field?
Mr. WEEMS. They could, yes. I'm not sure it would be in
their business interest to do so, but yes, they could.
Mr. BECERRA. Is there any requirement that a subcontractor
be accredited to provide the types of equipment or services
that are required under the contract?
Mr. WEEMS. The contractor themselves are required. The
winning supplier is required to be accredited. The same quality
standards from which that accreditation arose would also be
required of the subcontractor. They would not be required to be
accredited at this point, but all suppliers are going to be
required to be accredited as of September of 2009.
Mr. BECERRA. As I understand it though, your relationship
legally is with the contractor. What the contractor does to
satisfy the terms of the contract, you don't have that much
oversight over them in that regard, do you?
Mr. WEEMS. In these ten areas, they are going to be under
the microscope. We are going to have a high degree of scrutiny
over contractor's performance, and their ability to deliver
quality products to beneficiaries.
Mr. BECERRA. But you are going to have to rely on the prime
contractor doing this the right way, because your legal
relationship, CMS's legal relationship, isn't with the
subcontractor.
Mr. WEEMS. That's correct.
Mr. BECERRA. You've already said just a minute ago that you
don't interfere with the process of the subcontracting, so the
subcontractor could be someone or some entity totally
unfamiliar with the field that the contract with the prime
contractor is for.
Mr. WEEMS. Again, perhaps not in the best interest of the
contractor, but what you say is possible. Yes, sir.
Mr. BECERRA. So, why not run the thread of legal
responsibility that CMS, when it gives out money and gets a
contract, runs not juts to the contractor, but to any
subcontractor.
Mr. WEEMS. The contract right now, and, as you pointed out,
the legal responsibility, is with the contractor. They're the
ones who have had the bid. They're the ones with the skin in
the game and if they don't perform, we're going to take action
against them. That includes the non-performance of a
subcontractor.
Mr. BECERRA. The difficulty, Mr. Weems, with that is that
you're not trying to remedy a situation. You're not trying to
rectify a problem that may have occurred as a result of the
contract because of whatever activity by the contractor in this
case, in our example, with a subcontractor.
So, trying to remedy something doesn't necessarily assure
us that we are going to get our money back if we over-pay or if
we are defrauded. I think there is a real concern, at least
some of us, I think, that this so-called competitive bidding
process may not necessarily giving us everything we think we're
going to get in return.
Let me before my time expires ask something else with
regard to this competitive bidding process.
Doesn't it seem to run somewhat counter to intuition that
we have competitive bidding in the marketplace if you limit the
number of suppliers who compete?
Mr. WEEMS. Actually, it's quite intuitive to me, because
when we bid a contract in government, typically, there's just
one winner. Everybody who didn't win is excluded.
Mr. BECERRA. Well, now you're talking Pentagon. Let's
forget about the Pentagon for now.
Mr. WEEMS. No, I mean even in HHS. When we acquire things
or, you know, when we have a contract, we competitively bid it.
If you don't win, you don't win and you don't participate.
Mr. BECERRA. But rather than say that we only want as many
competitors as we think we'll need to satisfy the need, why not
say, everyone come forward. Anyone who can match the price is
eligible to compete and participate. So, this way, you always
have a lot of contractors out there who are able to
participate, and you ultimately, hopefully, then get the most
competitive price, because you have a very open, competitive
process.
But when you simply say we're going to need someone to
satisfy this need of medical widgets, we need a thousand of
these medical widgets, and we see that we have three suppliers
there that can provide the thousand medical widgets, so
therefore, we only need three suppliers. That doesn't
necessarily guarantee that those three suppliers are going to
give you the best price, the most competitive price. But, if
you say we need a thousand widgets; everyone compete, and
everyone at every point can compete, then there will be true
competition to try to keep the price of those widgets as low as
possible so they can get the business from the government.
Mr. WEEMS. I understand your point. First of all, the law
doesn't allow for any willing provider, but second of all, if
we bid and said everybody come in, it's likely we wouldn't get
26 percent discounts. Instead, we get the fee schedule again.
You know, if you don't have any skin in the game, you're going
to bid the fee schedule price.
Mr. BECERRA. I know my time is expired, so Mr. Chairman,
I'll stop.
But, Mr. Weems, at some point I'd like to transition this
conversation not in terms of DME but in terms of MA, Medicare
Advantage, and see if you'll say the same things with regard to
the process of competition that you provide for under the
setting for Medicare Advantage participation and are compared
to what you do for DME.
But I thank you for your time.
Mr. WEEMS. Yes, sir.
Chairman STARK. Mr. English, would you like to inquire?
Mr. ENGLISH. Yes, thank you, Mr. Chairman.
Mr. Weems, when a large hospital-based DME company fails to
secure Medicare contract, many patients and hospitals are
affected.
What are plans at CMS for transition in states where the
hospital-based DME companies currently serving many hospitals
and Medicare patients have not been offered Medicare contracts.
Specifically, my interest after July 1st, 2008, several
large health organizations will no longer be able to accept
Medicare patients including in my region, UPMC, which serves 13
hospitals, and Vantage, which serves 12 hospitals. What are the
transition plans for these patients in the hospitals?
Mr. WEEMS. Thank you for the question. Congressman, I am
not going to be able to speak about the particulars.
Mr. ENGLISH. I'm happy to entertain it.
Mr. WEEMS. All right. I will give you a general answer.
The particulars of this are still covered by the
procurement laws.
Mr. ENGLISH. Yes.
Mr. WEEMS. I expect that in hospital-based settings that
they will subcontract with a winning supplier. That's going to
be an area where we're going to have very good contact with
beneficiaries, so that they're going to become contract
suppliers. They're just not going to, you know, in their
service, and close down in a hospital.
Mr. ENGLISH. Okay. A very different kind of transition
occurs for many Medicare patients who will be leaving
hospitals.
What are the Medicare strategies for acquiring the new DME
contractors to be responsive and timely in fulfilling their
obligation to deliver equipment and services at the time of
discharge from the hospital, particularly after normal business
hours?
Mr. WEEMS. The people are going to be in this business to
succeed. They're going to be in this business to win market
share; and, with the market prices, there's going to be even
more motive to capture market share. The way to do that is
going to be through quality.
That is, they're going to offer higher quality services.
They are also going to be accredited. They will have met
quality standards that's not true today.
Mr. ENGLISH. Mr. Weems, one of the issues that has become
apparent in conversations I've had with interested constituents
is that there have been bids awarded to companies that have
never previously provided the bidded service. I'm curious.
What is CMS's approach to this particular issue and has
there been any thought to protecting the Medicare benefit by
making certain that awards are given to bidders who are clearly
able to provide that service and maybe with a focus on
providers that are already doing this?
If in fact the other is happening, how does that equate to
enhanced quality care for our Medicare patients?
Mr. WEEMS. Well, first of all, it's good to step back and
look at the circumstances today. Today, anybody can move into a
particular line of durable, medical equipment without that
expertise. For the competitive bidding program, they had to
show that they were a viable ongoing business. That's not a
requirement today. They had to meet our quality and
accreditation standards. That's not a requirement today; and
they also had to demonstrate a business plan that would show
capacity to meet the market. That's not a requirement today.
Those are the kinds of beneficiary protections that are built
into it.
Mr. ENGLISH. So, your argument is there's really no
protection today from folks entering stepping up providing the
service.
Mr. WEEMS. Absolutely.
Mr. ENGLISH. Okay. I wonder, Mr. Weems, can you offer the
rationale behind the requirement for national diabetes
suppliers to bid based on a full formulary while small
suppliers could bid and win by bidding on a limited number of
products. I wonder, what impact will this have on patient
choice.
Did CMS find that this created a disproportionate number of
particularly low bids, which were based on fewer products?
Mr. WEEMS. I am going to have to provide you that answer in
writing, Congressman.
Mr. ENGLISH. Very good. Thank you, Mr. Chairman.
Chairman STARK. Mr. Doggett, would you like to inquire?
Mr. DOGGETT. Thank you for your testimony, Mr. Weems.
While I certainly share a number of the concerns my
colleagues have voiced, I think it is important to understand
how we got to this point and there was a conclusion reached,
not only by you and your office, but by a number of other
groups that looked at this issue that we have been paying and
are today paying significantly more for durable medical
equipment that is necessary to provide quality, durable medical
equipment to Medicare beneficiaries. Isn't that correct?
Mr. WEEMS. It is, sir.
Mr. DOGGETT. That's why you conceived this competitive
bidding program?
Mr. WEEMS. It's why it was conceived. We are following the
law.
Mr. DOGGETT. I do want to get your reaction to the question
my colleague, Mr. Becerra raised, because if competition is a
good way to address this problem, why wouldn't it also be a
good way to deal with Medicare Advantage where we are still
paying $1100 more for beneficiary than for traditional
Medicare.
Mr. WEEMS. In Medicare Advantage the payment rates are
based on a county benchmark system within that benchmark
system, plans do compete.
Mr. DOGGETT. Well, they don't compete enough to not result
in a situation that's been estimated at a cost over 10 years of
$150 Billion more than if we just covered them with traditional
Medicare. So, there may be some competition, but it has yet to
lower prices; and, as you know, your actuary has been unable to
give us any future date by which we won't be paying out
billions of dollars more to these plants.
Why can't they compete in the same way that you propose to
occur here?
Mr. WEEMS. The payment for Medicare Advantage plans are
based on a county benchmark that's in statute. The payment rate
is fixed by statute on a county benchmark level.
Mr. DOGGETT. Well, I'll accept your answer, but
respectfully disagree with you that the system is not working
and it is causing us a much greater cost to sustain any quality
of care than any of what we are talking about today.
But, focusing on today, you will recall that back in 2001
the HHS Inspector General testified to congress that durable
medical equipment providers, that we were paying them for
products that were sometimes never delivered and we were paying
for more expensive items than what was actually received. That
was one of the initial voices of concern; and then in 2004, the
GAO indicated that Medicare lacks the capability to identify
specific items provided to beneficiaries, because suppliers'
claims use broad codes and don't identify the specific item.
I gather that that's still a problem, and my question to
you apart from competitive bidding, since I've heard that there
are concerns that their incentives to substitute lower price or
lower quality items for higher priced items is has CMS or HHS
ever considered establishing some kind of serial number or
identification program so that you can track individual pieces
of durable, medical equipment, and follow them through the
claims process?
Mr. WEEMS. I know of no attempt.
Mr. DOGGETT. No study of that? I mean, why wouldn't that be
feasible?
Mr. WEEMS. Well, for many of these pieces of equipment, you
know, some can be, you know, quite small.
Mr. DOGGETT. Some of the reference to scooters or motorized
wheelchairs are pretty substantial. Why couldn't you use a
serial number system on some of these items?
Mr. WEEMS. That might be something that we can look at. I
mean, one of the frustrations, sir, as you well know, with
durable medical equipment is it's supplied in the home. It's
supplied outside of the public view and it is one of those.
It's not quite a government acquisition, but, you now, you
don't get a corresponding control number or a corresponding
receipt. The government doesn't for actually having acquired
the equipment.
Mr. DOGGETT. You're going to respond to a question Mr.
Thompson raised about accreditation. But, as you did
accreditation for these suppliers, were you looking only at
financial capability or did they have to demonstrate some
expertise in being able to deliver a service.
If someone was in oxygen and they were now going to provide
diabetes supplies; or, if they were in motorized wheelchairs
like the scooter store and they would provide oxygen, what did
you look at to assure that they have the capability to provide
quality products?
Mr. WEEMS. We looked, first of all, at overall ability to
do delivery and set-up. Can they do that? For many of the kinds
of products we're talking about, that's not very complex. But
we took an additional step for two items, which are more
complex, and that is for oxygen and for complex power, motor
device, complex wheelchairs. We actually established higher
standards for the delivery and set-up, and the capability of
doing that for those two items, because they are more complex--
standards which don't exist to this day.
Mr. DOGGETT. So, if the scooter store will be providing
oxygen supplies, they had to meet those standards?
Mr. WEEMS. They do, yes.
Mr. DOGGETT. Just one other area. We all remember the
problem some would say fiasco associated with the initial
implementation of the Part D program and the claim that all you
had to do was just call 1-800-Medicare.
We are now about, I guess, less than 2 months out from this
program going into effect. What have you done to ensure we
don't have a repeat of that? What additional training has there
been and is there any, I guess, ombudsman-type office so that
if folks that are counting on this durable, medical equipment
have as many problems as folks had originally with part D, that
there'll be an alternative available for it.
Mr. WEEMS. That chart and the one that you have in front of
you shows the various outreach activities that we have. But,
let me stress two things, sir. Because you ask a very, very
good question. The most important moment in all of this is when
a Medicare beneficiary sits with their provider and their
written prescription. They need to know what to do with it at
that point. That's what we're concentrating on and we are going
to give physicians a list of qualified beneficiaries.
Remember, most of this is not storefront-type material.
What happens is the beneficiary takes that and then calls a
number and it's delivered to their home. That's the moment that
we are concentrating on. Every Medicare beneficiary in these
MSAs will get a letter from us. Every provider, every supplier
will get a letter from us laying out in detail. So, what
happens then?
One of the things that I think is vitally important when
you institute a new program is situational awareness. How do
you know what's happening?
We have put together a surveillance network so that we will
know what happens; and, yes, that includes calls to 1-800-
Medicare. It includes calls to our SHIPs. It includes the
regional offices involvement in each one of those areas. We're
going to check in with the suppliers. We are going to work to
get this right. I hope you are feeling better. I'm sorry, you
were in an accident.
Chairman STARK. Mr. Tiberi, would you like to inquire?
Mr. TIBERI. Thank you, Mr. Chairman. Thank you for letting
me sit in.
Sorry that I didn't hear your testimony. I look forward to
reviewing it, Mr. Weems.
Just a couple comments, I guess, to get your comments, I
guess, to get your thoughts on from things that I have been
hearing and thanks for your long-term service to the Federal
Government, our taxpayers.
Some would say that the entire process in which the
implementation of this program has not met transparency levels
that we would all be proud of in the Federal Government and
that there has been a lack of information provided to both
beneficiaries and suppliers and policymakers throughout the
implementation of this process.
What would you say to that criticism?
Mr. WEEMS. I would strongly disagree. I think that we have
done a very good job of educating our suppliers. We have an
advisory Committee with them that has met six times over the
course of this. We have taken considerable input from them. We
have been very transparent. About the requirements, the only
thing that I would say that we have not disclosed as a matter
of the bid process is exactly how we use the financial rations
in judging the financial viability of each bidder. We have told
them what financial documentation we need. We have told them
the ratios that we would use, but we have not told them how
that would be scored.
That, I would say, is the one piece sort of ``our audit
plan,'' we have not disclosed.
Mr. TIBERI. So, if Members of this Committee can give you
information that contradicts that, you'd be willing to look at
that?
Mr. WEEMS. Absolutely.
Mr. TIBERI. Just to follow-up on Mr. English's point or one
of his points the criticism that there are suppliers that could
be awarded regions that they have no business model presently
in may not be a concern, but after this process is put in place
and you have people providing a service in a region where they
have never provided a service before, if there are problems in
providing a service to beneficiaries, what would be CMS's
reaction to that?
Mr. WEEMS. You know, it depends on the problem. If we find
somebody who is simply incapable in that region then we're
going to take steps to end their contract and award it to
another. So, it depends on what problems.
But, again, these suppliers bid to have a viable business
model, to move into, if they're moving in, a community to
actually sell product. They didn't win not to sell product.
Mr. TIBERI. But there's no advantage given to someone who
has a business model within that community?
Mr. WEEMS. They might have a particular competitive
advantage by knowing the community, knowing the physicians,
knowing the beneficiaries. But there's no structural advantage.
Mr. TIBERI. Not with you. Not with you all.
Mr. WEEMS. Correct.
Mr. TIBERI. Thank you. Thank you, Mr. Chairman.
Chairman STARK. I just had a couple of questions. The
definition of a supplier, I gather, is that person with whom
the beneficiary patient has contact. Is that correct?
Mr. WEEMS. Yes.
Chairman STARK. For the most part, suppliers are not
manufacturers? Certainly not necessarily manufacturers?
Mr. WEEMS. They are not necessarily manufacturers. There
are some cases.
Chairman STARK. The supplier does not have to supply new
equipment. Is that correct?
Mr. WEEMS. They may supply refurbished equipment, but
that's true now. Yes.
Chairman STARK. They can purchase their equipment made in
China, Taiwan, France. There's no real prohibition on where
they buy the equipment. Is there?
Mr. WEEMS. It has to be an FDA approved, but after that, it
has to meet manufacturing standards. But yes, they can acquire
it.
Chairman STARK. Does the FDA approve crutches and bandages
and canes?
Mr. WEEMS. Well, those aren't ones that we competitively
did.
Chairman STARK. None of the supply? What about hospital
beds?
Mr. WEEMS. They do, I'm told. Yes.
Chairman STARK. The FDA approves hospital beds? Imagine
that.
How does one judge the quality of refurbished or used
equipment?
Mr. WEEMS. The equipment has to be in good working order.
It has to meet the standard of working for the beneficiary,
and, you know, being of good quality.
That's true today.
Chairman STARK. I would entertain any of my colleagues if
they'd like to further inquire. If not, we'll excuse you, Mr.
Weems. Thank you for your considerable help in this issue and
we will have our second panel.
Mr. WEEMS. Thank you, Mr. Stark; pleasure to see you again,
sir.
Chairman STARK. All right. Hurry back.
We are pleased to welcome Ms. Kathleen King, the Director
of Healthcare Studies at the U.S. Government Accountability
Office, affectionately known as GAO; Mr. Tom Ryan from the
American Association for Homecare; Mr. Peter Thomas, the Health
Task Force Co-chair at the Consortium for Citizens with
Disabilities; and Mr. Thomas Hoerger, a senior fellow at the
Research Triangle Institute International.
We have your prepared testimony and without objection for
each of you it will appear in the record in its entirety. If
you would like to expand on it, change your mind or inform us
in any way, please continue. We'll ring a bell here in about 5
minutes and we can elicit more details from you in the question
period that follows.
Ms. King, would you like to lead off?
STATEMENT OF KATHLEEN M. KING, DIRECTOR, HEALTH CARE, U.S.
GOVERNMENT ACCOUNTABILITY OFFICE
Ms. KING. Mr. Chairman, Members of the Subcommittee, thank
you for inviting us here today to testify about GAO's work on
Medicare payment for Medical Equipment and Supplies.
A number of you have made references to our earlier work
and we have in fact done a series of reports over the last 10
years or so where we talked about cases where Medicare was
overpaying of medical equipment and supplies.
In one case in 2000, we reported that Medicare paid more
than the median surveyed retail price for five categories of
equipments, including eyeglass frames, catheters and two types
of catheter insertion trays. I just point to that as one
example of our work. So, my remarks today will be based on our
previously issued work.
We have said that competition is a fundamentally different
way to pay for services and fee schedules based on historical
charges and that competitive bidding; and, this has also come
up today, difference from Medicare's usual practice of
accepting any willing, qualified provider by selecting among
providers based on established criteria such as price and
quality.
We believe that competition could reduce Medicare spending
by creating an incentive for providers to accept lower payments
in exchange for their ability to retain Medicare business and
to increase market share. In the demonstration of competitive
bidding that happened from 1999 to 2002, approximately 50 to 55
percent of the bids from suppliers were accepted and the
evidence suggests that competition helped lower payments
resulted in estimated savings of 7.5 million from the Medicare
Program and 1.9 million for beneficiaries who paid lower
copayments.
Based on the results of the demonstration, Congress enacted
the permanent program for Medicare competitive bidding that's
under discussion today; and, I think, I won't elaborate on all
of the elements of that except a couple; and, one is that the
accreditation process, which is new, and the fact that
suppliers must submit financial documents that include income
statements, credit reports and balance sheets.
In our view, this additional scrutiny could help CMS screen
out providers that are not stable or legitimate businesses, and
it could help reduce the improper payment rate of 10.7 percent
for medical supplies and equipment which is more than double
that for other Medicare providers. But we have also said that
the competitive bidding program raises concerns about accessing
quality of care, because it could encourage providers to cut
costs by providing lower quality of care or curtailing
services.
Therefore, we believe it's important and in fact adequate
oversight of the program is critical. When we evaluated the
competitive bidding demonstration, we made a number of
recommendations to CMS, and that was that they monitor
beneficiary satisfaction. That they set standards for providers
to participate. That they provide beneficiaries with the choice
of suppliers and that they select winning bids on the basis of
quality in addition to price. One of the ways they could do
that would be routine monitoring of beneficiary complaints,
concerns, and satisfaction.
I should point out to you and I know you have someone on
the panel today form the independent evaluation. But the
evaluation of the demonstration did not see any major adverse
effects on access or quality of care. There were a few concerns
raised. A decline in the use of portable oxygen among new users
and a possible shift away from providers making home delivery.
When you enacted the competitive bidding program, you also
directed us to look at the impacts on suppliers, manufacturers
and beneficiaries. We were directed to look at Access and the
quality of items and services. We now have a team working on
that and we have also been asked by the Committees of
jurisdiction to assess Medicare's implementation of the
competitive bidding program.
Mr. Chairman, that concludes my prepared remarks
[continuing]. I'd be happy to answer questions.
[The prepared statement of Kathleen M. King follows:]
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Chairman STARK. Mr. Ryan.
STATEMENT OF THOMAS RYAN, AMERICAN ASSOCIATION FOR HOMECARE,
AND PRESIDENT AND CHIEF EXECUTIVE OFFICER, HOMECARE CONCEPTS,
INC.
Mr. RYAN. Good afternoon, Mr. Chairman, and distinguished
Members of the Subcommittee. My name is Tom Ryan. I started in
the home care industry as a respiratory therapist and have
served patients in my community for 30 years. I'm the President
and CEO of Homecare Concepts. It's a company I founded 20 years
ago in Farmdale, New York, to provide respiratory and home
medical equipment to people with medical conditions and
disabilities. I appreciate the opportunity to testify about our
very serious concerns regarding the competitive bidding
program.
I am speaking today on behalf of the American Association
for Homecare, where I recently served as Chairman and currently
serve as a member of the executive Committee. Our members
operate home care practices that will be impacted by the
competitive bidding program. I am concerned about the problems
that have plagued round one of this program. My company is
scheduled to be in round two of the bidding program.
I will be blunt. This Medicare bidding program is a train
wreck. But this program jumps off the tracks, the attitude of
CMS is clearly let's go full steam ahead. The bidding program
is poorly conceived, it's fundamentally flawed, and it does not
account for the way home care providers currently compete for
business. As a result of these flaws, the program has been
plagued with problems since its inception. This program will
drive people out of business. A large portion of high quality
local home care providers will be driven out of business and
they will no longer be able to serve the communities that
they've been serving for years.
The real tragedy is the negative impact on the Medicare
beneficiaries. Problems with the design and operation of the
bidding program will seriously reduce beneficiary access, the
quality of care, and products that beneficiaries receive today.
The program is not the free market miracle that some have
characterized it to be.
In light of these problems, the American Association for
Homecare strongly urges Congress to immediately halt
implementation of this program. We urge Congress to develop an
alternative process that achieves not only accurate
reimbursement rates for home medical equipment, but most
importantly, ensures appropriate access to quality care for the
Medicare beneficiaries.
The bidding program will drive thousands of qualified
providers out of the marketplace, and as a consequence severely
limit the services available to millions of seniors and people
with disabilities. Providers currently compete on the ability
to improve quality. That's what attracts referral sources to
give us business. The new Medicare bidding program will stifle
that competition.
There are multiple problems with various products subject
to bid. I'll mention just a few. In the area of complex power
wheelchairs, long-time consumers of customized wheelchairs will
be forced to switch to new providers. For patients who rely on
these specialty wheelchairs for daily activities, this is a
drastic change.
In the diabetic treatment area, diabetic patients will be
forced to switch to different monitoring systems and supplies,
which has serious implications for patient compliance. The same
point is true for cancer patients who depend on enteral
nutrition for tube feeding. As a result of the new Medicare
policy for home oxygen therapy, disruptive changes in the area
of home oxygen therapy are scheduled to take place very soon.
The transfer of ownership of oxygen equipment and the 36-month
payment cap go into effect on January 1st, 2009. This will
cause confusion among beneficiaries and will reduce the level
and quality of services. New bidding rules only complicate
these problems.
With respect to the impact on home care provides, 63
percent of the accredited home care providers submitted bids in
round one, and they were disqualified. Most of these
disqualifications were for technicalities. A 63-percent
exclusion rate is totally unacceptable, and we feel is a
serious breakdown in the bidding program.
Home medical equipment providers are overwhelmingly small
to mid-size companies just like myself. We typically receive 50
percent of our business from Medicare. The loss in the ability
to serve these patients will result in widespread layoffs and
business failures.
The term ``competitive bidding'' is dead wrong. The bidding
program will in fact radically reduce the number of accredited
suppliers that are allowed to compete. The bidding program's
widely touted savings are misleading. Small providers bid
unreasonably low to have an opportunity to stay in the game,
since the alternative was to go out of business. The fact that
64 percent of the suppliers that were offered contracts were
small validates. We believe the extraordinary low-bid rates
will be unsustainable over a 3-year contracting period, and any
savings will be at the expense of services to the beneficiary.
Significant aspects of the development and implementation
of this bidding program have been shrouded in secrecy. The lack
of transparency, the unwillingness by CMS to share key
information, mask deficiencies of the program and make it
impossible to evaluate why CMS reaches various decisions.
Moreover, CMS has rejected congressionally mandated working
with the PAOC community. They have not worked with the PAOC
community.
There are 33 business days before round one of this program
takes effect. The program would be a historic change affecting
as many as three million beneficiaries in the first phase
alone, yet Medicare has not even announced who has won the bids
yet, leaving the education of providers and beneficiaries till
the last minute.
For this reason, the American Association for Homecare
urges Congress to immediately halt the implementation of this
program. The wide range of problems and questions about the
program must be independently evaluated and an alternative
process to determine payment rates for home medical equipment
must be explored. The Association stands ready to work with
members of this Committee and other Members of Congress
immediately to address these issues.
In closing, I want to remind you that home care is part of
the solution to Medicare. It's not part of the problem. Thank
you for your invitation to speak, and I would welcome any
questions that you have.
[The prepared statement of Thomas Ryan follows:]
Statement of Tom Ryan, American Association for Homecare
Good afternoon, Mr. Chairman and distinguished members of the
Subcommittee. My name is Tom Ryan. I am a respiratory therapist and
President and CEO of Homecare Concepts Inc., a respiratory and home
medical equipment company based in Farmingdale, New York. I appreciate
the opportunity to testify before you today about very serious concerns
surrounding the Medicare DME competitive bidding program and the
negative impact it will have on Medicare beneficiaries and homecare
providers.
I am speaking today on behalf of the American Association for
Homecare (AAHomecare) where I served as chairman during 2006 and 2007
and where I currently serve on its executive committee. AAHomecare is
the national trade association representing both providers of durable
medical equipment and manufacturers across the nation. The
Association's membership reflects a broad cross-section of the homecare
community including home medical equipment (HME) providers of all sizes
operating in approximately 3,000 locations in all 50 states. I am also
a member of the board of directors for the New York Medical Equipment
Providers Association (NYMEP).
AAHomecare works to strengthen access to high quality care for
millions of Americans who require home medical equipment, services and
therapies in their homes. Many of our member providers operate health
care facilities and businesses in areas that are subject to the
Medicare competitive bidding program. I am scheduled to be in Round Two
of bidding by virtue of serving beneficiaries in the New York
metropolitan area, but I have heard and seen in detail the first-round
problems that have plagued this high-profile program. I am well aware
of the bidding program's anticipated effects on both Medicare
beneficiaries and suppliers.
Summary
The Medicare bidding program is a poorly conceived and
fundamentally flawed program that is now exhibiting many of the serious
breakdowns that were predictable based on its failure to recognize and
account for the true nature of the way home medical equipment is
provided to Medicare beneficiaries. These breakdowns have been evident
since the start of the Round One bidding process in early 2007,
throughout the bid evaluation process, and right through the recent
awarding of contracts. Design and operational problems in the bidding
and contracting phase will seriously compromise beneficiary access and
quality of care. The Association strongly urges Congress to immediately
halt the implementation of this bidding program and develop an
alternative process that achieves not only accurate reimbursement rates
for home medical equipment but, most importantly, ensures good access
to quality care for Medicare beneficiaries.
The current bidding program will drive thousands of qualified HME
providers out of the Medicare marketplace. One of the consequences will
be limitations on services available to millions of seniors and people
with disabilities. Nearly two-thirds (63 percent) of accredited,
qualified homecare providers that submitted bids have been disqualified
in the first round of bidding. Moreover, such a dramatic reduction in
the number of homecare facilities will result in reduced access to home
providers and the quality of services that they provide if this bidding
program moves forward in its current form. Errors and flaws that have
emerged in Round One of bidding will be embedded in the program if CMS
rushes to implement Round Two in 70 additional areas in the months
ahead.
The Medicare Modernization Act mandated a competitive bidding
program to establish market-based pricing for home-based equipment and
care under Medicare. But because the bidding system will reduce the
number of home medical equipment providers, it will needlessly
eliminate thousands of qualified providers, reduce services to
beneficiaries, and systematically dismantle the nation's homecare
infrastructure.
HME providers are overwhelmingly small to mid-sized practices that
typically receive about 40-50 percent of their business from Medicare
patients. The loss in the ability to serve this patient population will
result in layoffs and many business failures. The term ``competitive
bidding'' is misleading because CMS is radically reducing the number of
suppliers that compete in a given area.
The changes that will result from the bidding program will affect
over three million beneficiaries who reside in Round One areas. CMS has
indicated that if Round Two is implemented, approximately 50 percent of
all Medicare beneficiaries requiring home medical equipment could be
affected. The bidding program could also quickly affect all Medicare
beneficiaries in the U.S. as early as January 1, 2009, when CMS will
have the authority to apply bid pricing in non-bidding areas. The
ability of CMS to apply bid pricing to non-bidding areas, especially
rural areas with hard-to-reach patients, is clearly not market-based.
For these reasons the Association urges Congress to immediately
halt the implementation of this program until the wide range of
problems and questions about the program can be independently evaluated
and an alternative process to determine payment rates for home medical
equipment can be explored. Without a pause in the implementation
timeline to review serious concerns and examine alternatives,
Medicare's home medical equipment benefit will be irreparably harmed.
Consequences of Bidding
Impact on Beneficiary Quality of Care
Many Medicare beneficiaries who reside in bidding areas will likely
see: (1) a reduction in the level of services they receive; (2) lower
quality items that may not be tailored to their specific needs; and,
(3) disruptions in continuity of care as they are forced to switch
providers.
Under the bidding program, suppliers are required to provide the
same products to Medicare beneficiaries as they provide to non-Medicare
patients, but only in situations where a physician specifically
prescribes a certain product and brand. In all other cases, suppliers
have the option to provide a range of products that fit within the
physician's prescription. With the drastic reduction in reimbursement
rates, there will be a diminution in the quality of goods and the level
of service that suppliers have furnished in the past.
Additionally, CMS has also awarded contracts to suppliers who
currently have no physical presence in bidding areas. These suppliers
have the following options. They can: (1) quickly form subcontracting
arrangements with local suppliers, or (2) attempt to open a new
location(s) to service beneficiaries residing within a bidding area. In
either case, suppliers will have to make these changes in the next 60
days because the program starts on July 1.
In the complex power wheelchair marketplace, there are a number of
problematic areas that will impact quality of care. A contract winner
who is not currently located in the bidding area could attempt to form
subcontracting arrangements. However, the Medicare allowable set
through bidding is unlikely to financially support both the contract
supplier and the subcontractor. Also, CMS accrediting bodies cannot
necessarily guarantee that ``winning'' suppliers use exclusively
accredited subcontractors. In its final rule on bidding, CMS stated
that it will ``not evaluate subcontractors to determine if they meet
the accreditation, quality, financial and eligibility standards because
a subcontractor to a contract supplier cannot itself be a contract
supplier and cannot submit claims under the Medicare DMEPOS Competitive
Bidding Program.'' Moreover, these subcontracting suppliers could
provide the beneficiary with a very inexpensive power wheelchair system
that may not be as durable nor may it fully meet the beneficiary's
needs, as complex power wheelchairs that are currently provided.
Finally, CMS does not mandate that suppliers repair the complex power
wheelchair they provide. Given the low payment rates for repairs, the
Medicare beneficiary may very likely find him/herself unable to find a
provider willing to repair the power wheelchair.
CMS made decisions in the diabetic arena that are likely to
jeopardize disease management services to Medicare beneficiaries. In
the diabetes treatment area, CMS did not ensure that all bidders played
by the same rules. First, it did not define a formulary and it did not
apply the rules of bidding equally to all bidders. As a result, CMS may
have significantly limited beneficiaries' range of choices of diabetes
monitoring systems and supplies. Second, by excluding retail providers
from the bidding process, CMS distorted and clearly undermined the
objectives of competitive bidding by allowing more than one
reimbursement rate for the same product in an area. This was not
envisioned by Congress. This unprecedented policy is anti-competitive.
Unless winning suppliers are providing the same or equivalent products
or services as are provided today, patients may now turn to retail
stores for their supplies, where the cost is greater and there is no
Medicare savings. We believe that CMS should establish one
reimbursement rate for a product in an area regardless of where it is
purchased, at a fair rate that allows choice so that beneficiaries do
not have to switch their systems.
Over 20 million Americans currently live with diabetes, a serious
and chronic disease. One in four Medicare patients suffers from
diabetes and these beneficiaries account for 40 percent of Medicare
spending. Given these statistics, it is imperative that we work to help
patients more effectively manage their chronic disease. Reducing the
likelihood that diabetes patients will be compliant in managing their
disease should not be the bi-product of bidding.
Prior to bidding being implemented, significant policy changes have
been slated to take effect that will impact home oxygen beneficiaries.
The transfer of ownership of oxygen equipment and the 36-month payment
cap--which both go into effect on January 1, 2009--are very likely to
cause confusion with beneficiaries and adversely impact the level and
quality of service beneficiaries have come to expect. These issues will
only be magnified with bidding and its additional set of rules. For
example, a beneficiary who is in his/her 31st month on oxygen therapy
with an advanced oxygen system who moves to a new geographic area is
unlikely to find an oxygen provider willing to furnish the same level
of technology that the beneficiary was previously using.
There is also the real issue of suppliers being able to ramp up
operations to meet significant new demand for medical equipment and
services subject to bidding. While CMS has presumably selected enough
suppliers to service an entire bidding area for each product category,
contract suppliers are going to have to be prepared for a significant
increase in demand for these items and services. Based on the
information provided by CMS that identifies the number of contracts
that were offered in each product category and each bidding area,
contract suppliers could see an increase of 200-300 percent in the
number of patients they are required to serve. Suppliers may be
overwhelmed by the huge increase in volume, which their systems and
infrastructure did not anticipate or may not be able to handle. This is
especially true for suppliers who have never operated in bidding
marketplaces prior to the implementation of this program. Contract
suppliers that cannot meet demand are unlikely to provide the level of
service that patients are accustomed.
These changes will also impact manufacturers who provide suppliers
with lines of credit, which allow them, in turn, to purchase home
medical equipment. These manufacturers will experience significant
chaos in the credit market. Good providers who lost bids will become
instant bankruptcy risks for manufacturer creditors because they have
no way to anticipate the impact of bidding on suppliers and their
ability to meet payment obligations. It will also be difficult for
manufacturers to provide winning suppliers with the credit they are
seeking given the significant payment cuts. Credit from financial
institutions for winning suppliers who need to increase their operating
capacity to meet increased demand also may not be readily available as
the financial markets have recently made lending much more difficult.
As a result, it will be the beneficiary who may not be able to receive
the same quality of items and services that were previously provided
due to credit pressures.
Impact on Beneficiary Access to Care
The Association is aware of some suppliers that were awarded
contracts for certain product categories, which those same suppliers
never before provided. In these circumstances, CMS has never outlined
how it evaluated a supplier's self-reported plans to provide these new
services. We also question how these suppliers could submit accurate
bids for such services and items while also incorporating an unknown
demand factor and operation costs into their bid calculation.
Consider the range of beneficiaries that will be impacted by
bidding effective July 1:
More than 220,000 Medicare beneficiaries who currently
rely on home oxygen therapy may experience a disruption of their
service if their provider does not elect to ``grandfather'' existing
patients, and tens of thousands of new patients prescribed the therapy
will have severely limited access from July 1, 2008 forward. As these
beneficiaries assume ownership of their equipment in January 2009, they
may have to switch providers in order to obtain portable oxygen.
143,000 beneficiaries currently receiving home-delivered
diabetic supplies may be forced to switch providers by July 1 since
there is no ``grandfathering'' provision. Small ``winners'' will be
overwhelmed by the rush of patients to switch suppliers by CMS'
deadline.
10,000 beneficiaries currently receiving home enteral
nutrition therapy may be forced to switch providers by July since there
is no ``grandfathering'' provision.
16,000 beneficiaries currently being treated at home for
Obstructive Sleep Apnea (OSA) may have to switch providers as they
assume ownership of their equipment under the Deficit Reduction Act
(DRA).
25,000 elderly beneficiaries currently relying on
hospital beds to remain at home may have to switch if their providers
do not ``grandfather'' due to pricing in one or more markets.
Beneficiaries also are likely to face the prospect of coordinating
care with multiple suppliers in bidding areas. Prior to bidding, a
beneficiary's home medical equipment needs could be served by one
supplier. Now, suppliers can only serve beneficiaries for items and
services subject to bidding for which they have received a contract. If
a beneficiary needs a hospital bed, a walker and oxygen therapy, the
beneficiary may require care from three separate suppliers due to the
mechanics of the bidding program.
Few beneficiaries are aware that changes resulting from this
program are imminent. If services and quality are reduced, if access is
curtailed or beneficiary compliance diminishes--all likely outcomes
from this program--Medicare costs will increase as patients require
longer hospital stays, seek more frequent physician interaction and
visit the emergency room.
Failure to Educate Beneficiaries, Referring Clinicians and Suppliers
CMS has touted an extensive list of steps it has taken to educate
the supplier community about competitive bidding. Nevertheless, 63
percent of suppliers who attempted to participate were unable to
navigate the bidding process and operational questions remain. Further,
the supplier community, who has the most direct contact with existing
beneficiaries that will be impacted by this program, has never been
formally engaged by CMS to educate the beneficiary community on the
changes that will result from bidding. To our knowledge, CMS has
published only one pamphlet, in October 2007, to educate Medicare
beneficiaries. This is for a program that is scheduled to go into
effect in less than 60 days.
Now that there are ``winners'' and ``losers'' because of the
program, ``losing'' suppliers have no incentive to educate
beneficiaries and ``winning'' suppliers are consumed with the prospect
of ramping up their operations to handle a significant increase in
demand for services.
Once again it is the beneficiary that will suffer. Unfortunately,
ensuring that three million beneficiaries in the 10 areas subject to
bidding are educated on how the home medical equipment benefit will
operate will be extremely difficult in the remaining days before this
program goes into effect. Many Medicare beneficiaries who rely on or
will need home medical equipment and services are the most frail within
our health care system. Many do not have access to the internet. They
are homebound. They are not able to attend public meetings like those
held to educate beneficiaries about the Medicare Part D program.
Bidding Implementation Problems
The Medicare bidding program is expected to immediately impact more
than 4,500 home medical equipment companies in the first ten
metropolitan statistical areas. Ultimately, only 1,005 unique supplier
companies submitted bids to CMS for consideration. Of that, 630
supplier companies were disqualified from consideration because of a
failure to submit complete and accurate information--leaving a pool of
only 375 companies for CMS to consider. Regardless of whether supplier
packages were deemed complete or incomplete, we do not believe that any
program where more than 60 percent of suppliers were disqualified
should be considered a success and should move forward. These
statistics point to a failure by CMS to properly educate suppliers
about the bidding program and flaws within the internal bid submissions
review process.
The lack of supplier participation can be traced back to the
initial bid submission period in May 2007. Suppliers in the 10
metropolitan areas subject to bidding immediately encountered a wide
range of significant problems.
Suppliers found that the bid submission system was primitive,
cumbersome and fraught with problems resulting in excessive data input
time and loss of submitted data. Frequently, the system was non-
operational and inaccessible.
The problems faced by suppliers during the bidding window were so
significant that CMS extended the bidding window three times (two one-
week delays followed by a 60-day delay). Ultimately, however, we
believe that some suppliers were unable to navigate the program and
were unable to participate in the program.
More procedural and operational flaws that threatened the integrity
of the entire program became more readily apparent when CMS began
informing suppliers whether they won a contract on March 21. These
flaws include, among others: (1) the Competitive Bidding Implementation
Contractor's (CBIC) inappropriate rejection of qualified bids due to
misplaced or overlooked documentation that was properly and timely
submitted by suppliers; (2) inappropriate disqualification of bids due
to purported ``financial stability'' reasons, which neither the CBIC
nor CMS has ever explained during or after the bidding process; (3) a
seemingly arbitrary process regarding how the CBIC or CMS used
providers' self reporting capacity to determine how many winning
suppliers were needed for each market; and (4) extremely minimal
information disclosed in terms of the calculation of the winning bid
amounts and related results.
The original ``request for bids'' rules on the CBIC's web site
stated that the CBIC will inform suppliers of any deficient
documentation; the original RFB rules said that, ``beginning 10
business days before the bidding window ends, suppliers will be
notified if there is any missing hard copy attachments.'' These rules
were in place as of May 2007, and upon which suppliers relied as they
navigated the cumbersome and confusing bid process. However, on
September 13 (just prior to the closing date of (Sept. 25, 2007), the
CBIC revised this RFB rule without any type of notice to the bidding
community.
Equally troubling, especially in light of an extraordinary
disqualification rate of 63 percent, is that CMS has never delineated a
process at any time in the development or implementation of this
program by which suppliers who were disqualified would be able to have
their cases reviewed. Subsequent to the mass disqualification of
suppliers on March 21, the CBIC initially informed suppliers who
questioned their disqualification that their cases would be reviewed
for accuracy within 30 days. Recently, the CBIC has sent e-mail
communication to some of these suppliers indicating that it would not
be able to meet its stated review period. For others, the CBIC has just
reaffirmed the original ``incorrect'' disqualification and left these
suppliers, who have proof that they have been wrongly disqualified,
with no avenue for a proper review of their supporting information.
Home Medical Equipment Supplier Impact
The Association believes that the Medicare bidding program will
radically change the HME marketplace if implemented in its current
form. CMS will selectively contract with only approximately 300 unique
supplier companies in the first 10 metropolitan areas under the fee-
for-service program. CMS' own statistics have shown that approximately
4,500 unique companies reside in these 10 bidding areas. This would
indicate that CMS intends to contract with approximately 7 percent of
existing home medical equipment companies. Even if we only account for
the unique companies that took part in the program--1,005 companies--
CMS is still threatening the financial viability of 70 percent of the
otherwise qualified and accredited suppliers in the current homecare
marketplace.
The integrity of contract suppliers may also become a question
since some suppliers who participated in the program submitted bids
based on the assumption that they would be awarded contracts for
multiple product categories subject to bidding. If, for example, a
supplier submitted its bids expecting to be a contract supplier for
multiple product categories but only ``won'' a contract for one product
category, the supplier's long-term sustainability may be in question.
Homecare has been shown to be the most cost-effective and patient
preferred type of care provided to beneficiaries. As baby boomers
retire and become eligible for the Medicare program, demand for home
medical equipment is likely to increase. These beneficiaries will
prefer the advancements in technology that allow them to live full
lives in the home setting. Arbitrarily limiting the number of homecare
companies that the market will support should be viewed as selective
contracting, not competitive bidding.
Savings Questionable
The bidding program designed by CMS is fatally flawed and its
widely touted savings are misleading. Smaller suppliers were fearful
that larger suppliers had a competitive advantage in the bidding system
due to the ability of these larger suppliers to negotiate volume
pricing with manufacturers. As a result, smaller suppliers believed
they could only remain viable by bidding at levels that were
extraordinarily low, but assumed that larger supplier bids would
reflect accurate (higher) pricing and would increase the final Medicare
single payment amount, thus, rationalizing payments.
Essentially, small suppliers bid unreasonably low to have an
opportunity to ``stay in the game'' since the alternative is to go out
of business. The fact that a large percentage of suppliers offered
contracts, 63 percent, were small suppliers validates this theory.
Because so many small suppliers bid so low, these bidders came close to
meeting the capacity projections; preventing many of the larger firms'
bids from being considered. We believe the extraordinarily low bid
rates will be unsustainable over a three-year contracting period.
The argument that the pricing levels established through bidding
are indicative of market pricing is unfounded. The bid system
established an elaborate ``game'' with skewed incentives, resulting in
prices that are not reflective of market pricing; but instead were
based upon a desperate need to ``stay alive'' through the bid program.
We anticipate that beneficiaries in the bid areas will receive
lesser quality items and reduced services. Also problematic will be
beneficiary disruption and confusion that will lead to additional
program costs in the form of longer hospital stays, more frequent
physician visits and care sought in emergency rooms. None of these
factors has ever been identified by CMS in its presentation of savings
that can be achieved through bidding.
Lack of Government Transparency
The development and implementation of the bidding program have been
shrouded in secrecy. The lack of transparency masks deficiencies of the
program and makes it impossible to evaluate fully the way CMS reached
its various decisions at every stage of the process. CMS' unwillingness
to share basic information about the program raises serious questions
about any future rounds of the program with respect to fair supplier
selection and patient access to quality suppliers.
CMS has not shared meaningful bidding data nor the methodology and
criteria used to establish new Medicare payment rates and the criteria
by which suppliers were evaluated. By refusing to release critical
data, CMS is impeding an open assessment and dialogue with the public.
How did CMS evaluate the financial stability of providers? How did
CMS review a supplier's self-reporting capacity to meet the market's
need? Did CMS properly calculate the single payment amount? What
criteria did CMS use to evaluate bids and determine whether a bid was a
``bone fide'' one? What process did CMS use to re-evaluate the bidding
packages of suppliers who believe they were inappropriately
disqualified from the program? These and other questions still remain
unanswered and threaten the integrity of the bidding program.
Recommendations
Due to the flaws, errors and questions that have plagued Round One,
and will certainly carry through to Round Two, we urge Congress to
immediately halt the implementation of this bidding program. The
Association supports the implementation of a rational, alternative
process to determine Medicare pricing for DME items and services.
AAHomecare stands ready to work with members of this Committee and
other members of Congress as early as today to address these complex
challenges and ensure the provision of cost-effective and quality
homecare to deserving Medicare beneficiaries.
Chairman STARK. Thank you.
Mr. Thomas.
STATEMENT OF PETER W. THOMAS, ESQ., CO-CHAIR, CONSORTIUM FOR
CITIZENS WITH DISABILITIES HEALTH TASK FORCE
Mr. THOMAS. Thank you, Mr. Chairman. My name is Peter
Thomas and I'm being so bold today as to try to represent the
voice of the Medicare beneficiary through the Consortium for
Citizens with Disabilities. CCD is a coalition of 100 national
disability-related organizations and includes some of the major
disability groups in the country, including the Brain Injury
Association of America, the United Cerebral Palsy Associations,
the National Multiple Sclerosis Society and many others.
Let me just take a moment to say that we've talked a lot
about devices and products today. I just need to bring home to
the Committee how vital these devices and services and items
really are to beneficiaries across the board, across the
Medicare Program, but especially for those with long-term needs
with severe disabilities, with chronic conditions. These items
and services and related devices are a lifeline to independent
living and to functionality and to health care, good, solid
health care.
In addition to the senior population, of course, the
Medicare program covers over six million people below the age
of 65 that are only on the program because they have
disabilities that permit them--or that do not permit them to
work. I hope that this Committee and CMS really takes this into
account in implementing the program.
DMEPOS items and services disproportionally impact people
with disabilities. This is a relatively vulnerable population
in the Medicare program and assistive devices really mean a
great deal for function and health care. The CCD groups have
opposed competitive bidding since the beginning, in 1997 with
the demonstration projects, in 2003 when the MMA passed, and of
course now less than 2 months before it's being implemented.
Under the current fee schedule, price is a constant, and
suppliers compete on a range of other variables, including good
service to patients, including being responsive to referral
sources and physicians, and exercising good business practices.
That's what competition is currently in the Medicare system for
this benefit. When price becomes the sole determinant of who
gets the contract, all of those other provisions become
secondary. So, the CCD opposes competitive bidding for three
main reasons: One, it will reduce choice, two, it will reduce
quality, and three, it will reduce access.
As to choice, choice of supplier, the competitive bidding
program clearly reduces the choice of suppliers as a large
number of longstanding, high quality providers did not receive
bids. Thousands and thousands of people with disabilities will
wake up on July 1st and have disruptions in their provider-
patient relationships, many of whom will not know the first
thing as to how to address those new needs.
Two, in terms of brand names. People with disabilities and
chronic conditions often use brand names because they have
particular needs or they have particular preferences that a
particular brand of DME item or service will really address. So
we are very concerned with shrinking margins and with lesser
providers that you're going to have a restriction in the number
and breadth of devices covered under the program.
Number two is quality. We believe that there will be in
fact a race to the bottom in the area of quality with respect
to competitive bidding. You know, the ability to choose and
move from provider to provider under the current system is an
important quality assurance mechanism. If a beneficiary doesn't
have a major interest in being restricted in their provider
choice and would like to save some on copayments, they can join
the Medicare Advantage plan. But if they're in the fee-for-
service plan, we feel strongly that they should maintain--have
the right to choose their provider and the services that that
provider provides.
In terms of access, we also believe that the competitive
bidding program will dramatically limit access to not only the
number of suppliers, and in fact cause additional need to
travel long distances and the like.
So, we have a series of recommendations. The first would
be, and our hope is to simply repeal or eliminate the
competitive bidding program. We believe there are mechanisms
that are currently in place that CMS has to adjust prices if
they deem them unreasonable, and to use those existing
authorities to adjust reimbursement levels when necessary. If
competitive bidding is not repealed or eliminated, we do think
that Congress should delay round one because of the concerns
that I've raised in my testimony.
If in fact that is not possible, certainly round two should
be delayed, because round two is where you are able to learn
what occurred in round one and hopefully apply those lessons
learned.
We do think that exempting specific, uniquely fitted and
individualized items and services are extremely important, and
so we do support the Medicare Access to Complex Rehabilitation
and Assistive Technology Act, H.R. 2231, which would exempt
seating, positioning, mobility devices and speech-generating
devices from competitive bidding.
Finally, let me also say that we think that there should be
an opt-out provision for beneficiaries to choose to opt out of
competitive bidding and simply pay the 20 percent of the fee
schedule amount, at least in the first or second year of this
program, to act as a real safeguard and a safety measure to
ensure compliance with quality care.
There is one other recommendation before I end, and that
simply is for CMS to create a separate toll-free number and
have an ombudsperson or people who are well qualified to answer
these questions and address the concerns that we are sure are
going to come to them on July 1st and beyond.
Thank you very much.
[The prepared statement of Peter W. Thomas follows:]
Statement of Peter W. Thomas, Health Task Force Co-Chair,
Consortium for Citizens with Disabilities
Chairman Stark, Ranking Member Camp, and Members of the
Subcommittee:
Thank you for this opportunity to testify on Medicare's competitive
bidding program for Durable Medical Equipment, Prosthetics, Orthotics,
and Supplies (``DMEPOS''), scheduled to begin being implemented in less
than two months from today.
My name is Peter Thomas and I am an attorney with the law firm of
Powers, Pyles, Sutter and Verville, P.C. I am here today representing
the Consortium for Citizens with Disabilities (``CCD'') Health Task
Force. The CCD is a coalition of over 100 national disability-related
organizations working together to advocate for Federal public policy
that ensures the self determination, independence, empowerment,
integration and inclusion of children and adults with disabilities in
all aspects of society. CCD members include the National Multiple
Sclerosis Society, the Brain Injury Association of America, United
Cerebral Palsy Associations, and United Spinal Association, to name a
few. The CCD Health Task Force focuses on health care policy from the
perspective of people with disabilities and chronic conditions and, as
such, I am testifying today to bring forth the views of Medicare
beneficiaries, particularly those with significant health care needs.
I am also here as an individual with personal experience with a
disability. My 34 years walking on artificial legs has demonstrated the
vital role that assistive devices can play in the health, function,
rehabilitation, and independent living of people with disabilities,
including Medicare beneficiaries. And it is important to remember that
in addition to seniors, the Medicare program serves the health care
needs of over six million beneficiaries below the age of 65 who have
become Medicare eligible due to a disability that is severe enough to
prevent them from working.
Many CCD member organizations opposed the Medicare DMEPOS
competitive bidding program since 1997 when the competitive bidding
demonstration projects were authorized by statute. The current
competitive bidding program was authorized in the Medicare
Modernization Act of 2003 (``MMA'') over the objection of many
disability-related groups. Those same groups, and more, remain deeply
concerned about the impact of this program on Medicare beneficiaries.
This is because we believe this program disproportionately impacts and
unfairly places at risk some of Medicare's most vulnerable
beneficiaries--individuals with disabilities and chronic conditions. We
fail to see why Congress and the Administration would single out vital
assistive devices and technologies under the Medicare fee-for-service
program to be provided by the lowest bidder when other benefits are not
exposed to this potentially harmful practice.
The hallmark of the Medicare fee-for-service program is patient
choice of provider/supplier. Accessing the provider of choice is an
important quality assurance mechanism, as any beneficiary can simply
choose another qualified provider if their current provider is not
meeting their needs. The current fee schedule makes price a constant
variable and makes suppliers compete for Medicare beneficiaries by
providing excellent service, meeting patients' needs, establishing
reliable and long-standing relationships with physicians who refer
patients to suppliers. When competitive bidding is employed, the sole
variable becomes price, while service, patient satisfaction, patient
choice, and access are presumed to be equivalent from one supplier to
another. As such, the fee schedule amount of an assistive device may
decrease, but so will the quality of care.
This is particularly important to beneficiaries who have
significant health care needs on an ongoing basis. If a beneficiary is
not concerned about choice of provider and would prefer to spend a
little less on copayments under Medicare Part B, they are free to
choose to enroll in a Medicare Advantage plan. Policymakers who have
concerns about the restrictions and disincentives in Medicare Advantage
plans should not be in favor of extending these same principles to the
Medicare fee-for-service program, as the current law will do.
To date, the competitive bidding program has been largely viewed as
a provider/supplier issue centered on the price that Medicare pays for
durable medical equipment and supplies (``DME''). (Although competitive
bidding generically applies to the DMEPOS benefit, all prosthetic limbs
and most orthotic braces are exempt from competitive bidding due to the
fact that they are highly customized to the patient and require
significant clinical services.) Although CCD and other consumer groups
have long opposed competitive bidding, it has been the DME/home care
industry that has been most vocal on this issue. However, as we now
begin to see the details of implementation of this program and the
real-life impact that these enormous changes in the benefit will have
on beneficiaries, we feel that the consumer voice needs to be
amplified.
CMS is about to begin a massive experiment and individuals with
disabilities and chronic conditions are the unwitting participants. The
public awareness of this program is extremely low and we are convinced
that many thousands of Medicare beneficiaries with long term
disabilities and chronic conditions will awake on July 1st to find that
they no longer have access to their trusted DME supplier. These
beneficiaries will have to start anew with another supplier, one who
may be less convenient and less familiar with beneficiaries' specific
needs. We as consumers must underscore at this point that assistive
devices and technologies are not interchangeable, luxury items, but,
instead, are essential tools with which we create independent lives. In
our opinion, experimenting with the quality of and access to these
devices is risky and simply not reasonable.
That being said, we are not opposed to adjusting Medicare
reimbursement levels for items and services to make them more
reasonable for beneficiaries. And we recognize the benefits to
consumers of lower reimbursement levels in the form of reduced co-
payments. However, there are currently mechanisms in place for CMS to
adjust reimbursement levels, such as the inherent reasonableness
process. It is our strong belief that the modest decreases in co-
payments that will result from the competitive bidding program simply
do not outweigh the price that beneficiaries with disabilities and
chronic conditions will pay in the form of reduced access, quality, and
choice.
Although CCD does not support competitive bidding, we do support
the Medicare Modernization Act's requirements that DMEPOS suppliers
become accredited and meet certain quality standards in the provision
of care. These requirements are vital to help ensure that all
beneficiaries receive the highest quality devices and technologies to
meet their medical and functional needs.
CCD Concerns with Competitive Bidding for DMEPOS
Although there has been a significant lack of beneficiary education
from CMS leading up to the roll out of this program, the CCD Health
Task Force is beginning to hear from members and numerous other
stakeholders regarding the potential threats to assistive devices and
technologies under this program. As a result, we have objectively
analyzed the program and I will summarize our current concerns.
Decrease in the Quality of Devices, Products, and Technologies: CMS
estimates that, on average, the price Medicare will pay suppliers for
the targeted products is 26% lower than current payment rates. These
dramatic price reductions provide disincentives to suppliers to offer
the highest quality devices and products. The likely decrease in the
quality of assistive devices and technologies, especially highly
individualized or complex devices and technologies, threatens the
ability of the beneficiary to be as functional and independent as
possible. Additionally, the use of improper equipment could result in
related medical complications (e.g. bed sores, shoulder injuries) for
the individual and the costs of treating these complications will
likely diminish significantly the cost savings from competitive
bidding. Furthermore, because many private payors take their
reimbursement cues from Medicare, we expect that individuals with
private insurance will eventually face many of the same quality issues
as Medicare beneficiaries when competitive bidding is implemented.
Access to Related Services: Often individuals with significant
disabilities such as spinal cord injuries, cerebral palsy, multiple
sclerosis, and amyotrophic lateral sclerosis (``ALS''), require
assistive devices that must be fitted and/or programmed to meet their
individual needs. In addition, technology assessments, home
evaluations, and other specialized services are regularly performed in
order to ensure that the appropriate equipment is provided. Suppliers
often have 24-hour hotlines for emergency service and strive to
maintain quick turn-around times on repairs. With the significant
decrease in reimbursement to suppliers for the competitively bid items
and, from what we understand, the inexperience of many of the potential
contract suppliers to provide the benefits they have been selected to
provide, CCD members are extremely concerned that these related
services will either be restricted or no longer available to consumers.
We would like to make clear that time-consuming services provided
to beneficiaries such as fittings, refittings, evaluations,
programming, repairs, etc., are not optional services, but instead, are
vital to the safe and effective use of many assistive devices and
technologies.
Access to Suppliers: It is our understanding that suppliers, when
bidding, offered CMS an estimate of the percentage of the population in
a metropolitan statistical area (``MSA'') that they believed they would
be able to serve. CMS then used these estimates to determine which
suppliers would be offered Medicare contracts without, apparently,
conducting any independent verification of these supplier estimates. It
is also our understanding that CMS expected approximately 15,000 bids
to be submitted for the first round of the program but received just
5,000. We also understand that across the 10 MSAs, CMS only offered
1,300 contracts to suppliers, even though they expected to award 9,000.
We expect the result to be a significant decrease in the number of
suppliers available to Medicare beneficiaries and CCD is very concerned
that this decrease, combined with the unverified manner in which CMS
has determined the number of suppliers necessary in each MSA, will
result in serious access problems.
For example, Lisa is a Medicare beneficiary with quadriplegia who
uses a custom seating and positioning system to promote proper posture
and preserve skin integrity while using her wheelchair. She currently
receives services at a specialized seating clinic, often the only
setting where a beneficiary in need of specialized seating systems can
be served properly. However, the suppliers that serve the seating
clinic were not offered a contract by CMS under the competitive bidding
program and, as a result, Lisa will loose access to the comprehensive
``team'' approach available only at this type of clinic. Instead, she
will have to travel ten miles farther to the next appropriate supplier
who will not be able to provide services using this team approach. It
is important to note that many individuals will also face the new and
difficult burden of physically accessing a new supplier who is located
much farther from their home or in a location that is more difficult
for them to access. For individuals with severe disabilities, this new
burden cannot be underestimated.
Impact on Beneficiary-Supplier Relationships: Many Medicare
beneficiaries may wake up on July 1st to find that they can no longer
purchase items from their supplier with whom they have worked for many
years. Many suppliers have detailed knowledge of their patients'
disabilities and related conditions, and a history of providing them
with the most appropriate devices to meet their needs. These long-
standing beneficiary-supplier relationships could be considered one of
Medicare's best defenses against fraud and abuse and an important
quality indicator; however, many of these relationships will be broken
as a result of the competitive bidding program.
For example, John, a power wheelchair user, had a spinal cord
injury when he was in high school and has been going to the same
supplier, located just four blocks from his home, for over 20 years.
This supplier has detailed knowledge of his disability and related
conditions such as prior decubitus ulcerations, contractures, and
``overuse syndrome'' in his shoulders, all conditions secondary to his
disability. As a result, this supplier has a history of providing John
with the most appropriate wheelchair and related accessories to meet
his changing needs. However, because this supplier was not selected as
a contractor in the Medicare competitive bidding program, as of July
1st, John will have to start all over with a new supplier. The new
supplier has no historical knowledge of his particular disability and
related needs, does not carry the specific brand of wheelchair he has
used for years, and is located more than five miles from John's home.
Access to Brand Name Devices: Individuals who use assistive devices
will tell you that consumer preference for a specific brand is an
important factor when determining the most appropriate device.
Competitive bidding will force many individuals to switch to new
suppliers who may not offer the same brands of devices that they are
accustomed to using. A forced substitution in brand could significantly
impact the functional level of an individual, thereby impacting their
health and functional status.
CCD's Policy Recommendations to Congress
Congress intended the competitive bidding program to be phased-in
over a several-year period by 2010. Unfortunately, because CMS fell
behind in the implementation of the first round, the agency has
accelerated the implementation of the second round, to be implemented
in 70 MSAs next year, in order to meet the 2010 statutory deadline.
This accelerated timeline means that CMS will be expanding competitive
bidding virtually nationwide with very little data on the impact of the
program on Medicare beneficiaries. It also leaves little time for
Congress to act to protect consumers.
For the reasons stated in this testimony, we urge Congress to
eliminate DMEPOS competitive bidding entirely so as not to subject
Medicare beneficiaries, especially those with disabilities and chronic
conditions, to a system that compromises access, quality, and choice.
CMS currently has at its disposable mechanisms to adjust prices when
Medicare reimbursement levels are deemed unreasonable, and it should
use those existing authorities to adjust reimbursement levels when
necessary.
If competitive bidding proceeds to be implemented, we urge Congress
to delay implementation of the first round of DMEPOS competitive
bidding until significant flaws in the selection process and number of
suppliers are addressed and until safeguards are in place to protect
the consumer.
We urge Congress and CMS to delay the second round of DMEPOS
competitive bidding in order to allow CMS and stakeholders appropriate
time to assess and address the impact of the first round on all
Medicare beneficiaries, especially people with disabilities and chronic
conditions.
We strongly support Congressional efforts to exempt items from
competitive bidding that must be uniquely ``fitted'' and individualized
for the specific user. CCD supports the Medicare Access to Complex
Rehabilitation and Assistive Technology Act (H.R. 2231/S. 2931),
legislation to carve-out complex assistive technology and devices such
as seating, positioning, and mobility devices and speech generating
devices from the competitive bidding program, with the goal of
protecting appropriate access.
We urge Congress and CMS to allow beneficiaries with disabilities
and chronic conditions to keep their current supplier under the
competitive bidding program in order to ensure continued quality and
choice of supplier. One method may be to allow Medicare beneficiaries
to ``opt-out'' of the competitive bidding network and continue
accessing their supplier of choice at the Medicare DMEPOS fee schedule
amount. Quality would be ensured as consumers would have the right to
pay less under competitive bidding or continue to pay a higher
copayment with their long-standing suppliers. Considering the potential
for significant disruptions in service if the first round of
competitive bidding proceeds on July 1st, this proposal seems
imminently reasonable, at least for the first year or two of
implementation.
We urge CMS to establish a separate toll-free number and
ombudsperson for beneficiaries to use regarding competitive bidding
questions and concerns. Consumers will have numerous and important
questions regarding the changes in the DMEPOS benefit and a specific
toll-free number and access to an ombudsperson are important safeguards
in implementation of this program. Such a dedicated toll-free number
would also allow Congress to more accurately monitor the impact of
competitive bidding on Medicare beneficiaries.
Reforming Competitive Bidding in a Difficult Fiscal Environment
CCD usually does not address Medicare reimbursement issues
involving providers and suppliers unless the policy proposals at issue
impact access to quality care. DMEPOS competitive bidding is such a
case and, in this difficult fiscal environment and with the
implementation date for competitive bidding looming, we offer the
following thoughts.
First, any and all alternatives to competitive bidding that are
considered by Congress, if designed to be budget neutral, should ensure
that beneficiaries are not harmed by compromised access, quality, and
choice.
Second, if Medicare DME fee schedule adjustments are to be made as
an alternative to competitive bidding, we would argue that such
adjustments must be confined to the range of DME items subject to
competitive bidding, rather than an across-the-board fee schedule
adjustment. For instance, prosthetic limbs, orthopedic braces, and a
range of other DMEPOS items are not included in competitive bidding and
they should not be affected if Congress decides to adjust certain fee
schedules to make budget neutral changes to competitive bidding.
Conclusion
CCD is very concerned that competitive bidding will significantly
threaten access to and quality of assistive devices and technologies
that are essential components of the health and independence of
individuals with disabilities and chronic conditions. We call on
Members of Congress and the Administration to delay implementation of
the program and initiate appropriate safeguards to ensure that
individuals with disabilities are not harmed by the upcoming changes in
this important benefit.
I thank you for this opportunity to testify before the subcommittee
and welcome your questions.
Chairman STARK. Thank you, Mr. Thomas.
Dr. Hoerger.
STATEMENT OF THOMAS J. HOERGER, PH.D., SENIOR FELLOW, RESEARCH
TRIANGLE INSTITUTE (RTI) INERNATIONAL
Mr. HOERGER. Mr. Chairman and Members of the Committee, I
am pleased to appear before you today. My name is Thomas
Hoerger. I'm a Senior Fellow at RTI International and also
Director of the RTI-University of North Carolina Center of
Excellence in Health Promotion Economics. RTI International is
an independent nonprofit research organization that performs
research for the U.S. Government and private sector clients.
Since 1991, I have led a series of studies on competitive
bidding for Medicare Part B services. All these studies were
funded by CMS. In one of these studies, my colleagues and I
evaluated the impact of Medicare's competitive bidding
demonstration for DMEPOS. After the evaluation, I led an RTI
project to provide technical assistance to CMS on the design
and implementation of the DMEPOS competitive bidding program.
That project ended in August 2007, thus I'm aware of the
general design of the bidding program, but I have no direct
knowledge of specific issues relating to how the suppliers were
selected.
Today my comments focus on our evaluation of the DMEPOS
competitive bidding demonstration as well as on the potential
value of using competitive bidding to set prices for DMEPOS.
The demonstration project took place in two metropolitan
statistical areas between 1999 and 2002 with two rounds of
bidding taking place in Polk County, Florida and one round of
bidding taking place in San Antonio, Texas.
We evaluated the impact of the demonstration on Medicare
expenditures, beneficiary access to care, quality of care,
competitiveness of the market, and the reimbursement system.
Our full evaluation report was included as part of the required
report to Congress on the demonstration project and is
available for downloading from the RTI website.
Briefly, we reached the following conclusions. Competitive
bidding produced lower prices, leading to lower allowed charges
for the Medicare Program and reduced copayments by
beneficiaries. We estimated that the demonstration reduced
Medicare allowed charges by 9.4 million or 19 percent.
The demonstration had relatively little effect on
beneficiary access, quality and product selection.
Beneficiaries remained as satisfied with their suppliers as
they were before the demonstration. The estimated reductions in
program expenditures exceeded the estimated costs of
implementation.
Because the demonstration reduced allowed charges, supplier
revenues had to fall, and that result was probably viewed
negatively by suppliers in general. Overall, we concluded that
the impacts of the demonstration were largely positive.
Looking more broadly at the use of competitive bidding for
DMEPOS, the basic rationale for competitive bidding is
relatively simple. Ask suppliers how much they are willing to
accept in payment for providing DMEPOS to beneficiaries. Then
offer contracts to those suppliers offering the lowest prices,
ensuring that enough suppliers who are accredited are selected
to serve all beneficiaries. Thus, in principle, competitive
bidding gives suppliers strong incentives to reveal their
underlying costs and meet accreditation and quality standards
and allow CMS to select suppliers who can provide DMEPOS
products most efficiently, thereby using program funds and
taxpayer dollars in the most prudent way.
Although the basic rationale for competitive bidding for
DMEPOS is simple, implementing competitive bidding is more
complicated. As they say, the devil is in the details, and
there a lot of details when it comes to implementation. In the
interest of time, I will only mention three of the most
important issues.
First and foremost is quality. The biggest concern with
competitive bidding is that after offering low prices, winning
bidders will provide low-quality products and little or no
service to beneficiaries. Congress and CMS have attempted to
address this issue by requiring accreditation for all DMEPOS
suppliers serving Medicare, both in competitive bidding and in
other areas. With this accreditation, specific quality
standards are also imposed for each product category.
Finally, multiple suppliers were selected in each bidding
area and product category. Thus, suppliers will need to provide
quality in order to attract beneficiaries.
Second, in selecting winning bidders, CMS must take great
care to ensure that enough suppliers are selected to serve the
Medicare beneficiaries in an area. This requires CMS to
carefully balance beneficiary access and program expenditures,
because selecting more suppliers would cause the winning bid to
increase. Or, conversely, if you try to keep the winning bid to
low, access may be reduced. It is important to achieve the
right balance.
Third, suppliers should be treated fairly in the bidding
process. This means providing adequate information about the
program and the bidding process and general information about
how bids will be evaluated. However, CMS cannot release the
proprietary bids of individual suppliers.
I would be happy to answer any questions. Thank you for
your time.
[The prepared statement of Thomas J. Hoerger follows:]
Statement of Thomas J. Hoerger, Ph.D., Senior Fellow, Research Triangle
Institute (RTI) International
Mr. Chairman and Members of the Committee, I am pleased to appear
before you today to provide you with information on research I have
performed on Medicare competitive bidding programs for Part B services.
My name is Thomas J. Hoerger. I am a Senior Fellow at RTI
International and also director of the RTI-University of North Carolina
Center of Excellence in Health Promotion Economics. RTI International
is an independent, nonprofit research organization based in North
Carolina that performs research and technical services for the U.S.
Government and private sector clients.
Since 1991, I have led a series of six studies on the design,
evaluation, and implementation of competitive bidding for Medicare Part
B services. All of these studies were funded by the Centers for
Medicare & Medicaid Services (CMS). In one of these studies, my
colleagues and I evaluated the impact of Medicare's competitive bidding
demonstration for DMEPOS. After that evaluation, I led an RTI project
to provide technical assistance to CMS on the design and implementation
of the DMEPOS Competitive Bidding Program. That project ended on August
31, 2007; thus, I am aware of the general design of the bidding program
but I have no direct knowledge of specific issues relating to how
suppliers were selected in the first round of bidding for the program.
Today, my comments focus on our evaluation of the DMEPOS
competitive bidding demonstration as well as on the general potential
value of using competitive bidding to set prices for DMEPOS.
Evaluation of the DMEPOS Competitive Bidding Demonstration
The demonstration project took place in two metropolitan
statistical areas between 1999 and 2002, with two rounds of bidding
taking place in Polk County, Florida and one round of bidding taking
place in San Antonio, Texas. We evaluated the impact of the
demonstration on (1) Medicare expenditures, (2) beneficiary access to
care, (3) quality of care, (4) competitiveness of the market, and (5)
the reimbursement system. Data sources for the evaluation included site
visits and telephone discussions with key demonstration participants,
focus groups, surveys of beneficiaries and providers, bid analysis, and
claims analysis.
Our full evaluation report was included as part of CMS's required
Report to Congress on the demonstration project and is available for
downloading at http://www.rti.org/pubs/DMEPOS--final-report.pdf.
Briefly, we reached the following conclusions.
Competitive bidding produced lower prices, leading to
lower allowed charges for the Medicare program and reduced copayments
by beneficiaries. We estimated that the demonstration reduced Medicare
allowed charges by $9.4 million, or 19%. Medicare program expenditures
fell by about $7.5 million, and beneficiary payments fell by about $1.9
million.
The demonstration had relatively little effect on
beneficiary access, quality, and product selection. Beneficiaries
remained as satisfied with their suppliers as they were before the
demonstration.
The estimated reductions in program expenditures exceeded
the estimated costs of implementation.
Because the demonstration reduced allowed charges,
supplier revenues had to fall, and that result was probably viewed as a
negative effect by suppliers in general. As expected, demonstration
suppliers gained market share as a group, while nondemonstration
suppliers lost market share.
Overall, we concluded that the impacts of the demonstration were
largely positive.
The Rationale for Competitive Bidding
Looking more broadly at the use of competitive bidding for DMEPOS,
the basic rationale for competitive bidding is relatively simple: ask
suppliers how much they are willing to accept in payment for providing
DMEPOS to beneficiaries. Then offer contracts to those suppliers
offering the lowest prices, ensuring that enough suppliers who are
accredited and follow predetermined quality standards are selected to
serve all beneficiaries. Thus, in principle, competitive bidding gives
suppliers strong incentives to reveal their underlying costs and meet
accreditation and quality standards, and allows CMS to select suppliers
who can provide DMEPOS products most efficiently, thereby using program
funds and taxpayer dollars in the most prudent way.
Although the basic rationale for competitive bidding for DMEPOS is
simple, implementing competitive bidding is more complicated. As they
say, the devil is in the details, and there are a lot of details when
it comes to implementation. In the interest of time, I will only
mention 3 of the most important issues.
First and foremost is quality. The biggest concern with competitive
bidding is that after offering low prices, winning bidders will provide
low-quality products and little or no service to beneficiaries.
Congress and CMS have attempted to address this issue by requiring
accreditation for all DMEPOS suppliers serving Medicare, both in
competitive bidding areas and in other areas. With this accreditation,
specific quality standards are also imposed for each product category.
Finally, multiple suppliers were selected in each bidding area and
product category. Thus, suppliers will need to provide quality in order
to attract beneficiaries.
Second, in selecting winning bidders, CMS must take great care to
ensure that enough suppliers are selected to serve the Medicare
beneficiaries in an area. This requires CMS to carefully balance
beneficiary access and program expenditures, because selecting more
suppliers will cause the winning bid to increase. It is important to
achieve the right balance.
Third, suppliers should be treated fairly in the bidding process.
This means providing adequate information about the program and the
bidding process and general information about how bids will be
evaluated. However, CMS cannot release the proprietary bids of
individual suppliers.
Additional Details on the Evaluation
The Evaluation of Medicare's Competitive Bidding Demonstration for
DMEPOS was conducted by the University of Wisconsin-Madison Center for
Health Systems Research and Analysis and RTI International under CMS
Contract No. 500-95-0061. Authors of the final evaluation report
included Sara Karon, Thomas Hoerger (Project Director), Shulamit
Bernard, Kevin Tate, Richard Lindrooth, Teresa Waters, and Kay Jewell.
Selected key results from the evaluation, taken from the Executive
Summary, include the following:
Medicare Expenditures
In Polk County, Round 1 demonstration prices were lower
than the existing Florida fee schedule for at least 90% of all items in
4 product categories. For surgical dressings, most demonstration prices
were higher. Almost all Round 2 demonstration prices were lower than
the Florida fee schedule.
In San Antonio, demonstration prices were lower than the
existing Texas fee schedule for all items in 4 product categories. In
the remaining category, more than half of the demonstration prices were
lower.
For most demonstration items, the demonstration did not
have a statistically significant effect on utilization.
Assuming that the demonstration had no impact on
utilization, we estimate that the demonstration reduced allowed charges
in Polk County by $4.7 million during its 3 years of operation. We
estimate that the demonstration reduced allowed charges in San Antonio
by $4.6 million during its 23 months of operation.
Combining savings from both sites, we estimate that the
demonstration reduced allowed charges by nearly $9.4 million (19.1
percent). Medicare expenditures (defined as allowed charges less co-
payments and deductibles) fell by about $7.5 million, and beneficiary
payments fell by about $1.9 million.
Beneificiary Access
Beneficiary survey data showed few statistically
significant demonstration impacts on access-related survey measures in
Polk County and San Antonio. This suggests that the demonstration had
little overall impact on beneficiary access in these sites.
In Polk County, most demonstration suppliers chose to
serve every zip code in Polk County. Similarly, in San Antonio, most
suppliers chose to serve all three counties in the demonstration area.
The transition to demonstration prices and suppliers
passed relatively smoothly in Polk County and San Antonio. The smooth
transitions appeared to be related to the existence of transition
policies and the willingness of nondemonstration oxygen suppliers to
continue serving their patients. As a result, there was relatively
little disruption of existing relationships between suppliers and
beneficiaries during the transition.
Our Polk County beneficiary survey analysis detected a
statistically significant decline in the provision of portable oxygen
equipment and an increase in conserving device usage among new users
under the demonstration. We also detected a decline in maintenance
visits among new users of medical equipment in the demonstration area.
Other statistically significant impacts in Polk County included changes
in the ways beneficiaries order and receive their equipment, as well as
declines in some types of training for urologicals and surgical
dressings users.
In contrast, beneficiary surveys in Texas indicate that
the demonstration did not have a significant impact on portable oxygen
and conserving device use in San Antonio, nor was there a decline in
maintenance visits for new users of medical equipment.
To further evaluate the impact of the demonstration on
portable oxygen use in Polk County, we analyzed claims data. This
analysis indicates that the demonstration had a negative and
statistically significant impact on the percentage of new oxygen users
who received portable oxygen, especially during Round 2. However, the
negative impact was smaller in magnitude than the impact suggested by
the beneficiary survey.
Referral agents who ordered equipment and supplies for
their patients reported a few problems with access during the first
months of the demonstration. Agents later became more familiar with
demonstration rules and demonstration-eligible suppliers, and began
using suppliers with whom they were comfortable. In general, referral
agents did not think that the demonstration had a negative impact on
beneficiaries' access to care, but the agents believed this was due to
the additional responsibilities they assumed to ensure access and
quality.
Quality and Product Selection
Users of oxygen and other medical equipment in Polk
County and San Antonio were highly satisfied with their experiences
with their DMEPOS suppliers. Survey data show that overall satisfaction
ratings were high before the demonstration and remained high 1 year
after implementation.
Survey data indicate that quality of DMEPOS products and
services was high before and after the demonstration in both Polk
County and San Antonio. There were few statistically significant
demonstration impacts on quality-related survey measures, suggesting
that the demonstration had little overall impact on quality.
During site visits to Polk County in Round 1, concerns
were raised about the quality of urological supplies. Some suppliers
believed that--partly through supplier inexperience--prices in Round 1
were set too low. Prices rose in Round 2, and a urological supplier
with a strong reputation was added as a demonstration supplier.
During site visits to San Antonio, referral agents
reported a number of issues related to wheelchair service provided by
some demonstration suppliers. Some suppliers did not provide the level
of service expected by referral agents in terms of equipment setup and
delivery, initial fitting and adjustments, and responsiveness to
problems. Agents responded by cutting referrals to these suppliers and
by taking increased responsibility for ensuring quality service to
their patients.
San Antonio suppliers reported on product selection in a
supplier survey. Most suppliers reported little change in the products
they supplied before and after the demonstration began.
Competitiveness of the Market
Thirty suppliers submitted a total of 71 bids in Polk
County in Round 1 of the demonstration. Sixteen suppliers, both large
and small firms, were selected as demonstration suppliers. Twenty-six
firms submitted a total of 52 bids for the four product categories in
Round 2, and 16 suppliers (62 percent) were awarded demonstration
status. The number of firms submitting bids for urological supplies in
Round 2 fell from 9 to 7, and the number of suppliers bidding for
surgical dressings fell from 8 to 4. These product categories had the
fewest Round 1 demonstration suppliers.
Entry into and exit from the market were still possible
in the presence of competitive bidding. Half of the Round 2
demonstration suppliers in Polk County also had demonstration status in
Round 1, but half did not.
Seventy-nine firms submitted a total of 169 bids for the
five product categories in San Antonio. Overall, 65 percent of the
suppliers that submitted bids won demonstration status in at least one
product category.
As a group, demonstration suppliers gained market share
during the demonstration, whereas nondemonstration suppliers lost
market share. In product categories where there were transition
policies that allowed nondemonstration suppliers to continue to serve
existing customers, the increase in market share for demonstration
suppliers occurred gradually.
The demonstration had relatively little effect on market
concentration.
As expected, individual suppliers generally gained market
share if they were demonstration suppliers and lost market share if
they were nondemonstration suppliers. Some demonstration suppliers in
Polk County, gained substantial market share. However, being named as a
demonstration supplier did not guarantee increased market share. In San
Antonio, many demonstration oxygen suppliers had little or no increases
in market share due to the fact that many of the largest suppliers in
the predemonstration period were granted demonstration status.
Reimbursement System
From an operational standpoint, CMS and Palmetto GBA were
able to successfully implement the demonstration project. The project
team was able to effectively solicit, collect, and evaluate bids;
educate suppliers, referral agents, and beneficiaries; monitor quality
and behavior; and administer claims throughout the demonstration.
Although the overall implementation was successful, not
everything went perfectly. A flaw in the weighting system used to
evaluate bids in Round 1 of the Polk County demonstration led to higher
prices in the surgical dressings category. In San Antonio, CMS delayed
the start of the demonstration by 1 month, and delivery of the
demonstration directories was delayed until very close to the actual
starting date. Such problems were relatively minor and reflect one of
the benefits of conducting demonstration projects: the ability to learn
from the demonstration and apply the lessons if the demonstrated system
is adopted on a wider scale.
For the entire demonstration, CMS and Palmetto GBA costs
of implementation totaled about $4.8 million between 1995 and 2002. The
costs of implementing the demonstration were nearly 50 percent lower
than the projected $9.4 million reduction in Medicare allowed charges
associated with the demonstration.
Administered Fee Schedules for DMEPOS
Previously, Medicare used an administered fee schedule to set
DMEPOS prices. The fee schedule was based on historical DMEPOS prices,
with periodic updates for inflation, occasional price fees mandated by
legislation, and occasional price reductions for items that were
believed to be overpriced. Since the fee schedule was established,
DMEPOS products have experienced great technological change,
utilization has increased dramatically, labor costs have risen, and the
cost of delivering many DMEPOS products has increased. As a result,
there is little reason to believe that the administered fee schedule
reflects the prices that would be set in a perfectly competitive market
for DMEPOS products.
It can be difficult to adjust an administered fee schedule to
reflect market forces. The administrators of the fee schedule lack
information to know when costs have risen or fallen and they typically
lack authority to make changes to the fee schedule. Suppliers have no
incentive to say when the costs of providing DMEPOS have fallen, and a
strong incentive to say that costs have risen. The Government
Accountability Office (GAO) has conducted a series of studies
concluding that Medicare pays too much for selected DMEPOS items. The
industry has responded, sometimes with good reason, that the prices
cited by the GAO do not reflect the full cost of serving Medicare
beneficiaries.
Chairman STARK. Thank you. We're going to just question for
about 10 minutes and we'll at that point happily have to
adjourn the hearing. But I have one principal question.
I want to thank the witnesses for their patience and their
willingness to provide us with this information, but I'm
afraid, Mr. Ryan, that you're stuck. I don't think you'll get
any quarrel from anybody on the dais today that the system is
flawed. As a matter of fact, somewhere between flawed and
lousy, and it's unimportant. Fault in that case is a useless
concept.
But to the extent that we're going to change it, the
Congressional Budget Office, who is a fiddler to whom we have
to dance here, has said that a 1-year delay in round one would
lose $3.5 billion in projected savings, or as we look at, if
we're going to have a 1-year delay, we've got to come up with
$3.5 billion in savings. Over 5 years, the current program is
north of $6 billion over the next 5 years.
Now we ain't going to take that out of kiddies' health
insurance, and we ain't going to take that out of the
hospitals, and the doctors already gave at the office. So, my
question to you is, is your industry prepared to have their
fees adjusted downward to the extent of $3.5 billion over five
or $6 billion more likely, if we get rid of this bidding
process? That's the bind you're in.
Mr. RYAN. Mr. Chairman, I understand we're in a PAYGO
environment and we need--we're in a PAYGO environment, and we
do need to look at alternatives. As I said, yes, the industry
is ready and willing today to sit and talk about alternatives.
We gave at the office quite a bit as well. If you look at
the history of what this industry has given back----
Chairman STARK. I've heard it.
Mr. RYAN [continuing]. Has been significant. We also have
to understand that the 26 percent savings that Mr. Weems talks
about is unrealistic. That is just unrealistic.
Chairman STARK. Mr. Ryan, all that's well and good. We have
to--if we are going to solve this legislatively, and we may
not, we're going to have come up with 6 billion bucks over 5
years. You know the drill. The question is, is your industry
willing--we just write a bill. We say, Mr. Secretary, cut out
the bidding and come up with the cost savings through adjusting
price structure. Are you willing to live with that?
Mr. RYAN. Mr. Chairman, the industry is willing to work
with this Committee, and, yes, we're willing to see if we
cannot come up with a savings projection.
Chairman STARK. Uh-uh. Uh-uh. Uh-uh. Six billion bucks. I
mean, I know you're willing to work with us. My question is,
are you willing to come up with the $6 billion----
Mr. RYAN. Yes.
Chairman STARK [continuing]. To get rid of the bidding
system?
Mr. RYAN. Yes.
Chairman STARK. Great. That's--I think we can do business.
Mr. Camp.
Mr. THOMAS. May I please make a statement?
Chairman STARK. Pardon?
Mr. THOMAS. Mr. Chairman, may I please say a word?
Chairman STARK. Sure.
Mr. THOMAS. The CCD usually does not engage in finding
offsets and talking about payment issues as they impact
suppliers, but in this instance, because these discounts are so
deep, wherever it does impact access, we do tend to speak up.
The only two principles that we would suggest that if you do
move in that direction, that we would hope that whatever
discounts or offsets are found obviously do not impact quality
choice and the beneficiary, and also that they be----
Chairman STARK. We'd direct the Secretary to do that and
Dr. Hoerger would make a plan to see that it didn't happen.
Mr. THOMAS. Fair enough.
Chairman STARK. Mr. Camp.
Mr. CAMP. Well, I--thank you, Mr. Chairman. Frankly, you
asked the exact question I was going to ask, and I know we're
running up against a vote, and so I don't think I need to
repeat it, but that is exactly my concern in terms of what we
do with the PAYGO problem that we're facing. I was going to ask
in a more open-ended way how we might get out from under this,
and I think that's something that you can provide us later, but
the fact that you've admitted your willingness to support this
PAYGO result I think is important. So, I thank you for stepping
up. I thank you all for your testimony, and I would just yield
back.
Chairman STARK. Mr. Tiberi.
Mr. TIBERI. Thank you, Mr. Chairman. To Mr. Ryan, what's
the average size of your members of your association employee-
wise?
Mr. RYAN. Our average member probably is in about a $3
million range.
Mr. TIBERI. How many employees?
Mr. RYAN. Are you talking about my company or the
association? I'm sorry.
Mr. TIBERI. The members of the association, companies like
yours that are members of the association.
Mr. RYAN. Well, my particular company has 52 employees.
We're a $6 million company.
Mr. TIBERI. How many members are members of the
association, how many companies?
Mr. RYAN. Five hundred.
Mr. TIBERI. What's the average? Is 52 the average or 25?
Mr. RYAN. I would say it's in the area of 30 to 40 perhaps.
Eighty-5 percent are considered small, and according to----
Mr. TIBERI. Thank you. Thank you.
Mr. RYAN [continuing]. Five million. I'm sorry, sir.
Mr. TIBERI. Would you say that 100 percent of the members
of this organization share your concern? Ninety percent?
Seventy-five percent?
Mr. RYAN. I believe that 100 percent of the members of my
association share the concerns about national competitive
bidding and the access to quality. I do believe that, sir.
Mr. TIBERI. Thank you. I know we have limited time. Thank
you, Mr. Chairman, for holding this hearing today.
Chairman STARK. I want to thank my colleagues and the
witnesses. It's arguably a program where the numbers are
significant but there seems to be some impetus to see if we
can't revise the system. I want to thank you, Mr. Ryan, because
we are faced with rules. Mr. Camp and I might have written the
rules differently, but we didn't write them. There is no other
way. We're boxed into this. It would be better if CMS would
cooperate with us, but they may not, in which case we're faced
with meeting these budgetary requirements. We'll do our best,
and I'm not sure of the legislative schedule being what it is
this year that we'll be able to resolve it this year.
Hopefully, we will because the more it expands across the
country, the bigger the problem it will be. So I'd like to find
a way to see if we couldn't get a resolution to this early on.
Appreciate your industry. I appreciate representation of the
consumers. It's important. GAO has got some more information to
give us. We'll look forward to that. Dr. Hoerger, I think
you're going to probably get another consulting contract before
this is all done. We'll put you back to work, and thank our
witnesses for participating, and the hearing is adjourned.
[Whereupon, at 3:31 p.m., the hearing was adjourned.]
[Questions for the Record follow:]
Questions posed by Mr. Johnson to Kathleen M. King
[GRAPHIC] [TIFF OMITTED] 47175A.026
[GRAPHIC] [TIFF OMITTED] 47175A.027
Questions posed by Mr. Johnson to Thomas J. Hoerger
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[GRAPHIC] [TIFF OMITTED] 47175A.031
Questions for the record posed by Mr. Stark, Mr. Kind, and
Mr. Johnson to Kerry Weems
[GRAPHIC] [TIFF OMITTED] 47175A.032
[GRAPHIC] [TIFF OMITTED] 47175A.033
[GRAPHIC] [TIFF OMITTED] 47175A.034
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[Submissions for the Record follow:]
Statement of David Soblick
I am writing on behalf of the Accredited Medical Equipment
Providers of America and also on behalf of my organization, Life
Quality Home Health Care, Inc and Pharmacy 18, Inc.
I am writing to address some major concerns related to the Medicare
DMEPOS Competitive Bidding Program and the standpoint CMS has taken
relative to these concerns.
The issue at hand I am referring to is the erroneous
disqualification of 63% of qualified bidders due to the poor
implementation and mismanagement of the entire program on behalf of
CMS' contractor Palmetto GBA, LLC. (CBIC)I would like to shed some
light on the manipulation of application rules by the CBIC, Palmetto
GBA, LLC and their gross negligence in regards to the program.
Additionally, I would like to bring to your attention CMS's poor
and inaccurate analogy purported to congressional staffers concerns
about the program during the H.H.S Briefing in Rayburn B-318 on
Tuesday, April 22, 2008.
When asked repeatedly why they did not inform applicants of the
supposed missing documentation per the original bidding rules, on CMS
staffer used the anaolgy of making an application to college.
``Colleges either accept your application or they reject it, they
do not call you to let you know that you didn't put something in.''
They added, ``All of the applicants are big boys and they know they are
supposed to meet the requirements.''
This rationale is not only illogical, it is completely false. I
took it one set further just to debunk CMS's analogy some more.
I contacted some admissions offices of various institutions,
University of Miami, N.C State, University of Florida, and Southern
Methodist University in Texas.
These schools receive on average 30 to 50 times the amount of
applications versus the 1,005 bid packages received by CBIC.
They informed me that as with all applicants, ``applicant status
reports'' are routinely mailed out throughout the application period to
inform applicants of any change to an applicants file including:
Change of Information,
Receipt of New Information (test scores, transcripts,
etc.), and
Missing information (lack of pertinent information
necessary for evaluation.)
They further confirmed that when information is missing in an
applicants file, they are notified numerous times via email and regular
mail, that in order for their application to be properly evaluated by
admission staff, they must submit the necessary items prior to the
application deadline.
To further apply this to CBIC logic and the original Rules for
Bidding Instructions, CBIC had every opportunity and ability to
properly notify bidders if information was truly missing. Furthermore
the bidding deadline was extended twice, giving the CBIC an extra 60
days for evaluation and notification of missing information.
It is analogies like the one referenced above that parallel the
poor rationale and illogical blueprint for the entire Medicare DMEPOS
Competitive Bidding Program.
I urge the Ways and Means Committee to examine the original biddin
g rules that were modified 12 days before the window closed to excuse
contractual responsibility for notifying bidders of missing information
in their bid packets. We firmly believe that the 63% of disqualified
bidders could have been greatly reduced if not eliminated, had CBIC
properly managed the implementation of the Competitive Bidding Program.
Sincerely,
David Soblick
Life Quality Home Health Care, Inc
5180 West Atlantic Avenue
Delray Beach, FL 33484
Accredited Medical Equipment Providers of America
20815 N.E. 16th Avenue-Suite B-32
Miami, FL 33179
305-654-5957
www.amepa.us
infoamepa.us
Statement of Accredited Medical Equipment Providers of America, Letter
Dear Members of the Ways and Means Committee,
I am writing to have a representative from our organization, the
Accredited Medical Equipment Providers of America, Inc., speak at the
Hearing HL-24. The issue at hand is the Competitive Bidding for Durable
Medical Equipment, Orthotics, Prosthetics and Supplies. We have over
100 members that feel that they have been disqualified erroneously or
have failed to win a bid due to the poor implementation of the program
by the Competitive Bidding Implementation Contractor, Palmetto GBA,
LLC.
There have been several problems with this new bidding process;
from manipulation of application rules, the rejection of standard
REGFLEX policies as required by law and the erroneous disqualification
of 63% of the applicants with no ability to appeal. Senators,
Congressmen and senior legislative staff have identified these problems
as ``gross negligence'' by the Center for Medicare and Medicare
Services (CMS). The results of which will be a limiting of access by
patients to much needed care, unqualified companies will be providing
incomplete services and major metropolitan areas will be grossly
underserved during times of emergency. In addition 17,000 to 21,000
gainfully employed Americans will lose their jobs.
I have included the following attachments and would like to discuss
the following developments:
1) A provider from Texas, which has won the Oxygen Category in 9
Metropolitan Statistical Areas, never provided the item before outside
of their own area. According to Florida State records, the company is
not licensed by Florida's Agency for Healthcare Administration as a
Home Medical Equipment Provider. The Bid Winner does not have a License
to deliver Oxygen from the State's Accredited Medical Equipment
Providers of America 20815 N.E. 16th Avenue--Suite B-32; Miami, FL
33179; 305/654-5957; Fax 1-866-322-2060; www.amepa.us Department of
Health either. I am not sure that the company has an Occupational
License in the State either.
2) The first line in the Rules For Bid (RFB) states that ``All
suppliers must--meet any local or state licensure requirements, if any
for the item being bid'' Clearly this bid winner did not meet the
requirements for the bid he won in Miami and Orlando. I also believe
that it was not the intent of Congress to allow something like this to
happen.
3) According to the Rules For Bid (RFB) companies were required to
prove that they could cover the complete geographical area of the MSA
prior to bidding. The attachment proves this Bid Winner did not have
any subcontract agreements in place before they bid, as they are
currently fishing for providers to do their work.
4) This bid winner and other out of state bid winners should
clearly not win the bid for oxygen and CPAP. Their bid should be
disqualified for not meeting proper licensure requirements. When their
bid is disqualified, their bid price should be removed form the
Composite Bid and all of the pricing would be affected and other bid
losers should take their place.
5) Another attachment is from a bid winner in Miami and Orlando.
This winner has changed their policy and as of April 1, 2008 (not July
1, 2008) they are refusing to deliver a commode or other bath safety
products unless the order accompanies Oxygen or another rented item.
Providers currently compete in the market by providing equipment at a
low margin in order to keep the referral source happy. Now the bid
winner does not have to compete for business and is refusing to provide
these Medicare covered items which are not subject to the bid as they
are considered inexpensive. If the Bid winner will not provide these
bath safety products then who will provide them?
6) This proves that the program will limit the patient's access to
care. If the patient cannot get their prescribed medically necessary
equipment from a bid winner they are unlikely able to get the equipment
else where as the typical Medicare patient that needs a commode cannot
travel to a store to purchase a 24 inch by 24 inch by 24 inch item on
their own. It also typically does not fit in a standard compact or mid-
size automobile.
7) This patient will most likely not pay for the equipment to be
delivered for an additional fee. The patient may likely not get the
prescribed equipment at all. It is questionable that this patient may
have a home fall due to the lack of proper equipment and that would put
extra costs and utilization in Medicare part A programs such as
Hospital, rehab and or future Home Health nursing.
8) This also brings into question the ability to discharge the
patient from the hospital in a timely manner. As liability issues may
not allow for the patient to be discharged without the proper home
medical equipment in place. This will also create increased costs and
utilization for Medicare Part A. The program may save money in Medicare
Part B but again will increase costs for Medicare Part A. Accredited
Medical Equipment Providers of America
Statement of American Council on International Personnel, Letter
Dear Chairman McNulty and Members of the Subcommittee:
Thank you for the opportunity to submit comments for the hearing on
Employment Eligibility Verification Systems and the Potential Impacts
on SSA's Ability to Serve Retirees, People with Disabilities, and
Workers.
American Council on International Personnel (ACIP) is an
organization comprised of approximately 200 corporate and institutional
members with an interest in the movement of personnel across national
borders. Each of our members employs at least 500 employees worldwide,
and in total, ACIP members employ millions of United States citizens
and foreign nationals in all industries throughout the United States.
ACIP sponsors seminars and produces publications aimed at educating
human resource and legal professionals on compliance with immigration
and employment verification laws, while working with Congress and the
Executive Branch to facilitate the movement of international personnel.
The College and University Professional Association for Human
Resources (CUPA-HR) provides global leadership to the higher education
human resources profession and the higher education community by
offering essential knowledge, resources and connections that enhance
individual and institutional capacity and competitiveness.
HR Policy Association brings together the chief human resource
officers of more than 250 of the largest corporations in the United
States. Representing nearly every major industry sector, HR Policy
members have a combined market capitalization of more than $7.5
trillion and employ more than 18 million employees world wide
The National Association of Home Builders (NAHB) is a trade
association that helps promote the policies that make housing a
national priority. NAHB exists to represent the building industry by
serving its members and affiliated state and local builders
associations.
National Association of Manufacturers (NAM) mission is to advocate
on behalf of its members to enhance the competitiveness of
manufacturers by shaping a legislative and regulatory environment
conducive to U.S. economic growth and to increase understanding among
policymakers, the media and the general public about the vital role of
manufacturing in America's economic and national security for today and
in the future.
The Society for Human Resources Management (SHRM) is the world's
largest association devoted to human resource management. Representing
more than 245,000 individual members, the Society's mission is both to
serve human resource management professionals and to advance the
profession.
The above-named organizations share the common goal of creating an
effective and efficient electronic employment verification system. E-
Verify, a voluntary pilot program since 1986, has provided valuable
experience on the challenges that will confront any mandatory
electronic verification system. For example, this pilot project has
given us insight into the wide-variety of worksites and employment
situations that must be accommodated, the time commitments and
documentation required to resolve discrepancies, and the resources
required by employers to train personnel to implement and maintain a
compliant system. We believe the New Employee Verification Act (NEVA)
(HR 5515) represents the next generation of electronic verification.
NEVA builds upon the lessons learned from the pilot project but changes
some fundamental aspects to ensure that any mandatory system meets the
needs of both the government and employers. The following are the
reasons we believe NEVA is a superior solution over simple mandatory
expansion of E-verify.
NEVA Builds Upon Existing Programs in Which 90% of Employees are
Already Enrolled.
According to the Department of Homeland Security (DHS), only 62,000
of the nation's approximately 7 million employers are enrolled in E-
Verify. DHS notes that 2,000 employers are enrolling every week. These
statistics belie the grave challenges in enrolling all U.S. employers.
With less than 1% of employers currently enrolled, even at a rate of
5,000 employers per week, it would take over 25 years to enroll all
current U.S. employers! The problem of enrolling employers is
illustrated in Arizona, which mandated E-verify use by all employers as
of January 1, 2008. Despite the fact that businesses can lose their
license for failing to use E-verify, fewer than 15% of employers have
enrolled.
NEVA avoids the tremendous burden of enrolling virtually all
employers in a new system by building upon an existing system that has
proven its effectiveness--the National Directory of New Hires. Over 90%
of employers currently report new hires to this system which is used to
check for child support enforcement. While modifying the National
Directory of New Hires for this new purpose would admittedly require
resources, the burden would be much less than expanding the current E-
Verify pilot program. Resources could be devoted to improving the
databases instead of educating employers on enrollment. Employers have
been participating in their states ``new hire'' database since 1986 and
are already familiar with the processes and procedures for reporting
necessary information. NEVA would utilize information in the new hire
database to determine if a new employee's information is consistent
with information maintained by SSA or by DHS.
NEVA Provides the Resources to Fix the Database Problems that Hamper E-
Verify
Our associations represent thousands of employers who desire a
reliable system for determining who is authorized to work in the United
States. Mistakes and delays in this process could prove to be costly
for a number of employers and employees who are caught in the system.
The current system, if mandatory, could prove to be unreliable in terms
of providing employers with an effective and efficient electronic
employment verification system.
In 2006, SSA's Inspector General issued a report estimating that
there are discrepancies in approximately 17.8million (4.1 percent) of
the 435million social security records. These errors include incorrect
social security numbers, names, dates of birth and citizenship status.
A recent report compiled by the CATO Institute, and using the estimates
from SSA's Inspector General, determined that a mandatory electronic
employment verification system would result in 11,000 workers per day
receiving a tentative non-confirmation throughout a given year (based
on an average of 55 million hew hires per year).
Furthermore, according to a Government Accountability Office (GAO)
report released last year, ``resolving some DHS non-confirmations can
take several days, or in a few cases even weeks.'' As more employers
enroll, this timeframe is likely to get longer. As GAO noted, the
expansion of E-Verify will ``affect the capacity of the system because
of the increased number of employer queries.''
NEVA takes several steps to resolve these database errors so that
employers and employees will have fewer tentative non-confirmations to
resolve. First, NEVA provides for advanced appropriated funds and
staffing to clean up the databases. This will benefit not only work
authorization, but also the other government programs that rely on
these databases for information. Second, NEVA requires SSA and DHS to
certify the accuracy of the system in advance of full implementation
and annually thereafter. Finally, NEVA requires the GAO to evaluate the
accuracy, efficiency and impact of the employment verification system.
These checks in the system will ensure that employers are not hamstrung
by a system that does not enable them to hire U.S. citizens and other
legal workers with ease and certainty.
NEVA Is Truly ``Electronic''
There is a great deal of misunderstanding about our current
``electronic'' pilot program which is really not an all ``electronic''
system. While E-Verify requires employers to submit an inquiry via the
internet to confirm work authorization, an employer can submit this
only after it has completed the Form I-9 and examined one or more of 24
paper-based documents to establish identity and work authorization.
Employers must retain two sets of records--the electronic one and the
Form I-9 (which can be maintained in paper, on microfiche or
electronically). Some proposals would expand this dual-recordkeeping by
requiring employers to keep photocopies of the documents examined and
to record the electronic approval or denial number on the Form I-9. All
of these steps cost employers time and money and open the possibility
for recordkeeping mistakes.
NEVA brings recordkeeping into the twenty-first century by creating
a truly ``electronic'' verification system that eliminates the Form I-9
(known as the Electronic Employment Verifications System (EEVS). In
addition, NEVA provides flexibility and easy accessibility for all
employers by allowing electronic inquiries over the internet and
telephone and builds upon a database that is already used by many
employers.
NEVA Protects Against Identity Theft
One of the acknowledged weaknesses of E-Verify is that it cannot
detect stolen identities. Thus, if an undocumented worker presents
legitimate but stolen or forged documents that contain the identity of
a U.S. citizen, the worker will appear to be work-authorized, duping
the employer into hiring and training someone who may ultimately be
deported.
NEVA addresses this problem by allowing employers to elect to
participate in a program that makes identity theft extremely difficult.
The Secure Electronic Employment Verification System (SEEVS) enables
employers to send newly hired employees to government certified private
companies that will authenticate their identities through the use of
publicly available databases. An employee's identity is temporarily
``locked'' with a biometric tool until work authorization is verified
by the government. Many employers are willing to pay for this
additional assurance, particularly where it builds upon other
background screening they are already doing.
Individuals could also benefit from this more secure system. Under
EEVS or SEEVS, employees could choose to ``lock'' their identity and
their social security number, thus making it very difficult for anyone
to steal their information.
SEEVS is a more advanced system than the photo screening tool
currently piloted by DHS. It does not require employers to make
subjective determinations by visually comparing a scanned photo to a
paper document. Furthermore, it does not require integration with state
driver's license or Federal passport databases. The photo tool is
currently limited to verifying the authenticity of Lawful Permanent
Residents or individuals with Employment Authorization Documents that
contain a photo which comprise a very small percentage of the
workforce. Efforts to expand this tool to driver's licenses and
passports will take years.
NEVA Preempts the Patchwork of State Employment Verification Laws
Frustrated with Congressional inaction on immigration reform, a
growing number of states are mandating the use of E-verify for
employers or contractors, and the list continues to grow. The expanding
patchwork of state employment verification laws is causing many
problems for human resource managers and employers struggling to
maintain consistent and compliant practices across the country. Federal
relief is needed.
Many states are exploiting the current INA provisions under 8 USCA
1324 (a)(h)(2) on employment practices. While the language preempts
``any State or local law imposing civil or criminal sanctions (other
than through licensing and similar laws) upon those who employ, or
recruit or refer for a fee for employment, unauthorized aliens,''
states like Arizona have been using the ``licensing exception''
language to mandate the use of the E-Verify system--a system that is
not ready for large-scale expansion. NEVA clarifies that immigration is
solely the purview of the Federal Government by establishing a clearer
preemption standard that protects both employers and employees from a
patchwork of state laws.
Our organizations strongly support a uniform national policy
towards employment verification. The employers we represent want an
efficient, effective, and powerful electronic tool to prevent
unauthorized employment. We need strong reform that is realistic and
workable. That is why we, the listed associations, support HR 5515, the
New Employee Verification Act (NEVA).
Thank you for your attention and consideration of our association's
views.
Statement of American Hospital Association (AHA)
On behalf of our nearly 5,000 member hospitals, health systems and
other health care organizations, and our 37,000 individual members, the
American Hospital Association (AHA) appreciates the opportunity to
provide a statement for the record on Medicare's Durable Medical
Equipment, Prosthetics, Orthotics, and Supplies (DMEPOS) Competitive
Bidding Program.
In an effort to reduce Medicare's costs for DMEPOS, the Medicare
Modernization Act of 2003 directed the Centers for Medicare & Medicaid
Services (CMS) to establish a competitive bidding process for these
products and services. The AHA supports potential congressional efforts
to allow hospitals to participate in the Medicare DMEPOS program but to
be excluded from the bidding process. This would allow hospitals to
continue to provide equipment and supplies directly to their patients
during a hospital stay and upon discharge to their homes and
communities.
While the AHA supports the broad goal of Medicare's competitive
bidding program, we remain concerned that the implementation of certain
CMS regulations will restrict the ability of many hospitals to meet
their patients' DME needs in a clinically comprehensive and timely
manner. To avoid this problem, hospitals wish to continue participating
in the DMEPOS program by accepting the price set through the
competitive bidding process, without being required to submit a bid.
This approach would treat hospitals in the same manner in which
physicians are treated under the DMEPOS competitive bidding program. It
recognizes that, unlike DMEPOS vendors, both physicians and hospitals
are health care providers primarily focused on treating patients.
This would allow hospitals to continue serving their patients
without interfering with the DMEPOS prices set through the competitive
bidding process and, therefore, would avoid adding costs to the
Medicare program.
This proposal would benefit patients who need DMEPOS, as well as
patient education and support on the proper use of the DMEPOS. This is
especially critical for medically complex patients who need more
advanced DMEPOS to be able to return home safely. Large DME vendors
place less emphasis on the training, education and ongoing technical
support needed for this type of DMEPOS, instead preferring to focus on
achieving the most cost-efficient methods of delivering high-volume
DMEPOS. Without being able to rely on the hospital for comprehensive
DMEPOS services, patients who need more customized care and specialized
DMEPOS might not be discharged as directed by the treating physician in
a timely fashion. In addition, the lack of comprehensive patient and
caretaker education and technical support could result in the
inappropriate and unsafe use of DMEPOS.
To ensure that beneficiaries have timely access to DMEPOS and
comprehensive service, we urge you to support legislation to allow
hospitals to continue participating in the Medicare DMEPOS program
without submitting a bid, thereby benefiting Medicare patients without
adding cost to the program.
We thank you again for the opportunity to submit a statement for
the record on Medicare DMEPOS Competitive Bidding Program and look
forward to collaborating further on this important issue.
Statement of American College of Physicians
Mr. Chairman and Members of the Committee:
We appreciate the opportunity to submit this statement for the
record and will limit our joint comments to addressing two requirements
established by the Medicare Modernization Act (MMA) in the Competitive
Acquisition for Certain Durable Medical Equipment, Prosthetics,
Orthotics, and Supplies (DMEPOS) that are problematic for the members
of each of our organizations.
First let us note that our organizations appreciate that the
Centers for Medicare & Medicaid Services (CMS) exempted physicians and
``treating practitioners'' from having to participate in the
competitive bidding program when they provide certain specified DMEPOS
to their own patients as part of their professional services, and when
the items are billed using a billing number assigned to these
practitioners.
We are concerned, however, with two requirements that could have an
adverse impact on Medicare patients. First, we believe that requiring
physicians and licensed health care professionals (hereafter referred
to as health care professionals) to be accredited in order to continue
supplying DMEPOS when treating patients is both financially and
administratively burdensome.
Second, we believe that CMS is inconsistent in its application of
competitive bidding requirements for health care professionals for such
items as off-the-shelf orthotics (OTS), crutches, canes, walkers,
eyeglasses following cataract surgery, and folding manual wheelchairs
when provided as part of their professional service.
The clinical judgment and expertise of health care professionals is
critical for selecting, sizing, and fitting DMEPOS, as well as
educating patients on their use. Many patients require immediate access
to such items for immobilization, injury support, facilitation of safe
mobility, or post-surgical recovery. It is unsafe and clinically
inappropriate to delay or deny a patient's access to items such as
orthotics, eyeglasses, or ambulatory support devices, or to send a
patient out of a practitioner's office without the necessary DMEPOS.
Accreditation
In the MMA, it appears there is no recognition that health care
professionals who supply DMEPOS integral to patient care are wholly
dissimilar from suppliers who furnish DMEPOS products to the public as
their primary source of income. There is also a lack of recognition
that health care professionals not only prescribe appropriate items of
DMEPOS, but must frequently and expertly dispense and educate patients
on their use at point of treatment.
As a result, CMS has made relatively few accommodations for the
more than 38,000 physicians who currently have DMEPOS supplier numbers,
as required by CMS, in promulgating supplier accreditation standards.
Health care professionals are not in the business of providing DMEPOS
to the public as a business, and we believe it is unwarranted and
unreasonable to require them to be accredited in order to provide the
patient services for which they have been educated, trained, and
licensed.
Furthermore, as of March 1, 2008 Medicare required health care
professionals who are either new to the program or are existing
suppliers looking to open a new practice location to become accredited
prior to obtaining a national supplier clearinghouse (NSC) number. This
requirement is unduly burdensome and unjust to health care
professionals who are just beginning to practice or are looking to
expand the quality of the integral services they provide to their
patients. The deadline for existing suppliers not changing their
practice is September 30, 2009.
Health care professionals who provide DMEPOS products to their
Medicare patients are licensed by the state in which they practice and
are thus subject to a wide range of state regulatory and other
requirements. DMEPOS suppliers who are not health care professionals
obviously do not and cannot satisfy these requirements.
CMS' claims data indicates that DMEPOS products furnished by health
care professionals make up a small portion of the Medicare-covered
DMEPOS charges--slightly more than 3 percent according to 2004 claims
data. It is unclear, therefore, what, if any, program improvement or
cost savings would be realized by imposing these requirements on health
care professionals who only dispense DMEPOS when providing patient
treatment.
Consider, for example, that some health care professionals who
supply DMEPOS receive an average total reimbursement (gross) of $7,000
per year from Medicare for these products. Accreditation costs
approximately $3,000 per office for up to a three-year period. The
accreditation process is time-consuming, expensive, and heavy on
paperwork--precisely the type of barrier that large companies are
equipped to surmount, but which pose special difficulties for small
health professional businesses that do not or cannot afford to hire
additional full-time regulatory compliance staff.
A supplier manual from one of the CMS-sanctioned accrediting
organizations for physicians is 128 pages, and represents the
administrative red tape for meeting the CMS requirements. It is not
difficult, therefore, to understand why health care professionals find
it impractical to seek accreditation just to continue dispensing
relatively small quantities of DMEPOS in their offices. It would
essentially be impossible to recoup these costs given the amount
Medicare pays for the small quantities of DMEPOS products furnished to
their patients.
Additionally, many of the DMEPOS supplier quality standards and
proposed enrollment safeguards do not make sense in the context of a
health care professional's practice. For example, it would not be
practical nor would it appear to serve any useful purpose to require
all the health care professionals in a large professional building to
each have a sign visible at the main entrance of the building with
their business hours (as recently proposed).
Similarly, health care professionals are concerned that the
proposed enrollment safeguard precluding a DMEPOS supplier from sharing
a practice location with another Medicare supplier, ``including a
physician/physician group or another DMEPOS supplier,'' would
inappropriately prevent a health care professional from providing both
DMEPOS products and professional services to patients in the same
practice location.
Ultimately, requiring additional, unnecessary, and redundant
accreditation requirements of health care professionals may keep them
from dispensing necessary DMEPOS items at point of treatment.
Unfortunately, this could inconvenience or endanger Medicare
beneficiaries, and compromise the health care professional's objective
of providing the most appropriate quality care and of doing patients no
harm.
The only other available alternative would be to refer the
beneficiary to a DMEPOS retail supplier, which may be unsafe for the
beneficiary, prolong access to appropriate treatment, or, even worse,
prevent the beneficiary from receiving the proper item because there is
no DMEPOS retailer in close proximity. Sadly, either outcome would be a
gross disservice to Medicare beneficiaries and place health care
professionals at risk for not immediately providing necessary care.
Inconsistent Exemptions from the Competitive Bidding Process
A second immediate concern is that, while we appreciate that CMS
exempted physicians and ``treating practitioners'' from having to
participate in the competitive bidding program when they provide
certain specified DMEPOS to their own patients as part of their
professional services, there seems to be an inconsistency in how the
determinations were made for who would be exempt for what products.
For instance, CMS did not exempt physicians and what they term
``treating practitioners'' who dispense off-the-shelf (OTS) orthotics,
but did exempt them from bidding for other DME (crutches, canes,
walkers, and folding manual wheelchairs). Alternatively, physical
therapists (PTs) and occupational therapists (OTs) are exempt for OTS
orthotics, but not for crutches, canes, walkers, and folding manual
wheelchairs.
Failure to exempt physicians and ``treating practitioners'' from
having to competitively bid to furnish OTS orthotics to their patients,
and failure to exempt PTs and OTs from the competitive bidding process
for select DME, including, crutches, canes, walkers, and folding manual
wheelchairs, could cause significant access and patient safety issues.
Providing such DMEPOS items is an integral part of patient care for
many health care professionals. Failure to provide these exemptions to
all health care professional groups is inconsistent and raises
significant access and patient safety concerns.
Given the inconsistency of the DMEPOS final rule, and the threat to
patient care posed by health care professionals being effectively
prohibited from providing certain DMEPOS, the undersigned organizations
have strongly urged CMS to permit health care professionals to continue
supplying the aforementioned DMEPOS items to their patients without
participating in the competitive bidding or accreditation processes.
We look forward to working with the House Ways and Means Committee
and CMS to find a way to address these accreditation concerns and to
avoid access issues for patients who rely on health care professionals
to provide DMEPOS as part of their care.
Statement of Andrea Logan, Letter
Dear Mr. Chairman
I am writing to you today regarding the upcoming DMEPOS Competitive
Bidding hearing on May 6th, 2008. I am so very pleased that you and
your colleagues are taking this issue so seriously.
I have owned and operated a nursing home medical supply company in
Michigan, since 1995. We currently supply over 500 beneficiaries with
enteral nutrition therapy in skilled nursing centers throughout
Michigan. I employ 25 exceptional people.
The upcoming competitive bidding program will impact my business
severely. Based on the ``Single Payment Amount'' that is offered in the
first round of bidding we will see a dramatic decrease in profit and
ability to serve the frail elderly here in our state. We are making
plans to educate our customers on the upcoming second round that we
will be part of and determining if we will even be interested in moving
forward with this service.
Our company did submit bid in the first round and were not offered
a contract. The reason given was that our bid was too high. I based my
bid on true ``cost the serve'' and considered the fact that
beneficiaries should be able to receive whatever is clinically
necessary and therefore there are times when we need to supply a
product that does not cover our cost or at very little profit, once all
the paperwork, delivery, set up and clinical in-servicing has taken
place.
Many suppliers underbid in the hopes of expanding their business
through ``joint ventures or sub-contracted relationships''. Those
relationships did NOT have to be accredited or meet ANY CMS
requirements I do know this to be true as I too used a ``sub-contracted
relationship'' to serve an area that we are currently not in. Low
bidders also expect to receive additional discounts with the two
manufactures of enteral nutrition. (Nestle/Abbot Nutrition).
Unfortunately the manufactures (Nestle/Abbot Nutrition) are faced
with the same issues that all businesses are facing: rising fuel, raw
material costs and health care. The bottom line is that beneficiaries
will suffer. The types of nutrition they may require will be ignored do
to cost, additionally there was no verification process that assured a
``sub-contracted relationships'' could actually perform the necessary
services.
We currently make a small profit on a few products today based on
the current ``fee'' schedule; however we make it up on other product
categories so it has not been an issue for us to provide what is
clinically best for the beneficiary. For bidding purposes going forward
that will be a greater consideration on what products are selected for
bidding in a particular category.
Here is an example of what I am referring to:
Billing Cost per Current Fee Monthly
Units/ Month Billing Unit Screen Profit/ Loss
Resident on 1800 calories
per day 558 $.45 $.58 $ 72.54
Isosource 1.5 or Nutren
1.5
HCPC Code B4152
Single
Billing Cost per Payment Net Profit
Units/ Month Billing Unit Amount Loss w/SPAResident on 1800 calories
per day 558 $.45 $.43 $(11.16)
Isosource 1.5 or Nutren
1.5
HCPC Code B4152
The costs of these products are effective today 4/30/08. These 2
products are high volume product codes for Nestle. The manufacture of
these products have told us that pricing beginning 6/1/08 will increase
approximately 8-10%, adding further to the loss on patients requiring
these nutritional products.
Lastly I would like to draw your attention to the latest practice
by winning suppliers in round one. I received a letter today from a
winning supplier that is offering suppliers who were not offered a bid
the ability to ``purchase these patients from your organization''. In
my opinion this is opening the door to beneficiary neglect at the
highest level, it will also further add to confusion for the elderly in
particular.
As a supplier in good standing I certainly agree with the
accreditation process, and need to lower the burden on the increasing
demands of Medicare and Medicaid. I simply ask why could CMS not have
lowered the current fee schedule? If in fact it was only to lower
costs, then this would have been a very simple task and we as suppliers
would have shared the burden. The fee schedule cut could also be
immediate, unlike the Competitive Bidding program which I am sure has
cost more to this point than any savings that may or may not be
realized by CMS.
I strongly urge you and your committee to not only delay the next
round but seriously consider the future of the competitive bidding
program altogether.
Thank You,
Andrea Logan
President--All Med Medical Supply LLC
All Care Billing LLC
Statement of Angelene Adler, Letter
Dear Members of the Subcommittee on Heath,
The intent of this letter is to encourage your attention to the
mis-administration of the Centers for Medicare and Medicaid (CMS)
Durable Medical Equipment, Prosthetics, Orthotics, and Supplies
(DMEPOS) Competitive Bidding Program. I am writing this letter as a
deeply concerned citizen, constituent, and businessperson. Established
in 1970, Care Medical Equipment, Inc. is an independent, family-owned
company that has grown to include ten branch locations throughout both
Oregon and Washington states. Care Medical specializes in home medical
equipment services, rehabilitation equipment services including custom
seating and positioning, bariatric equipment and respiratory equipment
services including home medical oxygen, ventilators, and sleep apnea
products and has been serving the needs of the Pacific Northwest for
nearly 38 years.
We continue to notice the inconsistencies in CMS' administration of
the Medicare Modernization Act of 2003 (MMA), and are especially
concerned with its recent implementation of the Competitive Bidding
Program. This policy has the potential to adversely affect well over 42
Million U.S. citizens who are current Medicare recipients (as of the
most recent 2005 Centers for Medicare and Medicaid Services (CMS)
Statistics Systems). CMS Secretary Leavitt and Administrator Weems'
interpretation of this program disregards the individuality of our
patients in need of complex rehabilitation equipment that takes a
tremendous amount of customer attention to assure proper fit and
function. Without individualized custom equipment, patients often
develop alternative complications that ultimately cost the Medicare
system considerably more.
Several studies have demonstrated that competitive bidding will be
a tragedy for the healthcare industry and Medicare beneficiaries alike.
Furthermore, savings brought on by the CMS program will be
substantially offset by increased administrative costs associated with
implementation and oversight of the Competitive Bidding Program
ensuring lowered standards of patient care. The first study I am
referring to was a peer-reviewed study conducted jointly through
Kennesaw State and Drexel University, and published in the Southern
Economic Journal in January of 2008. The primary focus of this study
was to examine the Polk County, Florida and San Antonio, Texas CMS
Competitive Bidding demonstration projects. The main premise of the
report found that the process was: ``inefficient, leads to price
increases and may cause decreases in the quality of services.''
The second report I would like to refer to is the recent Robert
Morris University. That found the CMS bidding program is optimally
designed to reduce the number of DME providers (business' such as
mine), thus concentrating the home care market into a state of
monopolies. This study points out that concentrated markets usually
result in higher, not lower, prices of services, and consistently
lowered standards of quality. This is not an acceptable practice for
America's healthcare system. This study also concluded that loosing DME
suppliers would likely be forced to terminate their businesses since
approximately 40% of their business is Medicare related. The outlook of
both studies casts heavy doubt as to the effectiveness of the current
CMS Competitive Bidding Program.
More poignantly, CMS recently received 6,300 bids from 1,005
providers whoparticipatedin the first round of competitive bidding. Out
of those initial 1,005 bidding providers, 630 (63%) were disqualified
due to ``incomplete'' submissions or responses to the CMS Request for
Proposal (RFP). Unfortunately, there seems to be significant problems
with companies being inappropriately disqualified from consideration
for the bidding program without sufficient evidence for dismissal.
Those bidding providers have no recourse for reconsideration since bids
will be awarded prior to resolution of provider grievances. This
effectively renders their bids null, void, and victim to a CMS policy
that adheres to meaningless process without recourse.
The American Association of Homecare (AAHC) has begun to document
DME companies that were disqualified from the CMS Competitive Bidding
Program for: 1) not providing requested financial information--when the
companies have hard copies demonstrating they did indeed provide the
information, 2) not responding to requests for additional information--
when the companies have Fed Ex receipts and fax confirmations that the
information was indeed sent, 3) failing to take adequately into account
bidder's capacity to provide services to Medicare beneficiaries, and 4)
awarding bids to companies who do not have established business
locations in the prospective bidding area (as outlined in the CMS
standards of participation).
We believe that the large number of disqualifications raises
serious questions regarding the adequacy, and competency of the CMS
Competitive Bidding Program. Continuously, our industry has requested
additional information regarding this program, and have been routinely
denied adequate accommodation. What concerns us even more is the non-
disclosure policy CMS has taken making it impossible to ensure
transparent government oversight of such essential services. We feel it
imperative that prior to implementing round one of the CMS program that
a minimum 6-month postponement for essential third-party evaluation be
commissioned before patient care is potentially compromised.
The home Durable Medical Equipment (DME) industry continues to be
most cost-effective resource for the Medicare recipient. Unfortunately,
as Medicare allowables continue to dwindle, our direct costs of service
continue to exponentially increase. Nationwide, providers are
evaluating whether they can simply survive at the current reduced
Medicare allowables, let alone at the steep reductions that would make
many essential items unprofitable. Essentially, the only willing
bidders will be those ``low ball'' bidders incapable of rendering
services once awarded contracts or non-scrupulous and unqualified
parties interested in locking out competition for the sake of
monopolization, which would lead to the further detriment of both
healthcare providers and patients alike. This circumvents the
competitive marketplace, and ensures making our healthcare market ripe
for future fraud, collusion, and abuses in patient care.
CMS needs to realize that competitive bidding eliminates incentives
for suppliers whether the supplier ``wins'' the bid or not for any
product category. Presently, beneficiaries have numerous choices
regarding equipment selection because of our free-market enterprise
system that allows patients to choose both their provider and type of
equipment. Competitive bidding will force suppliers into providing
lesser quality products and supplies in order to maintain sound
business practices. Suppliers will simply be unable to provide
equipment in as efficient a manner under competitive bidding
regulations. Services to patients that include delivery, setup,
maintenance, education, quality control, product availability, and
patient access will decline as a direct result of this incentive
elimination.
With the implementation of Round 1 we have seen winning providers
who currently have no physical location, are not accredited, and do not
have certified & licensed staff. One of the major national competitors
is recognized for these types of business practices, and in 2005 was
fined $4 Million for its fraudulent practices in dealing with Medicare
(available: http://www.hmetoday.com/news/2007-05-14--01.asp). We find
it interesting that CMS continues to support policies detrimental to
patient care, and yet supports fraudulent abuse in the marketplace.
The CMS Competitive Bid Program is bid by product categories, such
as Complex Rehabilitative Power Wheelchairs, Continuous Positive Airway
Pressure Devices (CPAP), Hospital Beds, and Oxygen Supplies/Equipment.
Providers of services who were able to provide prescribed equipment may
not be able to do so in all product categories if they are not awarded
the bid for that particular product category. In simple real-life
terms, this means that a patient, caregiver, physician, discharge
planner, case manager, or physical therapist could very likely be
forced to call numerous providers to request each individual item such
as a wheelchair, walker, and oxygen concentrator for patient
discharges. Under the CMS Competitive Bidding Program these
stakeholders may have to contact multiple providers just to meet the
specific needs of the patient. Why is this bad? Because, DME providers
currently compete for the business of both our customers and referral
sources. If competition is alleviated there is no incentive to meet
hospital or skilled nursing discharge timelines to return patients to
the home setting. With such reductions in competitive quality control
measures, increased hospitalization stays are inevitable, which results
in increases to Medicare expenditures on the hospital side.
Suppliers are being asked to make a bid that encompasses analyzing
so many variables that are out of their control such as shipping costs,
gas costs, and manufacturer price increases as well as increases in
employee benefits such as health insurance. We propose that all
suppliers be allowed to bid, regardless of the size of the
organization. If suppliers agree to quality and financial standards set
by CMS and they accept established payment amounts, suppliers should be
allowed to service all Medicare beneficiaries in the areas they serve.
CMS would be better off adhering to the inherent reasonableness (IR)
methodology authorized by Congress under the Benefits Improvement and
Patient Protection Act of 2000. The IR methodology includes procedural
steps to protect stakeholders and requires an analysis of the factors
that influence a determination to make a payment adjustment.
The CMS Competitive Bidding system is only going to enhance the
strength of the national DMEPOS providers who are already decreasing
the volume of staff involved in customer service and education to meet
the demands. We at Care Medical share the general consensus of the DME
industry in that decreasing the number of DMEPOS suppliers in this
manner will not allow for increased competition, but will rather
encourage lowered quality product and reducing the level of customer
service being provided to beneficiaries. Decreasing competition in the
DME industry can only be detrimental to patient care. DME providers
cannot increase prices charged to Medicare (they are set by the CMS
governed fee schedule), and various state Medicaid programs.
Providers of services earn the business by providing high quality
products, services, and care. Simply stated, eliminating competition
eliminates the incentives that our free-market economy is based on. We
also find it abhorrent that apparently no thought or consideration has
been given to the emotional or economic impacts of the resulting
displaced workers. This is a much larger issue than realized at first
glance. These employees and their families are dependent upon their
jobs for basic food, shelter, and healthcare.
Furthermore, Competitive Bidding is not a necessary strategy in
reducing Medicare expenditures, nor is it an appropriate response to
dealing with recent fraudulent practices in the industry. Allowables
can be reduced, quality standards can be enacted/enforced, and
accreditation requirements should be strictly upheld. These are the
direct responsibilities that have been constantly neglected under
Secretary Leavitt and Administrator Kerry Weems. Incidents of fraud and
overutilization have occurred specifically due to lack of oversight and
enforcement of CMS. Competitive Bidding will not resolve any of the
underlying issues that support fraudulent practices such as
overutilization. Perhaps the more pertinent question ought to be: Why
did CMS supply so many fraudulent providers with supplier authorization
numbers without inspections/enforcement of its own regulations?
The Medicare Access to Complex Rehabilitation and Assistive
Technology Act of 2008 (HR2231/S2931) would effectively exempt complex
rehabilitation equipment from the CMS Competitive Bidding Program.
Complex rehabilitation equipment is custom-configured items and
requires extensive customization for each patient due to serious
disease and disability. Often, these patients cannot afford the out-of-
pocket expenses associated with complex rehab equipment necessary to
continue being productive members of society. We request your offices
to contact Senator Baucus (D-MT) and urge for the addition of this
legislation to the upcoming Medicare package.
It is of our opinion that CMS Competitive Bidding Program is a
lose-lose public policy for healthcare, citizens, and business' alike.
Our company requests delaying Round 1 of the CMS DMEPOS Competitive
Bidding Program for a minimum 6 months period to obtain a third-party
evaluation of the program. This CMS program has been fraught with
procedural and operational flaws that continue to threaten the
integrity of the entire homecare industry, consequently affecting small
businesses such as myself, and ultimately the access of those Medicare
beneficiaries whom we serve.
Respectfully yours,
Angelene Adler, Vice President
Care Medical & Rehabilitation Equipment
1877 NE 7th Ave
Portland, OR 97212
(800) 952-9566
Statement of Annie Nation
To: Congressman Sam Johnson,
I am writing to express a concern regarding the Competitive Bidding
Program implemented by the Centers for Medicare and Medicaid Services.
As a supplier of Durable Medical Equipment this program will force us
to close our doors and the beneficiaries will lose.
On July 10, 2007 I mailed all the required documents to the CBIC.
They received the package tracking number EB57 3048 087US on July 11,
2007 at 12:43 pm in Augusta GA. The items were signed b L BENEFIELD.
The contracts were issued to suppliers on Friday 21, 2008 via Federal
Express. I did not receive my letter because they mailed it to my home
rather than my office which is on their files and every agency that is
associated with this program. On July 21, 2008 I spoke to Jean Catalano
(803) 763-8194 the Program Manager for Palmetto GBA who is overseeing
the CBIC Program. Ms. Catalano statement to me was ``You better pray to
God that the error was on our part rather than yours''. After 48 hours
on Tuesday March 25, 2008 at 8:28 am Trish, called me and said they are
still looking for the paperwork and someone will call back in 48 hours.
On Friday March 28th 2008 Lisa Edwards from Palmetto called and stated
it will be 30 days before we find your paperwork, but less than 30
days. How is it possible for all the providers to have the same or
similar documents missing?
One day the CBIC told Congressman Johnson's office they found my
paper work and that same evening I received an email saying they did
not. As of May 1, 2008 the CBIC and CMS has told me that the
documentation was never found and as of July 1, 2008 I will no longer
be able to provide service for our patients. CMS has not provided any
information nor have they found a resolution for the disqualified
suppliers. Their answer is we will notify you in a letter what our
findings are. This is a communistic way of doing business. CMS chooses
who they want to do business with and eliminate the ones they don't.
What happened to free enterprise? What happened to protecting the small
businesses the very back bone of this country. What CMS and CBIC have
said and what they did are very different. What they have told our
elected officials are all lies. That is if they decide to communicate
with them. They have entirely too much power. Not all suppliers are
fraudulent.
Sincerely,
Annie Nation,
President
Statement of Capital Medical and Surgical, Inc.
To: House Ways and Means Health Subcommittee
From: Capital Medical and Surgical, Inc.
Re: CMS DMEPOS Competitive Bidding Program
The current CMS DMEPOS Competitive Bidding Program has many flaws,
and is not good for the Medicare patients, or the DME/HME industry.
Many providers will be prevented from servicing the senior
population under this program. This will result in substandard patient
care and service. By reducing the number of DME providers able to serve
this population, many of these needed seniors will not be provided the
level and quality of service that they require.
Most of the DME providers are small business that are focused on
providing the needed service for this senior population. With the
competitive bidding program in its current form, many of these small
providers will be forced to close their business.
If the goal of CMS is to lower costs, there are better ways to do
it than limit the number of providers for the growing senior
population.
Statement of Cara C. Bachenheimer
Introduction
Invacare Corporation (NYSE: IVC) is the global leader in the
research, development, manufacture, and distribution of the broadest
product offering of innovative home medical equipment (HME) that
promotes recovery and active lifestyles for seniors and people with
disabilities. We sell a broad array of products to approximately 10,000
HME providers in the United States, including manual and power
wheelchairs, other mobility aides such as canes and crutches;
respiratory products such as oxygen concentrators, portable oxygen
systems, and new oxygen technologies; nebulizer compressors and
respiratory disposables; sleep therapy products; home care beds; low
air loss therapy products; bath safety products; and patient transport
equipment. In turn, our HME provider customers interface directly with
Medicare beneficiaries in their homes by furnishing and servicing these
items. The majority of this equipment falls under the definition of
``durable medical equipment'' as defined under Part B of the Medicare
Program.
Background
Section 302(b)(1) of the Medicare Modernization Act of 2003 (MMA)
requires, the Centers for Medicare and Medicaid Services (CMS) to
implement a ``competitive acquisition'' program for certain items of
durable medical equipment, prosthetics, orthotics and supplies
(DMEPOS). In 2007, the bid submission process began in ten of the
largest metropolitan statistical areas (MSAs), and bid rates will be
implemented on July 1, 2008. The first ten bid areas are: Charlotte,
Cincinnati, Cleveland, Dallas/Ft. Worth, Kansas City, Miami/Ft.
Lauderdale; Palm Beach, Orlando, Pittsburgh, Riverside/San Bernadino,
and San Juan. The ``competitive acquisition'' program will expand to 70
additional MSAs in 2009, and beginning January 1, 2009, CMS has the
authority to apply bid rates in non-bid areas. The MMA allows the
Secretary to contract with only as many providers as the Secretary
deems necessary to meet the demand of an area. Any provider not awarded
a contract will be prohibited from participating in Medicare for bid
items and services for up to three years.
On March 21, 2008, CMS and its contractor, CBIC,\1\ notified
bidders of whether they would be offered a contract to provide items
the suppliers bid on in each of the initial ten metropolitan areas. The
CBIC had six months to review the bids, and requested a 10-day
turnaround for suppliers to respond with a ``Yes'' or ``No'' answer,
and has stated that it needs four weeks thereafter to finalize the list
of ``winning'' bidders. We expect CMS to announce today the list of
winning bidders in each of the ten markets and the program is scheduled
to be effective July 1, 2008. This means that patients will have no
more than seven weeks to find a winning supplier if theirs did not
``win'' and transition their products and services to the other
supplier. Winning suppliers will take a 26% payment cut and will have a
short period of time to ramp up product inventories (assuming they are
credit worthy), hire and train new staff, purchase trucks and in many
cases will have to establish a new business location in the MSA.
---------------------------------------------------------------------------
\1\ The Centers for Medicare and Medicaid Services (CMS) contractor
for administering the bid program is the CBIC, or Competitive Bidding
Implementation Contractor. Palmetto GBA, based in Columbia, SC is the
CBIC.
---------------------------------------------------------------------------
The bid process forces HME providers to bid only lowest prices,
despite current rapid inflation and dramatically increasing costs such
as fuel. Winners of the bid do not really ``win'' as do military
contractors who enjoy a guarantee of certain volume. Instead winners
merely get the right to continue competing in the marketplace. Further,
bidders were not obligated to sell at the prices they bid (unlike
Medicare Part D contractors); providing skewed incentives that
fundamentally distort the bid process so that bid prices have no
relation to market prices. CMS allowed companies to bid who had no
physical location in or near the bid area. For beneficiaries with
respiratory and/or high end rehab needs, it is not possible to
appropriately serve beneficiaries long distance.
CMS is planning to implement Round Two of the program in an
additional 70 areas, and will begin the bid process this summer. Round
Two will add 18 million Medicare beneficiaries to the program.
Manufacturer Impacts
On July 1, 2008, when the bid program goes live for the first ten
MSAs, Invacare believes there may be significant problems in the credit
markets for the industry. Many providers who lost bids have become
bankruptcy risks for all manufacturers, if those providers rely heavily
on Medicare as a payor. It will also be difficult for manufacturers to
provide winning firms with the credit they are seeking given the lack
of guaranteed volumes, the significant payment cuts, and in some cases,
the size and financial stability of the company. These credit exposures
will become larger and more difficult to manage as the bid program is
rolled out nationwide. Further complicating the credit problem is the
fact that CMS offered contracts to many bidders who have no presence in
and have no history or experience in providing the product and services
in the particular bid area. The impact of credit issues at the provider
level may well ripple through to manufacturers particularly as the
process continues into 2009.
Consumer Impacts
Beneficiary Access to New Technology--Home respiratory technology
has evolved substantially over the last ten years. New home oxygen
technology is essential to meet the clinical needs of all
beneficiaries. New oxygen technology is more complex, difficult and
expensive to produce and is not a commodity class of goods. Physicians
and patients prefer the innovative, new oxygen technologies due to the
impact clinical outcomes and quality of life. Importantly, new oxygen
technologies will prove to be more cost effective for the Medicare
Program and the beneficiary. The President's intention to protect new
oxygen technology was ignored in the bidding process.
Despite the many advantages of newer oxygen technologies, the way
that CMS has structured the bidding program will stymie consumer access
to these technologies due to the antiquated code system that requires
providers to use the same code to bill for traditional and new oxygen
technologies. CMS could easily fix this problem by creating a separate
billing code for the stationary component of new technology, as it has
for the portable component of new technology. Beneficiary access to new
oxygen technology is further exacerbated by the Deficit Reduction Act's
requirement that the beneficiary assume ownership of all oxygen
equipment at 36 months. Under the bid program, CMS' final rule requires
contract suppliers to serve all beneficiaries; many beneficiaries will
presumably transfer from their supplier who lost to a contract
supplier. Contract suppliers will therefore begin to serve
beneficiaries who have been on oxygen for some months; without the
assurance of 36 months of payment. In fact, contract suppliers have no
idea before the program starts how many home oxygen beneficiaries it
will be serving, nor do they know at what month of medical need all
these beneficiaries will be in. In this situation, the contract
supplier will be forced to provide the least expensive oxygen system,
which is certain to be the oldest equipment. As a result, new
technology which physicians and patients prefer, and which requires
significantly higher up front investment, is likely not to be provided
to beneficiaries in the bid areas.
Beneficiary Access to High End Rehab Services--Provision of complex
rehab technology is not a commodity. Each consumer of complex rehab
technology has individual and specialized needs that require extensive
customization for the individual's needs. These items are simply not
appropriate for a competitive bid process that is designed to attract
low-ball bids on commodity items. Most importantly, if items or
services of sub-standard quality are provided, consumers' conditions
will be exacerbated, requiring more extensive medical intervention. The
bidding program is based on HCPCS codes, not individual products.
Herein lays the conflict for applying bidding to high-tech rehab and
assistive technology products. These products are uniquely configured
for the individual consumer based on diagnosis, prognosis and
lifestyle. Moreover, while products may be classified in the same HCPCS
code, they are not equal in regards to their ability to meet the
medical need of a consumer. Competitive bidding is not appropriate for
high-tech rehab and assistive technology. By nature, rehab companies
have a unique business model that involves a high level of personal
involvement between the provider and consumer and the integration of
licensed health care professionals throughout the process. These
products and integrally related services are particularly ill-suited
for the bid program because the bid program will result in DME
suppliers reducing services and selecting products provided based on
cost, not appropriateness. A reduction in services or limitation of
products based on price alone which would result from competitive
bidding, will have a severe negative impact on clinical outcomes
associated with the provision of high-tech rehab and assistive
technology.
Referral Impacts--Physicians and Hospital Discharge Planners
Physician referral sources as well as hospital discharge planners
will be limited to referring beneficiaries only to the small number of
contract suppliers in the bid areas. These contract suppliers are not
chosen based upon the referral sources' preference; they may not be
companies the referral sources are familiar with or have any assurance
that their patients will obtain the care they need. Hospital discharge
planners may have to wait longer period of time; requiring them to
incur costs of longer hospital stays. These referral sources will
likely have to arrange for services with multiple suppliers, since most
did not win contracts for multiple product categories. Finally,
referring physicians and hospital discharge planners will have no
assurance that their patients will obtain the level of care they
received in the past.
Summary of Unintended Beneficiary Impacts of the Bid Program
The First Round of the bidding program will eliminate an
estimated 71% of all suppliers in the first ten markets, including
small, medium and large businesses. Many of these suppliers will not
survive and will declare bankruptcy.
Almost four million Medicare beneficiaries who may need
DMEPOS are covered by the first ten competitive bid areas (CBAs). An
additional 18 million Medicare beneficiaries will be impacted by Round
Two.
CMS' selection of a relatively small number of suppliers
will result in an increase in ratio of beneficiaries to supplier of
339%--numerous winning suppliers will be overwhelmed by the huge
increase in volume which their systems and infrastructure may not be
able to handle.
Almost 224,000 Medicare beneficiaries who currently rely
on home oxygen therapy may experience a disruption of their service if
their provider does not grandfather, and tens of thousands of new
patients prescribed the therapy will have severely limited access from
July 1, 2008 forward. As they assume ownership of their equipment in
January 2009, they may have to switch providers in order to obtain
portable oxygen.
The largest oxygen patient bases impacted are located in
Miami/Ft. Lauderdale/Palm Beach, FL; Riverside/San Bernadino, CA;
Dallas/Ft. Worth, TX; Orlando, FL; Kansas City, KS/MO; Charlotte, NC
and Cleveland, OH.
Over 143,000 beneficiaries currently receiving home-
delivered diabetic supplies may be forced to switch providers by July 1
since there is no grandfathering provision and few of the providers
currently serving Medicare won bids. Small winners will be overwhelmed
by the rush of patients to switch by CMS' deadline.
Over 10,000 beneficiaries currently receiving home
enteral nutrition therapy may be forced to switch providers by July 1
since there is no grandfathering provision and few of the providers
currently serving them won bids.
Over 16,000 beneficiaries currently being treated at home
for Obstructive Sleep Apnea (OSA) may have to switch providers as they
assume ownership of their equipment under the DRA.
Almost 25,000 elderly beneficiaries currently relying on
hospital beds to remain at home may have to switch if their providers
do not grandfather due to irrationally low pricing in one or more
markets.
The 26% payment cuts, a significant reduction in revenue
stream, will it difficult for contract supplier to obtain needed growth
capital.
Beneficiaries may be forced to sever long term
relationships with their HME provider (particularly for beneficiaries
with high end rehab and oxygen needs). Plus, beneficiaries will be
forced to deal with increased paperwork (statements, deductibles) if
they have multiple needs that will be provided by multiple suppliers.
In addition, consumers will often be forced to choose a supplier they
don't want.
Unintended Consequences of the Bid Program, Round One
Ten major metropolitan areas will be directly negatively
impacted with job loss and bankruptcies, starting July 1, 2008. Long-
standing local companies who have offered quality homecare services for
decades were excluded from participating, and will be forced out of
business based upon government fiat. This will result in significant
local market disruption.
Beneficiary Disruption--Almost four million Medicare
beneficiaries will be impacted by Round One, and an additional 18
million Medicare beneficiaries will be impacted by Round Two of the bid
program. Beneficiaries have come to rely on the longstanding
relationship they have with their home oxygen and DME providers. Not
only will they be surprised to discover their long-time provider may no
longer be able to serve them effective July 1, they will also be faced
with obtaining services, equipment and supplies from multiple new
suppliers (some of whom may not be local or experienced in providing
the care they need).
Good Companies Arbitrarily Eliminated--Many suppliers
traditionally serving the initial ten bid areas did not win the bid for
products representing their core business. It appears that many non-
traditional and ``long-distance'' providers with little or no history
serving these markets won bids, simply because they bid the lowest
prices. Many of the winning bidders in these areas have no physical
presence where they won the bid; they have absolutely no ``skin in the
game.'' With little other bid criteria, super low bid strategies worked
to secure a winning position and potentially eliminating established
and more experienced companies from participating. These winners are
already contacting local providers who lost, with whom they wish to
subcontract to serve these local markets because they have no physical
presence in the market or competency in providing the products and
services they won. The CBIC told many bid applicants that their bids
were disqualified for technical reasons; no detailed explanation was
provided and there is no appeal process allowed. We expect significant
job loss and business bankruptcies in these communities. In a program
designed in part to weed out unscrupulous providers, this ``roulette''
game will instead result in the financial demise or disqualification of
some of the country's best providers on technicalities that cannot be
corrected. They are shut out of the market for at least three years.
Winners Did Not Necessarily ``Win''--Even suppliers who
won bids are seriously concerned that the deep payment cuts will make
it impossible to remain financially viable and be able to serve
beneficiaries throughout the three year contract period, given the
magnitude of the payment cuts (26% on average). Because of the median
price methodology, 50% of the winners must accept pricing below their
actual bid. Many will have difficulty in obtaining additional working
capital in the current credit environment. These cuts, combined with
the upcoming January 2009 implementation of the Deficit Reduction Act
of 2005 (DRA), will jeopardize patient access to care and services.
Finally, winning bidders cannot even sell their businesses without
government approval.
Program Threatens Long Term Viability of the Industry and
Its Ability to Serve Beneficiaries--As the industry's largest industry
creditor, Invacare foresees significant chaos in the credit market for
this industry given the tight margins that currently exist. Good
customers who lost bids have become instant bankruptcy risks. It will
also be difficult to provide winning firms with the credit they are
seeking given the significant payment cuts. Inflation rates for certain
provider costs have escalated since the bids were prepared and
submitted almost a year ago (e.g., fuel), yet providers must live with
the new rates for three years without any opportunity for adjustment.
Beneficiaries Will Suffer--When suppliers are forced to
establish an artificially low bid to obtain a winning contract, two
things often occur to the disadvantage of the beneficiaries they serve.
First, suppliers may substitute cheaper products and reduce the non-
equipment services they have historically provided, as they must find
ways to reduce their operating costs. Both the General Accounting
Office (GAO) and MedPAC raised this concern specific to portable oxygen
equipment, which CMS has identified and encouraged for its ability to
reduce costs to the Medicare program as well as improve patient quality
of life. Second, once budget pressures begin to set in for these
suppliers, due to poor inflation projections or unexpected
administrative costs from meeting capacity requirements, support
services are eliminated, for example, services such as 24-hour on-call
service, preventative maintenance, etc. Hospital discharge planners
will be forced to place patients in the hands of suppliers with no
track record of service. Further, a significant challenge for
beneficiaries will be the fact that they will have to obtain
competitively bid products from as many as nine different suppliers,
depending on the products and services they need to treat their medical
condition(s) at home. This is contrasted with their ability today to
receive many services from a single, local provider.
Answers Needed From CMS
1.
CMS' one-page notification letter and grid of wining/non-winning products,
along with reason codes, was simply inadequate for a program of this
magnitude. CMS must be held accountable for its decisions regarding which
suppliers won contracts and which did not. There was zero clarity around
how CMS determined each supplier's ``capacity'' and determined how many
winners were needed for each market. Since CMS disqualified many bidders
for supposedly not providing the correct financial reports (without giving
them the opportunity to rectify the situation), CMS must be fully
transparent and publicly disclose the financial criteria it used to assess
the financial information bidders submitted to CMS.
2.
CMS must publicly disclose how it calculated the single payment amount for
all the HCPCS codes in each product category in each competitive bidding
area. Some non-winning bidders lost by 1%, which represents pennies or
dollars, and since CMS' definition of ``capacity'' remains unclear,
arbitrary exclusions of high-quality, accredited providers occurred.
3.
CMS must explain why it relied on unsubstantiated ``supplier-reported''
capacity for growth (as explained by Mr. Weems on the March 20, 2008
national conference call) and how it used that capacity data to determine
the total number of winners needed for each market.
4.
If, in fact, errors occurred that were the fault of CMS and its CBIC
contractor, will CMS/CBIC fix the errors and allow affected suppliers to
participate?
5.
Since the Federal Acquisition Regulations are generally not applicable to
this process (via the statute), what legal basis exists for CMS' refusal to
provide information related to:
a.
The number of bids submitted in each product category for each of the ten
areas?
b.
The financial criteria and review process that were applied to the
supplier's financial information that was submitted?
c.
How CMS/CBIC calculated the single payment amount for each HCPCS code in
each product category in the ten areas.
d.
How CMS determined that a provider with an office eight hours away could
serve Medicare beneficiaries with home oxygen therapy?
Request to Congress
Given the high likelihood of significant negative impacts starting
July 1, 2008, and the series of fundamental procedural flaws already
identified (see Attachment), we recommend that Congress suspend the bid
program and work with the industry to establish a workable alternative
system.
Summary
This is a heavy handed government takeover of an industry, where
CMS determines whether individual businesses live or die, CMS sets
pricing, and controls an owner's individual right to even sell the
business. This ``Russian Roulette'' process will be repeated every
three years, steadily eliminating competition in the local markets
until oligopolies/monopolies are established and ensuring that
consumers have limited access to needed items. This is not the American
way.
Attachment
Fundamental Procedural Flaws/Irregularities
Following is a summary of the types of significant procedural flaws
identified since bidders were notified on March 21, 2008 of whether or
not they were offered a contract in any of the products and areas they
bid. It appears that so many errors have been made during this initial
supplier selection process that it has resulted in numerous suppliers
being improperly and unfairly removed from the bidding program. There
is no due process associated with this program. If these errors are not
addressed and Round One proceeds as is currently planned, Medicare
suppliers and the beneficiaries who rely on their items and services
will be irreparably harmed.
1. Many suppliers submitting bids were improperly and unfairly
disqualified from the process because of missing data, according to
letters they received. However, most of these disqualified bidders can
demonstrate that they did, in fact, provide the proper data to CMS and
should not have been disqualified.
2. Some suppliers were erroneously rejected because they
supposedly did not meet the requirement that they were accredited when,
in fact, these suppliers were accredited by the deadline.
3. MEPOS suppliers that were offered contracts were provided less
than ten days from the postmark date to accept the contract. This is a
very short period of time for a firm to evaluate the pricing impact and
contract terms and conditions and determine whether they will accept
the contract. Moreover, at the time they were offered contracts,
winning bidders had no information regarding how many other suppliers
were offered contracts in the product category, to determine how many
competitors will be serving the market. This is critical information to
determine whether the supplier can financially sustain the business at
the bid rate.
4. In some product categories, identical bid prices were
calculated for multiple bid areas, suggests flaws in the bid
calculation process. Unless the median bid submitted for these HCPCS
codes in these multiple markets was identical, this is highly
improbable mathematically, based upon CMS' final regulation on the bid
program. For example, in the high end rehab wheelchair product
category, there are 105 codes whose prices are identical in 2 markets,
24 codes' prices are identical in 3 markets, and 14 codes' prices are
identical in 4 markets. In the standard power wheelchair product
category, there are 76 codes whose prices are identical in 2 markets,
and 18 codes' prices are identical in 3 markets. In another example,
the new single payment rate for stationary oxygen systems is exactly
the same amount, to the penny--$136.90--in both Charlotte, NC and
Pittsburgh, PA. Again, this is statistically highly unlikely.
5. Suppliers were rejected based upon criteria that were never
communicated to bidders. For example, bidders submitted low prices for
codes that had close to or zero utilization, to maximize the
competitiveness of their ``composite bid,'' upon which they would be
compared with other bidders. These suppliers' bids for the entire bid
category were thrown out, supposedly because these items bids were too
low. In reality, if utilization is zero or very small, suppliers can
afford this. This type of application of financial criteria was never
publicized. It illustrates the subjective nature of the reviewers who
evaluated the bids, their lack of familiarity with DMEPOS business
operations and is contrary to the process CMS set up for suppliers to
submit bids.
6. On September 13, 2007, Twelve days before the bid window
closed, CBIC changed the Request for Bids rules. The original RFB
stated that ``beginning 10 business days before the bidding window
ends, suppliers will be notified if there are any missing hard copy
attachments.'' Two days before the bid window closed, the CBIC web site
document stated that ``the system will remain open for at least 15 days
after the bidding window ends to allow bidders to check the completion
status of their electronic bids and verify receipt of hard copy
documents by the CBIC.'' Therefore, at the last minute, the CBIC
changed the rules without informing suppliers who had already submitted
bids to require suppliers to verify receipt rather than the CBIC
notifying suppliers if there was missing information.
For more information, contact Cara C. Bachenheimer, Invacare's
Senior Vice President, Government Relations at
[email protected].
Statement for David Carey
Arizona Bridge to Independent Living (ABIL) is urging you to
support H.R. 2231 and S.2931, which will exempt complex rehabilitation
products and assistive technology products from the Medicare
Competitive Bidding Program.
As an organization that promotes independence for people with
people with disabilities we understand your concerns, however, a
blanket approach is not the answer.
In Arizona, the number of Durable Medical Providers (DME) has
dwindled as have the quality of service. Creating barriers to service
and causing many consumers, as well as some of our staff members to
wait months in order to get repairs to their mobility devices (i.e.
power wheelchairs). Besides losing taxable income from being unable to
work some individuals have developed secondary conditions that have
required medical attention. Which as you know, drives up the cost in
another area.
What we have now is a monopoly! A good approach would be to create
an open market, which will create competition, manage costs and give
consumers options to timely service similar to local automotive repair
shops. Doing so will allow individuals to be productive taxpayers
within the community, as well as remain healthy.
We urge you to ask your colleagues to support H.R. 2231 and S.
2931. On behalf of ABIL, your support is greatly appreciated!
Statement for Douglas T. Harris
Dear Chairman Stark and Ranking Member Camp:
Thank you for the opportunity to present these comments to your
committee. I enjoyed watching the hearing and I am anxious to see what
results will follow. The Scooter Store is the nation's largest supplier
of freedom and independence to Medicare beneficiaries via scooters and
power wheelchairs. We have been in business for nearly 20 years and
have over 1300 employee-owners (40% of the company is owned by our
employees in an ESOP). We have over 60 company owned and operated
locations in 42 states. We are proud to have a long standing tradition
of making proactive suggestions to CMS and Congress to improve the
Medicare benefit and continuously struggle to partner with CMS to
combat fraud and abuse. While there are many ideas I would love to
discuss with your committee, I will limit these comments to your recent
hearing on Medicare's bidding program for DME.
1. Members of the committee mentioned that the results of the
bidding showed that ``Suppliers are willing to take less, much less,
than the current Medicare fee schedule''. The committee's comment
demonstrates that the committee is not fully aware of how the bidding
process worked. Any bid that was not less than the current fee schedule
was automatically disqualified. The results do not necessarily indicate
that suppliers are ``willing'' to take much less than the current
Medicare fee schedule, it simply shows that some bidders understood the
rule put in place by Medicare for this process; bid lower or be
disqualified. Further, it shows how terrified some bidders were about
being put out of business by losing a bid for their core business as
they bid to sell some products at a LOSS.
2. Members of the committee mentioned a possible legislative
solution of setting aside the bidding process and resetting the fee
schedule at these new lower prices. We believe this would completely
destroy the integrity of a ``bid'' process. As Ms. King from GAO, and
Mr. Weems from CMS testified, suppliers that followed the rules in this
process understood that the primary incentives to bid low were to
retain Medicare business and gain market share. The committee's
suggestion would make the winning bidders compete with these new
substantial price reductions, AND eliminate any potential for increased
market share. Suppliers should be able to survive with lower prices if
they at least have the potential of increased volume. The committee's
suggestion would eliminate that simple economic reality. When Mr. Ryan
from AAHomecare said ``yes'' to that suggestion, he was clearly
speaking on behalf of the losing bidders and not necessarily the
winning bidders.
3. The Chairman expressed concerns about methods The Scooter Store
might use to supply oxygen services. While we appreciate his humorous
point to Mr. Weems at our expense, we can assure you that any and all
respiratory patients we serve will receive the highest quality
equipment and services. As one of the largest DME suppliers in the
country, we have an outstanding family of over 1300 employee-owners,
with operations in 42 states. We have been accredited for almost 5
years for all DME items, and we will continue to meet and exceed CMS's
highest standards. As noted later in the hearing by Administrator
Weems, we meet all of the newly created higher standards for oxygen
services. The Chairman also expressed concerns that we would be serving
the beneficiary from hundreds of miles away. While our national
headquarters are in New Braunfels, Texas, we also have over 60 company
owned and operated facilities in 42 states.
4. Over 60% of the bidders were disqualified. The committee
indicated that this must indicate some type of ``systemic problem''
with CMS' process. Clearly the other option that must be considered is
that there are ``systemic problems'' with many suppliers. While we
agree that CMS's online bidding tool was an absolute mess, it was not
impossible; as evidenced by the other 40% that figured out how to make
it work. CMS, Congress, and even some industry insiders have been
advocating for many years that the entire DME industry needs to
substantially raise its level of professionalism. We believe the high
disqualification rate substantially supports that argument.
5. The committee questioned whether or not the bidding process
would result in a reduction in the number of suppliers, and thus a
reduction in competition. We do not think that will be the outcome. As
an example: In 2006 for the Miami bid area there were approximately 900
suppliers that furnished ``standard power mobility'' equipment to
approximately 5000 beneficiaries; or an average of about 5 sales per
supplier per year. Under the new bid process there will be less than 20
suppliers servicing the same area. This process will prevent over 850
suppliers from selling standard power mobility in Miami, but it was
also allow the winning bidders to average 250 sales per year and thus
achieve an economy of scale that could possibly create an opportunity
for even greater savings to CMS and the beneficiary in the future.
6. The committee asked an outstanding question about the pricing
for Medicare Advantage (MA). If the structure of this bid was so good
that CMS wouldn't change a single thing, then why not bid MA this way.
Remember, the simple mechanics of this DME bid were that if you did not
bid LESS than the current Medicare price, your bid was automatically
disqualified. So, how do we have MA costs that are $150 Billion higher
than if those beneficiaries were on straight Medicare? MA companies are
allowed to bid higher than the current Medicare cost. CMS had one
pricing rule for DME bidding and not for MA bidding. So, what does this
have to do with the current hearing questions? Simple again. The
Chairman made it clear under ``Pay-Go'' rule we must find a $6 billion
offset to delay or correct the problems with the current DME bid. Delay
Round 1 of the DME bid for 6 months to get the obvious problems
resolved, and delay Round 2 until there is clear information about the
success or failure of the Round 1 implementation, AND at the same time
add this really cool new rule (bid lower than current cost or be
disqualified) to the MA bid and you have SAVED $140 BILLION.
7. The committee asked questions about tracking high cost DME
items with serial numbers as a way to prevent fraud and abuse. We
believe this is an excellent idea. The standard CMS claim form already
has an input box for the product's serial number, and thus it could be
submitted with every bill. This would give CMS the first tool of its
kind to avoid improper payment BEFORE they are made, instead of the
current method of paying now, and chasing down overpayments later. I
would love the opportunity to discuss this idea with you or CMS at any
time.
8. Additionally, as a fraud fighting method we encourage CMS to
immediately implement the $65,000 surety bond for DME suppliers that
was already authorized over ten years ago in the BBA of 1997. Earlier
this year a bill was proposed to raise the $65,000 bond limit to
$500,000 since someone believed the $65,000 clearly wasn't preventing
fraudulent suppliers from stealing money from Medicare. However, the
big news should be that the $65,000 bond has never been implemented.
The amount doesn't need to be raised. CMS just needs to enact the
project. We urge you to require CMS to add this fraud fighting tool
immediately.
Thank you again for looking into ways to make this bidding program
work for everyone. If competitive bidding is done properly then CMS,
beneficiaries, the tax payer, AND suppliers can win. If the bidding
program is executed poorly, it might get a good score from CBO, but it
will wrongfully and unfairly hurt suppliers, CMS, and worst of all
disabled beneficiaries.
Respectfully submitted,
Douglas T. Harrison
Founder and President
The SCOOTER Store
(830) 626-5802
The SCOOTER Store
1650 Independence Drive
New Braunfels, TX 78132
Statement of Ellen S. Durrence, Letter
The Honorable Pete Stark:
Please accept this letter as our formal request to submit our
comments for inclusion in the record of the hearing on Tuesday, May 6,
2008.
As a small, local DME provider in Charleston, SC, we have several
concerns relating to the implementation of the competitive bidding
program. We met with our State Representatives regarding this program
and they feel, as we do, that it is ``Anti-American'' because it will
eliminate the patient's freedom of choice, eliminate competition,
create a significant loss of jobs, and destroy small businesses.
We have served our community for more than 20 years and have
provided much needed medical equipment to area residents, many of whom
live in rural areas with little or no ability to access routine
healthcare. We have established long-term relationships with many of
these families and are concerned for their future ability to access a
medical equipment provider if this competitive bid program is
implemented. Additionally, we employ 35 dedicated people who take pride
in delivering the much-needed items to our patients. We, with several
other independent providers, are facing an imminent threat of losing
both our patients and our employees.
Following are urgent, legitimate concerns for our patients as well
as small business providers and employees:
Round 1 eliminated 65% of bidding applicants
Applicants were rejected for reasons CMS has yet to substantiate
Patients will suffer
Patients will be required to get a bed from one provider, a bed-
side commode from another and a wheelchair from yet another provider
Access to Durable Medical Equipment providers will be extremely
limited, some patients will be hours away from the nearest provider
Equipment standards will decline due to the significant
reimbursement cuts; providers may supply sub-standard equipment in
order to survive the drastic cuts
There is no assurance that the ``winning'' providers will be able
to stay in business with these reimbursement rates. If they are forced
to close, what provisions are in place to assure patient access? By
this time, the ``losing'' providers will have already been eliminated
from the industry.
More than 60% of the nation's independent providers will be out of
business
Because independent providers do not have the backing of a large
national chain, the independent providers are typically the ones
willing to ``go above and beyond'' for the patients and are willing to
reach the outliers
Thousands of jobs will be lost
Round 1 has already eliminated 2,500 jobs
Round 2 is estimated to eliminate 15,000 jobs
CMS administrative costs will absorb the majority of any ``savings''
projected
Please, I urge you to stop the competitive bidding process. The
durable medical equipment providers are more than willing to work with
CMS to help reduce costs, however, this process will, inevitably,
damage the industry and the patients relying on it.
Sincerely,
PHARMACEUTICAL HEALTH CARE
Ellen S. Durrence, R.Ph.
Vice President
Letter Submitted by:
Ellen S. Durrence, R.Ph., Vice President
Pharmaceutical Health Care
Statement of Eric Sokol and Stephen Azia, Letter
Dear Chairman Stark and Ranking Member Camp:
The Power Mobility Coalition (PMC), a nationwide association of
suppliers and manufacturers of motorized wheelchairs and power operated
vehicles, applauds the House Ways and Means Subcommittee on Health for
holding a hearing examining the problems implementing the competitive
bidding program for Medicare durable medical equipment, prosthetic and
orthotic supplies (DMEPOS).
As numerous witnesses at the hearing testified, various bidding
irregularities were identified and an inordinate number of suppliers
were unfairly disqualified during the first round of bidding. According
to the American Association for Home Care, nearly two-thirds of
accredited qualified DMEPOS suppliers who submitted bids were
disqualified in the first round.[1]
Moreover, single payment amounts for competitively bid DMEPOS items
in the impacted Metropolitan Statistical Areas (MSAs) resulted in a 26%
cut under current fee schedule amounts. For power mobility devices
(PMDs), this translates to a 21% decrease across the ten impacted MSAs.
This cut comes on the heels of a 27% reduction in PMD reimbursement
when CMS established a new PMD fee schedule in November, 2006. In just
17 months, therefore, PMD reimbursement will have been reduced by
nearly 50% in competitive bidding areas.
Even without these competitive bidding rates being implemented,
utilization for PMDs has already been negatively impacted. According to
CMS' own projections, 243,000 prescriptions for PMDs were expected to
be written in 2007.[2] SADMERC data shows, however, that only 180,000
PMDs were provided by Medicare or 30% (57,000 beneficiaries) below CMS'
own forecast.
As a result of these bidding irregularities, the possibility of
systemic problems in the bidding process and the further cuts in DMEPOS
reimbursement that threaten service and access, the PMC supports
efforts to delay implementation of the program until the all problems
and irregularities in the bidding process have been identified and
resolved in a manner that will ensure beneficiaries access to high
quality DMEPOS items.
In the alternative, the PMC offers the following recommendations to
improve the competitive bidding program by establishing a more level
playing field among bidders, compelling greater supplier participation
and establishing safeguards to ensure beneficiary access. These
recommendations include:
Increasing Transparency in the Bidding Process
The current bidding process is shrouded in secrecy increasing the
mistrust between bidders and the Competitive Bidding Independent
Contractors (CBIC). The PMC recommends that the CBIC share bidding
methodology and criteria used to establish the single payer amounts in
impacted MSAs. The PMC recommends that the CBIC release a report,
shortly after it awards contracts in each bidding round, which sets
out:
1) number of total unique bidders;
2) number of bidders awarded contracts;
3) criteria of how bidders financial statements were evaluated;
4) how utilization and capacity was evaluated;
5) was accreditation reviewed; and
6) how the single payment amount was calculated for each MSA.
Allowing Suppliers the Ability to Correct Minor Errors or Omissions
As numerous witnesses at the hearing testified, many suppliers were
unfairly disqualified from the initial round of competitive bidding
because of missing information on their bidding application or
confusion surrounding bidding instructions. Some of these applications
could have been easily corrected and suppliers could have avoided
disqualification if they had an opportunity to cure these applications
prior to deadline. The PMC recommends that CMS instruct the CBIC to
alert suppliers within 30 days of submission if their applications
contain some minor errors or omissions and, further, provide suppliers
with 10 days to make corrections and resubmit the application.
Establishing an Appeals Process
Under the competitive bidding rules, suppliers have no
administrative or judicial review for ``the awarding of contracts''
under the competitive bidding program.[3]
The PMC has concerns that CMS can conduct the competitive program
without any opportunity for administrative or judicial oversight of the
process. Considering the number of procurements that are set aside each
year by the General Accountability Office (GAO) and the United States
Court of Federal Claims based upon government error, it is
inconceivable that CMS would even suggest such a secret and insulated
process. This is a recipe for arbitrary and erroneous awards.
Suppliers who have a reasonable grievance should be able to
challenge a determination of the CBIC before an independent entity or
Administrative Law Judge to ensure fairness and due process. Suppliers
will be staking resources and, in certain instances, survival of their
business on contracts awarded by the CBIC. As a result, suppliers must
be afforded the right to contest questionable determinations. Further,
to ensure no disruption in DMEPOS services to beneficiaries, any
independent appeals process must be expedited.
As a result, the PMC recommends that Congress require any
competitive bidding program to be subject to the traditional judicial
review of procurements conducted by the government.
Providing COLA Increase for Single Payment Amounts
CMS should allow for cost of living adjustments (COLAs) to single
payment amounts determined under the bidding process. COLA increases
will ensure that suppliers are fairly compensated if costs increase as
a result of inflation or other economic pressures. Such an adjustment,
moreover, will ensure that suppliers won't have to cut back on quality
or services in order to continue participation in the Medicare program
and will aid suppliers in meeting capacity targets set out in the
bidding contracts.
Monitoring Supplier Capacity and Allow the CBIC to Make Mid-Course
Corrections
At the hearing, the GAO recommended that CMS closely monitor
competitive bidding, through beneficiary and supplier surveys and other
oversight, to ensure access and that contracted supplier's meet
capacity. The PMC recommends that CMS give the CBIC the authority to
contract with new suppliers if GAO reports potential beneficiary access
issues as a result of suppliers failing to meet capacity for a
particular product in a particular MSA.
Requiring at Least a 10% Savings Before a DMEPOS Item Can be Subjected
to Competitive Bidding
Given the costs to the Medicare program in establishing and
implementing the competitive bidding program, the PMC recommends that
CMS exempt those items and services for which the application of
competitive bidding is not likely to result in significant savings of
at least 10%. This will ensure the outlays made by the Medicare in
implementing a bidding process will pay off in a net savings to the
program.
Prohibiting CMS from Extending Single Payment Amounts Beyond
Competitive Bidding Areas
Under competitive bidding rules, CMS has the authority to extend
single payment amounts for DMEPOS items to areas that have not been
subjected to competitive bidding after 2009. The PMC recommends that
Congress repeal this authority since reimbursement reductions in rural
or underserved areas will further exacerbate beneficiary access and
jeopardize the mostly small, ``mom and pop'' operations that serve
these communities. Suppliers who serve rural and underserved areas have
to travel great distances to service beneficiaries and often their
costs are higher since they serve fewer patients and cannot take
advantage of volume discounts.
Establishing a Serial Number Tracking Program for DMEPOS Items
CMS has characterized competitive bidding as an additional anti-
fraud tool. Since the late 1990's, the agency has testified to Congress
than more needed to be done to address fraud and abuse. In 2001, former
Health and Human Services (HHS) Inspector General, June Gibbs-Brown
testified to Congress that the two primary issues the Medicare faces
with DMEPOS suppliers is paying for products never delivered and/or
paying for more expensive items that what was actually delivered to the
Medicare beneficiary.
Rather than punitively punishing legitimate providers by
drastically reducing the fee schedule, the PMC recommends that CMS
establish a serial number identification program that can track
individual DMEPOS items through the claims process. Under such a system
DMEPOS manufacturers could report serial numbers to be included in a
CMS data base. Suppliers would then have to include the serial number
on their claims, allowing CMS to monitor and track supplies from
manufacturer to supplier to beneficiary.
The PMC appreciates the opportunity to comment on the establishment
and implementation of the competitive bidding program for Medicare
DMEPOS items. The PMC agrees with many members of the Subcommittee who
question CMS' characterization of the program's implementation and
urges Congress to delay any further implementation of the program or,
in the alternative, implement the above-described recommendations.
The PMC wishes to note that the Medicare PMD benefit provides
thousands of beneficiaries with freedom, independence and the ability
to live healthier and more active lives. PMDs save the Medicare program
resources by keeping beneficiaries with compromised or limited mobility
out of more costly institutional settings and decreasing their need for
hospitalizations by making them safer in their environments. We look
forward to working with the Subcommittee on appropriate competitive
bidding program safeguards to ensure that qualified beneficiaries
maintain access to high quality DMEPOS items and services, including
PMDs
Respectfully Submitted,
Eric Sokol
PMC Director
Stephen Azia
PMC Counsel
Statement of Ford C. Greene
SUBMISSION FOR THE RECORD
1. Please explain the rational for not letting everyone who will
accept Medicare reimbursement for an item remain in the program and
remain a provider. This decrease in providers WILL stop the advancement
of NEW technology. In the Cincinnati MSA the three largest private
companies who specialize in respiratory products and home oxygen are
OUT of the Medicare program for three years. These three companies use
the latest and smallest technology for it's patient's. The winning
companies do not embrace this idea.
2. Competative Bidding WILL cost many job's in the MSA area's,
effecting small business a disproportional amount!
3. Why were companies that did not have an office in the MSA
allowed to bid?
Ford C Green
CEO
Green Respiratory Services Inc.
513-831-0507
Statement of Freeman H. Smith, Letter
Dear Chairman McNulty:
The American Subcontractors Association, Inc. (ASA) appreciates the
opportunity to submit comments for the record on employment eligibility
verification systems and the potential impact on the Social Security
Administration's core mission of serving retirees, workers and people
with disabilities. We would like to commend the Subcommittee for its
leadership on this important issue, and hope that our members'
experience with work authorization might be useful as you work to
determine the effects these new systems will have on SSA.
ASA represents more than 5,000 businesses who are primarily engaged
in non-residential construction subcontracting. We are also concerned
about the burden these employment authorization systems will have on
SSA and believe that both the extent of the burden and the costs that
will inevitably be born by SSA have not been adequately studied.
ASA remains committed to working with Congress to enact
comprehensive immigration reform that will not unduly burden employers
or Federal agencies. ASA's position on immigration reform calls for a
comprehensive legislative package that:
Addresses both future economic needs for workers through
the creation of a guest worker program and practically
addresses the estimated 7-11 million undocumented workers
already in the United States.
Creates an immigration system that functions efficiently
for employers, workers, and government agencies.
Creates a program that allows hard working, tax paying
undocumented workers to earn legal status.
Ensures that U.S. workers are not displaced by foreign
workers.
Ensures that all workers enjoy the same labor law
protections.
Strengthens national security by providing for the
screening of foreign workers and creating a disincentive for illegal
immigration.
Strengthens the rule of law by establishing clear,
sensible immigration laws that are efficiently and vigorously enforced.
Thank you again for the opportunity to submit comments for the
record. I hope you will let me know if we can be of assistance as the
Subcommittee works to address this important issue.
Very respectfully,
Freeman H. Smith,
Director of Government Relations
Statement of Greg Butchko, Letter
To Whom It May Concern,
My name is Greg Butchko. I own a Medical Supply company in Austin,
TX that employs three full time employees, one part-time employee and a
contract sales person. We are growing and expect to add another full-
time employee this summer. I started the company five years ago after
being laid off from a High Tech Company that I moved my family here to
work for, which almost sent us into bankruptcy.
Although Austin is not scheduled to be in a competitive bid MSA
until Round 2, I am extremely concerned with the information coming out
as a result of the round one implementation of competitive bidding to
date for a number of reasons:
the overlooking of small providers
a flawed certification/application process
unfair bidder exclusions
an excessively short period (10 days) for contract
acceptance in round one
My greater concern is that should the commercial payors, which
already pay at a reduced percentage of the Medicare allowables, choose
to adopt these new rates, every item we sell will be paid below our
cost. We will have no choice but to shut down, and I will once again be
on the street, looking for a way to feed my family.
The House Ways and Means Health Subcommittee has scheduled a
hearing on the Medicare bidding program tomorrow (Tuesday, May 6). The
hearing will begin at 1 p.m. in the Longworth House Office Building. I
hope that you or one of your staff will attend the meeting and let our
concerns as a small business in your district be heard.
Sincerely,
Greg Butchko
Sungate Medical
Statement of Henry Ford Health System
Thank you for the opportunity to submit comments regarding the
Medicare Competitive Bidding Program for Durable Medical Equipment,
Prosthetics, Orthotics and Supplies (DMEPOS). I am Nancy Schlichting,
President and CEO of Henry Ford Health System in Detroit, Michigan. I
am also President-Elect of the Michigan Health and Hospital
Association.
About eighteen months ago, Henry Ford Health System (HFHS) began
collaborating with health systems in Michigan and other states in an
effort to prepare for the eventual rollout of the CMS competitive
bidding program for DMEPOS in 2008 and 2009. Our coalition includes
Michigan's premier healthcare organizations, such as the University of
Michigan, Beaumont Hospitals, McLaren, Sparrow, St. John's Health-
Ascension, Munson, Mercy Memorial, Genesys Health System/Ascension and
Oakwood Health. Michigan has many comprehensive health systems that
have integrated the full continuum of care, including hospital,
physician, home-health and DMEPOS services under a single health system
entity. All hospitals and health systems in Michigan are not-for-
profit.
Medicare and many private insurers, including Blue Cross of
Michigan, have encouraged integration of care and reward cost-effective
care management. Our experience demonstrates that DMEPOS services are
vital to our ability to release patients from the hospital when they
are clinically ready to go home, and secondly to prevent unnecessary
readmissions. These are hallmarks of an efficient and cost-effective
health system. In order to preserve our ability to integrate care, we
are seeking legislation that will allow hospitals and health systems to
provide DMEPOS services for our Medicare patients at a price determined
through competitive bidding, without risking disqualification under
competitive bidding.
The Medicare Modernization Act of 2003 directs CMS to establish
competitive acquisition strategies for DMEPOS, which CMS has translated
into a program of competitive bidding with contracts awarded based on
price, capacity to serve a large number of patients and quality
standards. During consideration of the final CMS rule in 2006 and 2007,
we filed comments requesting consideration for the hospitals and health
systems. The American Hospital Association made similar requests. No
changes to address our concerns were made in the final CMS rule. We
fully support the broad goals of competitive bidding on cost savings
and improved quality for patients. However, we are concerned that the
final CMS rule fails to recognize a continuing role for hospitals and
health systems; similar to what has been provided for physicians and
others.
Unlike DMEPOS vendors, physicians, hospitals and health systems are
primarily focused on a broad spectrum of patient care. We are committed
to doing what is best for the patient and to provide care in the least
expensive setting. Home care and DMEPOS is an essential link in our
strategies to provide safe and high quality care outside the hospital
setting. Where patients and our hospitals currently can count on making
one call to our own employees for all of the services covered by DMEPOS
competitive bidding, we will now face an array of separate contractors
for each of the ten services included under competitive bidding. The
DMEPOS services are prescribed by physicians. Our hospital discharge
planners work with patients and families to assure that everything is
ready when the patient is ready to go home. The prospect of converting
this efficient and cost-effective process of hospital discharge
planning into what will necessarily involve a number of unaffiliated
contractors is daunting and probably not feasible. Many of our Medicare
patients leave the hospital with multiple DMEPOS requirements, such as
a wheelchair, oxygen, surgical supplies, diabetic supplies and a bed.
Coordinating this array of equipment and supplies among many
contractors will destroy what is now a seamless process and introduce
the opportunity for mistakes and unnecessary cost. Patients and
families will face similar difficulties with the unbundling of services
formerly available from us on a ``one stop shopping'' basis.
A key barrier to hospital and health system participation in
competitive bidding is the CMS requirement that all bidders demonstrate
their ability to serve all Medicare patients in very large regions
defined through zip codes by CMS. The Henry Ford Health System includes
7 hospitals and the Henry Ford Medical Group, with more than 1,000
salaried physicians and researchers in 40 specialties. We provide care
to more than 1 million southeast Michigan residents per year, and we
employ more than 22,000 health care workers and professional staff.
Although our hospitals serve large numbers of Medicare patients (33% of
total payer mix at HFHS), we are not ready to provide DMEPOS services
to all Medicare patients in this region without significant new
investment, and we have no incentive to compete for DMEPOS patients
from other Michigan hospitals. The final CMS rule does not provide a
safe haven that would allow us to forge relationships with other health
systems and create regional hospital-based DMEPOS networks without
violating anti-trust laws. Because our hospital-based DMEPOS services
are owned and controlled by HFHS, which has more than $3.2 billion in
annual revenues, the small business exemption for companies with less
than $3.5 million in annual revenues does not apply. Our dilemma is
similar to other health systems in Michigan and other states.
Most hospitals and health systems are preparing to file bids for
some or all of the DME services subject to competitive bidding, even
though we do not expect contracts. Our colleagues in states already
affected by competitive bidding in 2008 report either disqualification
or failure to win contracts. For example, the SUMMA Health System in
Ohio, serving 9 hospitals, was disqualified. BayCare in Florida,
serving 11 hospitals, was disqualified. Cleveland Clinic in Ohio,
serving 9 hospitals, was disqualified. The University of Pittsburgh
Medical Center, serving 13 hospitals in Pennsylvania was not able to
bid low enough to qualify for a contract. These companies are part of
our coalition of hospitals and health systems and require immediate
help.
A losing bid or disqualification poses a huge threat to our
hospitals and patients, as well as the communities that rely on us. The
hospital is a key link in disaster planning, with our DMEPOS employees
providing essential items and coordination that have proven effective
for responding in the first critical hours of a natural disaster, such
as flooding due to a hurricane (in Florida) or a terrorist attack (New
York). Also, at Henry Ford, we are often called upon to provide DMEPOS
services at no cost to patients who can't pay, along with home health
services. We do this to help our patients, but also because the cost of
equipment and supplies is often less than a hospitalization would be.
These community benefits will be lost if hospitals and health systems
are not allowed to participate in the Medicare DMEPOS program. CMS has
no requirement that contractors participate in disaster planning or
provide charity care.
CMS has estimated more than $1 billion savings to the Medicare
program and patients as a result of competitive bidding. We believe
this estimate should be revisited to also encompass the significant new
inpatient costs where our hospitals are not able to discharge patients
and where patients are readmitted due to the inability or unwillingness
of an outside contractor to provide services on a timely basis. We are
also worried about repairs and replacement of equipment that is needed
to prevent fragile home-based patients from returning to the hospital.
During the recent power outage that left the Detroit area without
electricity for several days, for example, DMEPOS vendors advised home-
based patients to call us or return to the emergency room for oxygen
and other supplies until power could be restored and deliveries
resumed. We were able to organize supplies with sister health systems
in the Lansing area for these patients, even though we were not
responsible for their DMEPOS services. If our hospital-based services
cannot be maintained, this kind of safety net for DMEPOS services will
disappear.
We do not believe a grandfathering for hospital-based DMEPOS
services would in any way interfere with competitive bidding. For
example, we have reviewed the CMS listing of the top 100 suppliers of
Medicare DMEPOS services, which provide approximately 50% of all
Medicare DMEPOS care to patients. Less than 1% of revenues in this top
100 group are part of a hospital or health system. The presence of
hospital-based services in the marketplace is simply too small to
adversely affect the number of bidders. Similarly, by accepting
whatever pricing is determined through competitive bidding, we will
actually contribute to the overall savings anticipated from the
program.
The CMS rule includes quality standards for DMEPOS companies, which
are long over-due. High standards are not new for our hospital-based
DMEPOS services, since they are already subject to accreditation
reviews by the Joint Commission on Accreditation of Hospitals (JCAHO),
as well as transparency of business practices required under IRS rules,
because they are part of our non-profit health system.
Our coalition of hospitals and health systems has come together to
ask Congress for legislation that will preserve our role in providing
DMEPOS services as part of our continuum of care. Because Medicare
constitutes upwards of 30% to 40% of our DMEPOS service volume, we are
not sure that we can continue this service without access to Medicare.
Our coalition includes 60 hospital-based DMEPOS companies owned and
controlled by health systems consisting of more than 225 hospitals in
23 states:
1. Alaska 9. Michigan 17. Pennsylvania
2. Arizona 10. 18. Tennessee
Minnesota
3. Colorado 11. Missouri 19. Virginia
4. Florida 12. New York 20. Wisconsin
5. Illinois 13. North 21. North Carolina
Dakota
6. Indiana 14. Ohio 22. South Carolina
7. Iowa 15. Oklahoma 23. Washington
8. Maryland 16. Oregon
We respectfully ask the House Ways & Means Health Subcommittee to
consider including in the Medicare package this year legislative
language that preserves Medicare patient access to DMEPOS goods and
services currently available through non-profit hospitals and health
systems.
Respectfully submitted,
Nancy M. Schlichting
President & CEO
Henry Ford Health System
One Ford Place
Detroit, Michigan 48202
Statement of Hugh D. Durrence, Letter
The Honorable Pete Stark:
Please accept this letter as my formal request to submit our
comments for inclusion in the record of the hearing on Tuesday, May 6,
2008.
I am a physician practicing family medicine in Charleston, South
Carolina. As such, I see patients every day that have illnesses or
injuries that can be treated easily in the patient's home. It is a good
outcome for everyone; the patient desires to remain in his or her home
and the government saves considerable money given this option in lieu
of a hospital or facility stay.
Having said that, I am deeply concerned that the Competitive
Bidding Program currently being implemented by CMS is threatening the
``patient home option''. As a physician, I foresee numerous challenges
my patients and staff will face under this program.
Following are some of my concerns:
Patients, very possibly, will need to acquire home medical
equipment from various suppliers. Typically, these patients are elderly
and often times confused by the healthcare maze. Can you imagine an 80-
year old lady coordinating the delivery of home medical equipment from
2, 3 or even 5 different suppliers for the husband she is caring for in
the home? Couple that with the ``invasion'' of the suppliers' delivery
technicians and the required documents each supplier will demand be
completed upon delivery. You now have an overwhelming situation for the
caregiver. I would also imagine that each supplier would demand the
patient pay his or her deductible upon delivery. If equipment is being
furnished by different sources, who will monitor when and if a patient
has paid the deductible. For example, Company A is delivering a
hospital bed and requires receipt of the patient's deductible amount.
The patient complies, only to have the second supplier arrive moments
later with the oxygen concentrator. They, too, demand a deductible from
the patient because they have no confirmation that the patient has met
the deductible with the first provider. This second provider will not
leave the oxygen concentrator without payment because the reimbursement
is such that they can't risk it. Now you have the patient paying
duplicate deductibles with the hope of being reimbursed from Medicare
some time later. These patients are often on fixed incomes. This has a
great potential of being financially damaging to the patient.
Case workers, discharge planners and physician office staff will
have an extremely difficult time placing equipment for patients if they
are required to call several different medical equipment providers.
Currently, hospital caseworkers and discharge planners are overloaded.
Thus, they attempt to discharge the patient quickly in order to manage
their caseload. They must ensure the patient's needs have been met when
they return home. Under the Competitive Bidding Process, caseworkers,
discharge planners and physician office staff will triple their already
overwhelming workload by trying to coordinate the medical equipment
with various providers. I foresee the ``overloaded'' discharge planner
or caseworker taking ``shortcuts'' to get the patient out. This could
be potentially damaging to the patient if appropriate equipment is not
placed in a timely manner, or not at all. We could expect to see
hospitals admissions increase as a result, thus resulting in increased
government expenditures. I would also imagine we could expect to see
increased patient health issues if the patient does not receive
appropriate or adequate equipment when ordered.
Reimbursement rates have been reduced by an average of 26%. How can
we expect a medical equipment provider to absorb such a significant
cut? How will they remain in business and assure the patients get the
necessary equipment? The providers offered a contract under this
competitive bidding program must provide the equipment under these
reduced rates for a period of 3 years. There are no accommodations for
vendor price increases, economy fluctuations, employee wage increases
or even cost of living increases. The providers that did not get
awarded a contract will be long gone. What assurances are in place that
contracted bidders will remain in business? The potential for complete
loss of equipment access defiantly exists under the current Competitive
Bidding process.
I, and many other physicians, am terribly concerned for the
patient's ability to maneuver this process. I respectfully request your
immediate action to stop the Competitive Bidding Program and implement
an alternative cost-cutting option for the medical equipment providers.
Sincerely,
Hugh D. Durrence, R.Ph, M.D.
President
Statement of James T. Bragiel, Letter
Dear Congressmen,
The idea of competitive bidding for durable medical equipment sound
good on the surface but, it WILL put many small suppliers out of
business. My company is small compared to the nation-wide providers but
we are average sized when compared to the multitude to oxygen providers
throughout the nation. We have seven employees. We cannot even provide
all the oxygen services to the city of Midland let alone the entire
state. I cannot afford to staff or buy equipment to cover the state of
Michigan, and I'm not sure I would even want to do it. I do understand
that Medicare needs to save money and that there needs to be a
reduction of prices, even if I don't like it. We now get paid less than
half of what we did in 1997. I don't know of any other business that
could survive if that reduction hit their company.
What I am asking for is to allow the small providers (less than 50
employee's) to accept whatever price the bidding decides and let those
small providers continue to service Medicare patients. Please feel free
to call me regarding this subject. My very existence as a business, and
that of thousands of other suppliers, hinges on your decision.
Sincerely,
James T. Bragiel
Statement of Jann Sherin, BS, RRT, RCP, Letter
To the House Ways and Means Committee:
I am a Respiratory Therapist, and have been a therapist for 38
years, in homecare for the last 21 years. I was in healthcare when the
first question that was asked of the patient was ``What's your
problem?'' as opposed to today where the first question is ``What's
your insurance?''--And the insurance will determine your treatment and/
or care. Maybe I am ``old school'', but as a healthcare worker, I
resent it! What kind of treatment or care would you want for you or
your relative? The sad fact is, ``care'' is exiting from healthcare.
In an industry that is driven by third party payments with less
coverage for needed items, higher co-pays, or no pays, and medical
facilities providing less care, we
are setting ourselves up for disaster. I have never seen an insurance
reimbursement go up, however gas goes up, heat light and power goes up,
landlords want increases, but our reimbursements keep going down. In
homecare, we want to keep the patient out of the hospital, however with
completive bidding; the patient is going to have no choice but to go to
the hospital, then watch the healthcare cost! Completive bidding will
only result in less care. Anyone can deliver equipment. Knowing how to
use the equipment to its full capacity, reinforcing physicians' orders
and educating patient and caregivers on disease processes and
additional ways to manage their disease will be missing. Dr's spend 5-8
minutes with a patient. We spend whatever time is necessary to insure
the patient and/or caregiver knows the uses, contraindications, and
gets the most from the equipment.
Large DME distributers view this as a distribution business. In my
opinion by definition, this is a distribution and service business. The
experts say things will be fine. I invite anyone and everyone on the
committee to come see my America. Help patients decide on medication or
food or rent, or electric because they can't afford it. Basics!
Everyone wants studies. Come out with me and I promise not to let the
facts get in the way. Please, I urge you to accept this invitation and
see for yourself. Look at the people your decisions affect and explain
your position. As an American, I realize that we are a nation of give
and take. Time has come to stop taking from healthcare and give to the
nation's assistance. Take care of your people. They make your Nation.
Thank you for your time to read this communication.
Sincerely,
Jann Sherin, BS, RRT, RCP
Clinical Director, NBN Infusions and Respiratory
Statement of Jim Buteyn, Letter
Dear Member of the Ways and Means Committee,
In the almost 20 years that I've been affiliated with DME industry
I've never seen such sad and scary state of affairs as I do today in
respect to the affects of Competitive Bidding on beneficiary care and
access and the apparent deliberate attempt to put over 70% of the DME
stores in this country out of business.
Fact:
CMS, through its CBIC contractor Palmetto GBA did not contact
suppliers regarding missing documentation in their applications.
Palmetto GBA conference moderated by Cindy Dreher in June 2007.
Page 13 of the document around the 3rd paragraph it states the
following:
``If your bid is not considered complete, including hard copy
documentation, you will receive an email advising you that your bid is
not complete. This email is only telling you there is missing
information. At this time there has been no evaluation of the accuracy
or completeness of the information provided. The notification is simply
letting you know whether or not we've received all necessary
information.''
Fact:
CMS, through its CBIC contractor Palmetto GBA silently changed the
rule regarding contacting suppliers about missing documentation from
their application. Suppliers around the country have before and after
page prints of the CBIC web site to prove this. CMS, nor its
contractor, did not disclose this rule change.
Fact:
CMS, through its CBIC contractor Palmetto GBA awarded bids to
suppliers who had never previously provided the bid item. Beneficiaries
will now receive equipment by untrained suppliers who will ``muddle''
their way to make the correct assessment of the beneficiaries' needs.
More disturbing is that some of these bids that were awarded to
suppliers who had never previously provided the bid item are for
oxygen, a life-sustaining DME item!
Fact:
CMS, through its CBIC contractor Palmetto GBA offered 44 oxygen
bids in the Miami MSA. The Miami MSA is currently served by 501 oxygen
suppliers. A 91% decrease in oxygen suppliers will not only affect
daily access by beneficiaries but is also in total disregard of
Disaster Preparedness. When the next hurricane hits the Miami MSA 44
oxygen suppliers (if their business has not been affected by the
hurricane) will not be able to meet the needs of thousands of
beneficiaries prior to and after the hurricane. It is physically
impossible. Further review of other bid items shows the same trend.
Fact:
CMS has been quoted that they disqualified 63% of all received bids
due to missing documentation. Such a glaringly high number of
applications missing documentation should have alerted the contractor
that this figure was far beyond the normal 1-3% average and that they
may have a problem with the submission system.
Fact:
CMS, through its CBIC contractor Palmetto GBA awarded bids to
suppliers in states the supplier is not licensed to provide medical
equipment in. CMS ignored its own rules on competitive bidding.
Fact:
CMS has ignored cost of goods increases that suppliers must absorb
for three years, even if it means taking a loss on the bid item.
Several bid items are already at or near cost due to the change in the
current economy.
Fact:
By CMS's own admission, over 70% of the DME suppliers in this
country will be closed by the end of the implementation of Competitive
Bidding. This will be detrimental to beneficiary access and put
thousands of citizens on the unemployment roll. I do not believe this
was the intent of Congress.
Fact:
Some winning bid suppliers are already creating their own rules
because they no longer have competition. They are doing this by
refusing to deliver certain small inexpensive items to beneficiaries.
With no competitors, the beneficiary does not have free access or
choice. This type of conduct is the beginning of creating the monopoly
which was forewarned by industry experts. When a monopoly is in place,
prices go up, not down.
Fact:
Due to the sporadic awarding of bids beneficiaries will end up
dealing with multiple suppliers for their medical equipment. These are
the geriatric citizens of our country, many of whom are confused, very
ill, or simply do not understand how the system works. They are used to
going to their local DME store and obtaining everything the physician
ordered. Under competitive bidding the beneficiary could potentially
deal with three or more suppliers in order to obtain the equipment.
Fact:
The physician community is already frustrated and angry with the
supplier community due to the amount of documentation CMS mandates the
supplier must obtain from the physician. Under competitive bidding the
documentation requirements will increase for the physician community
because the physician will have to complete paperwork for multiple
suppliers for the patient.
In closing, I would also like to state that in my opinion the
implementation of this type of a program is of great grievance to the
Medicare beneficiaries in this country. Each and every beneficiary
signed a contract in effect with the U.S. government when the
beneficiary agreed to pay a premium for Part B Medicare coverage. In
return for their premium the government agreed to provide the
beneficiary with open choice for their Part B services. The
implementation of a competitive bidding program takes away the
beneficiary's choice and essentially creates the largest HMO in this
country, financed by the U.S. taxpayer. Beneficiaries who agreed to
Part B services chose that option because they wanted choice. The
option for the beneficiary to use those same Part B premiums to
participate in a Medicare HMO already exists.
Respectfully,
Jim Buteyn
Arrow Medical Mgmt.
Statement of Joe Fernandez, Letter
To whom it may concern:
My name is Joe Fernandez, the owner of Harrisonville Home Health
Equipment, which has been serving Harrisonville and the surrounding
rural communities since may of 2002. This prevents many of patients
from having to travel into Kansas City to take care of their Durable
Medical Equipment services. We provide an alternative to the bigger
corporations. For example, we are a friendly face that they recognize
and trust for all of their home medical equipment and repair services.
We are a small business that treats each new customer as ``family''.
They are not just another number to us. We provide a valuable service
to the people in the Cass County area.
We find it difficult to compete with the large corporations but by
offering friendly and quick service we have found our corner of the
market. However, what Medicare has done with competitive bidding is
completely unfair and unreasonable for the small business owners of
America. Competitive Bidding will force the small businessman out of
business. I have done every thing I could to stay in business. I became
Joint Commission Accredited and I submitted my bids, only to get back
bid disqualifications for all my bids. I received BSE-4: (Bidder did
not submit along with its bid the applicable financial documentation
specified in the request for bids). I called Medicare and found out
specifically what I needed to send in for financial documentation very
early in the bidding process. So I sent in the financial documentation
along with all 5 of my bids. Harrisonville Home Health Equipment deals
in many areas of medical equipment and supplies. We provide a valuable
service to the community and physicians. However if we lose our
contract with Medicare to supply Standard Power Wheelchairs, Scooters
and Related Accessories we will be forced into Bankruptcy and we will
have to close our business.
It doesn't make any since with the way the economy is right now to
force a large volume of businesses into bankruptcy and increase
unemployment for hardworking Americans. This is a big industry and it
will have a big impact that will be felt everywhere in the United
States. In most cases the government would step in and stop such a
hostel take-over or prevent certain disaster for American businesses.
But the government just wants to add kindling to the fire we our
already under.
Thank you for your time
Joe Fernandez
Statement of Joel Israel, Letter
To whom it may concern,
I received an e-mail from HomeCare Magazine this morning advising
me of this hearing to take place on May 6th.
It is my opinion that this whole Competitive Bidding process is
nothing short of ridiculous. My DME business has been caring for people
in my area for nearly 70 years, and between the cut backs and now the
Competitive Bidding, I will probably be forced to close my doors,
placing my staff on unemployment, and forcing myself into early
retirement.
You seem to have completely overlooked the small business people,
who have been around for very long periods of time, and have built
long-standing relationships with local customers, their families, their
doctors and therapists. This is something that most of the so-called
``chain'' stores can never hope to do.
Whatever happened to patient care?
My company employs 5 full time staff members. How can I possibly
afford the thousands of dollars as well as the man-hours involved in
the accreditation process? Not to even mention the whole competitive
bidding process? There is no way I could ever compete with the pricing
that's afforded to these larger companies.
Respectfully,
Joel Israel, Owner
Best Care Medical Supply
61 Lakeview Avenue
Clifton, NJ 07011
Statement of Laura Cohen, PhD, PT, ATP, and Barbara Crane, PhD, PT,
ATP, Letter
Dear Chairman Stark,
The Clinician Task Force (CTF) is writing to express member
concerns and make recommendations regarding competitive acquisition for
Durable Medical Equipment, Prosthetics, Orthotics and Supplies
(DMEPOS). Our group is comprised of a nationwide group of 39 members,
primarily physical and occupational therapists, whose work involves
providing complex wheelchair seating and mobility services to
individuals with severe disabilities. All of our members care deeply
about individuals with disabilities who require wheeled mobility and
aim to ensure appropriate access to medically necessary technologies.
Most members of the Clinician Task Force have over 15 years of
experience practicing in seating and wheeled mobility evaluation,
recommendation and training.
Overview
People with severe disabilities need individualized, custom-fit
power wheelchairs and rehab devices. These complex rehab devices
represent a very small percentage of the overall power mobility
benefit. These devices differ greatly from standard power wheelchairs
in technology and associated services required to provide these
devices. In order to accomplish the medical and functional goals of
this small population of Medicare beneficiaries, off the shelf products
will not suffice; a wide variety of technologies must be available in
order to meet the specific and unique needs of an individual. As
clinicians involved in the provision of complex rehab devices to people
with severe disabilities we believe that competitive bidding will no
longer allow access to the variety of necessary features and options,
and the extensive service component that produce highly customized
equipment. While it is important to remain fiscally responsible
implementation of this flawed program is incomprehensible. We request
that Congress intervene by supporting a statutory exemption of Complex
Rehab from the competitive bidding program.
Round 1 Issues
Now results of Round 1 of the CMS competitive bidding program are
available revealing the following concerns:
1. the number of suppliers being offered contracts in any given
CBA is too low to ensure adequate choice of supplier and timely access
to technologies and services;
2. equipment suppliers inexperienced and unknowledgeable regarding
complex power wheelchairs and rehab devices have been offered contracts
leaving few, if any experienced suppliers in contracted areas to
provide complex technologies to Medicare beneficiaries; and
3. single payment amounts established for the category of complex
rehab technology are inadequate to provide access to the range of
products within specific codes severely restricting beneficiary access
to medically necessary, custom rehab power mobility, which is needed to
meet a beneficiaries' daily mobility needs.
Inadequate access to contract suppliers
Supplier and Quality Standards do not require that a contract
supplier have a physical location in a CBA or proximal to the Medicare
beneficiary. Due to the custom nature of complex rehab it is our
concern that Medicare beneficiaries will not have adequate choice of
contract suppliers or timely access to contract suppliers. Loop holes
in the Supplier Standards and Quality Standards have resulted in an
alarming trend. Companies without local facilities or trained certified
staff are predominantly the companies that have been offered contracts
in multiple CBAs. Safeguards implemented have instead left out
reputable companies with long track records of successful service
provision.
Inexperienced suppliers without certified Assistive Technology Supplier
Staff
It is alarming to CTF members to learn that the experienced
suppliers that we have worked with providing complex rehab technology
services for years have been left out of the competitive bidding
program. We are told that many have not been offered contracts due to
errors in application processing. Suppliers have been told that
requisite materials submitted were missing from their application
eliminating them from the program with no option for appeal. It is the
Medicare beneficiaries that will loose when they can no longer work
with experienced and certified ATSs that they have life long
relationships with in regard to their complex rehab technologies. The
combination of price reductions eliminating the related services that
accompany complex rehab and the availability of primarily suppliers
with little to no experience in complex rehab will completely disrupt
the service delivery process.
Severely restrict product availability
It is apparent from the announced single payment amounts that
beneficiaries will be denied access to the range of products included
within specific code categories. Similar to the issues identified by
CMS in relation to full support surfaces included in the bidding
process for complex rehab technologies are not distinct enough and
cover a variety of clinical applications, features, levels of
adjustability and levels of durability. This lack of distinction makes
applying competitive bidding to those codes difficult and complex.
It is apparent from the single payment amounts announced for Round
1 that pricing is based on the lowest product cost within a code
category. More complex chairs, cushions and postural supports, within
the same code, significantly exceed announced payment amounts.
Contracted suppliers will not provide products that exceed their costs
and therefore Medicare beneficiaries will no longer have access to a
variety of product within a code category. Furthermore, there simply is
inadequate reimbursement in most competitive bid areas (CBAs) for many
bid items further restricting beneficiary access.
Negatively impact clinical outcomes
CMS requires Medicare beneficiaries to be evaluated by a licensed/
certified medical provider (LCMP) to determine complex rehab technology
needs. Yet the competitive bidding process undermines this requirement.
The contracted supplier is not required to provide the specified
product even when a LCMP specifies and justifies an item. The
contracted supplier can substitute product for ``comparable'' product
under the same code. The problem is that ``comparable products'' do not
necessarily have the same distinct functionalities as the product
specified as a result of an individual evaluation. Complex Rehab
Products--chairs to cushions are not easily interchanged. As a result
contract supplier substitution of specified product with product from
within the same code will not result in a comparable system negatively
impacting the functionality of the final system.
Beneficiaries provided with inappropriate product are prone to
secondary medical problems such as pain, decrease in functional
ability, pressure ulcers, aspiration, and orthopedic deformities. Costs
associated with the treatment of secondary complications can range from
medication to hospitalization and surgery. For instance the cost to
heal an ulcer can range from $5,000--$40,000. The occurrence of
secondary medical complications resulting from the provision of
inappropriate bid products can easily negate any savings that may be
obtained from the bidding program especially for complex rehab
technologies.
Increased costs to beneficiaries
Beneficiaries in medical need of products that exceed the single
payment amounts can obtain medical documentation from a medical
professional indicating the need for a specific product however the
contract supplier is not required to provide that product even if ample
justification and rationale are provided. The Medicare beneficiary will
need to go to each of the other contracted suppliers to determine if
they can obtain the required product elsewhere. If all contracted
suppliers refuse to supply the needed item (because supplier cost
exceeds single payment amounts) the only other option the Medicare
beneficiary has is to go to a non-contract supplier, sign an advanced
beneficiary notice (ABN), and pay cash to obtain the product.
Previously reimbursed products obtained by Medicare beneficiaries are
now only available by self pay further constricting the DMEPOS benefit.
Medicare beneficiaries will only obtain access to the lowest cost
products. Cheaper less robust products will be provided to Medicare
beneficiaries. The final rule regarding competitive bidding does not
require contract suppliers to repair beneficiary owned equipment,
therefore, contract suppliers will not be required to service the items
they sell. And, since unreasonable bids were used to develop the single
payment amount, other non-contract suppliers will not be able to afford
to repair these items either, leaving Medicare beneficiaries struggling
to find a supplier willing to repair their power wheelchairs or paying
for repairs directly.
For the beneficiary who relies on a power chair for mobility,
getting payment for a repair is almost secondary to getting the repair
done in a timely and efficient method. Reliability of product is of
primary importance to beneficiaries relying on power chairs.
Summary
By design the competitive acquisition program reduces cost to the
Medicare program at the expense of product quality and access. It is
clear from the published single payment amounts for round one that
contract suppliers can only provide the lowest level product within
each code category simply because supplier cost for most complex
technologies exceed the single payment amounts in many codes.
We urge Congress to take the following steps:
1. Exempt complex rehab devices from the competitive bidding
requirement as the cost savings resulting from competitive bidding will
be derived from inferior equipment and a decrease in service resulting
in devices ill-suited for use by those with severe disabilities. The
average savings that Medicare will experience due to competitive
bidding of complex rehab technology is much less than reported.
2. Exempt complex rehab from the competitive bidding program.
Competitively bidding complex rehab technologies is inappropriate,
undermines the evaluation by the licensed/certified provider and puts
the clinical outcome of Medicare beneficiaries at risk.
3. Request an audit and report from CMS of all potential contract
suppliers of complex rehab to ensure there is a physical location with
full service repair facilities within the CBA in proximity to the
Medicare Beneficiary and ensure that certified Assistive Technology
Supplier staff is employed on staff PRIOR to announcing winning
contractors.
4. Request that CMS conduct a thorough assessment of the variety
of products in each HCPCS code compared to the single payment amount to
ensure that beneficiaries will continue to have access to medically
necessary products through a viable reimbursement structure and report
back to Congress.
5. Mandate that CMS rescind the pricing established for
replacement parts and allow the current fee schedule amount to be paid
for replacement parts for power mobility devices to ensure beneficiary
access to repairs.
In the end it is the Medicare beneficiaries in greatest need of
power mobility that are harmed by a bidding program which may be
applicable to ``commodity'' products being applied to ``Complex Rehab
Products''. To date CMS has failed to pay attention to ongoing public
comment and concern. Now we ask Congress to intervene.
These same beneficiaries are the ones that have been most affected
by the many policy changes that have occurred over the past several
years restricting access to power mobility devices in the name of
fighting fraud and abuse. There needs to be a balance between fiscal
responsibility and ensuring access to quality technologies for the
beneficiaries that need it.
We appreciate your consideration of our requests and hope you
understand our concerns. If additional information is required, please
contact either Laura Cohen at 404-370-6172 or Barbara Crane at 860-529-
4936.
Sincerely,
Laura Cohen PhD, PT, ATP
Barbara Crane, PhD, PT, ATP
Statement of Manyvone Champavannarath
In my opinion the system is never going to be right. The people who
are making these decisions will never understand what people with
disabilities go through every day. All they see are words and numbers
on paper.
I challenge each person who is making the decisions to think about
the following when making decisions: Imagine you are a quadriplegic and
have limited services. Can you imagine what it's like having to depend
on someone for everything? Can you understand how it feels to have to
wait for four hours to use the bathroom? Do you know what it's like to
sit in your own excrement for hours? Can you understand how disgusting
that feels? Can you imagine having to ask a stranger to help you get a
coke at the store? Imagine being hungry and not being able to get
something to eat for yourself. Can you imagine what it's like to have
your stomach growl and you cannot do anything about it? Can you
understand what it's like to drool and not be able to wipe your own
face? Imagine what it's like to have your eyes burn and not be able to
do something about it. Can you imagine what it's like to sit at the
computer and not be able to turn on the lights when it gets dark?
Imagine what it's like to come home and not able to do anything until a
staff person comes on duty. Can you understand what it's like to drop
something on the street and you cannot pick it up? Imagine having to
wait for a stranger to come by and then you have to ask that stranger
to pick up the thing you dropped. Imagine being alone and have your
nose itch and you cannot scratch it. Imagine what it's like to be in
one position for fourteen hours a day. These questions need to be
considered when decisions are being made regarding the disabled.
Please do not tell me that you understand because you truly cannot
understand unless you are disabled. No one understands unless they are
disabled or have taken care of a person with disabilities. Don't get me
wrong--I love my life, but the system makes lives for people with
disabilities tremendously more difficult than it already is.
Manyvone Champavannarath
Area 14
Statement of Matthew J. Rowan, Letter
Dear Chairman Stark:
Thank you for holding the Health Subcommittee hearing on May 6
regarding Medicare's competitive bidding program for durable medical
equipment, prosthetics, orthotics and supplies (DMEPOS). On behalf of
the Health Industry Distributors Association (HIDA), we appreciate your
consideration of the following comments for the record. HIDA is a
nonprofit trade association representing approximately 200 distributor
companies that provide medical-surgical supplies and equipment to
numerous hospitals, nursing homes, and home health agencies across the
United States. Our members account for roughly 80 percent of the
medical products distributed through the healthcare supply chain. The
competitive bidding program will significantly impact providers that
serve Medicare beneficiaries in the nursing home, homecare, and
extended care markets.
HIDA strongly recommends that the Centers for Medicare and Medicaid
Services (CMS) postpone the July 1, 2008 implementation of Round 1 in
order to address procedural flaws surrounding the implementation of the
DMEPOS competitive bidding program. We also ask the agency to delay
further implementation of Round 2 until the effects of Round 1 can be
fully evaluated. With administrative spending becoming one of the
fastest growing expenditures in healthcare, HIDA feels that Congress
needs to evaluate the projected vs. actual administrative costs thus
far associated with implementing the competitive bidding program. In
the final rule 42 CFR Parts 411 and 414, CMS estimates internal costs
and costs to its contractors to be approximately $1 million in
immediate fixed calendar year costs for contractor startup and system
changes for Round 1. HIDA believes that the analysis in the final rule
significantly underestimates the actual administrative costs associated
with implementing the program, therefore further reducing the program's
net savings.
1. Medicare beneficiaries are poised to face disruptions in
service, in addition to reduced quality. In an effort to preserve their
business opportunities with Medicare, suppliers may substitute products
with lower quality and less expensive equipment and reduce the non-
equipment services they historically provided as part of the bidding
package of home medical equipment and services. This occurs as
suppliers strive for ways to reduce operation costs. Suppliers are
beginning to feel the impact of the lackluster economic conditions
currently afflicting the country. Costs associated with the price of
raw materials needed for packaging, nutrition, and transportation have
escalated since the September 25, 2007, Round 1 bidding deadline.
Financial pressures on suppliers may result in a reduction of support
services that have been traditionally offered to beneficiaries, or
planned for prior to the increase in production costs. Hospital
discharge planners will be forced to either place patients under the
care of suppliers with no established track record of service, or to
delay discharge. Additionally, a significant challenge facing
beneficiaries will be obtaining competitively bid products from
multiple and unfamiliar contract suppliers, depending on the types of
home medical equipment services and items that are needed.
2. CMS must allow more time to educate beneficiaries on the effects
and resulting changes of the competitive bidding program. It has been
projected that close to four million Medicare beneficiaries will be
impacted by Round 1 of the competitive bidding program. With the
apparent lack of beneficiary education tools in place prior to the
Round 1 implementation date, the program will inevitably undermine
access to quality care for millions of beneficiaries that rely on the
Medicare Part B benefit. The current implementation timeline indicates
that CMS has only allowed one month to bring Medicare beneficiaries up
to speed on the impact of the program. The current timeline will cause
confusion and interrupt the continuity of care for beneficiaries.
Unless Round 1 is delayed, and proper steps are taken to adequately
educate beneficiaries, CMS will be forced to inform patients and
physicians that their Medicare beneficiary access will suffer as they
can no longer utilize their current provider on most supplies.
3. The contract evaluation process needs to be re-evaluated.
Medical-surgical suppliers with winning bids were only allowed ten days
to assess the contract. However, the competitive bidding implementation
contractor (CBIC) had six months to review the bids. This is a very
short period of time for a supplier to evaluate the pricing impact,
contract terms and conditions and determine whether they will accept
the contract. Moreover, winning bidders have no information regarding
how many other suppliers were offered contracts in the product
category, to determine how many competitors will be serving the market.
This is critical information to determine whether the supplier can
financially sustain the business at the bid rate.
Furthermore, an alarmingly high number of legitimate long-standing
companies who have been offering extended care and homecare services
for decades were unfairly disqualified from the program for reasons
that appear to be erroneous. Reports from various suppliers indicate
that the CBIC has made serious errors that led to disqualifications of
round one bids in nearly all of the first ten bidding regions.
Disqualification from the supplier selection process has serious
ramifications for Medical-Surgical providers, and CMS needs to
immediately develop a diligent and thorough review process to ensure
that all disqualification decisions are valid. Those who have been
improperly disqualified need to be readmitted into the contracting
process.
4. Further implementation of Round 2 needs to be delayed until
Round 1 can be properly assessed. On January 8, CMS announced 70
additional metropolitan statistical areas (MSAs) and eight product
categories for the second round of the competitive bidding program.
Moving forward without a thorough evaluation of Round 1 will limit the
ability of suppliers to continue to serve key providers and patients--a
dangerous process that will have negative effects on patient and
provider choice and the downstream quality of care. The program may
also force suppliers to serve markets where they have no experience--a
shift that's poised to significantly diminish the quality of service
and patient care. CMS must carefully evaluate phase one of the
competitive bidding program in order to ensure that subsequent phases
are successful and implemented in a rational and logical manner. CMS
must use beneficiary surveys, as well as supplier surveys, to evaluate
the success of Round 1 and share this information with the provider
community and the public, solicit feedback, and make necessary changes
to improve the developing program.
5. Long term care (LTC) facilities should be excluded from Round 2
of the DMEPOS competitive bidding program because the Medicare
Modernization Act addresses the delivery of products and services in a
home health care setting. Nursing homes are a very unique setting
compared to home care:
LTC distributors prepare unique utilization and control
procedures to conform to each nursing home's needs, which are
integrated into their clinical staff requirements.
LTC distributors' products are standardized to all
residents based upon each nursing home's specific clinical protocol.
Product availability is a major requirement for a
provider serving a skilled nursing facility (SNF). A typical LTC
distributor carries ample DMEPOS stock to service the Part B patient's
and non-Part B patient's requirements of all SNFs in their MSA. A
typical LTC distributor has 20,000-40,000 square feet of storage and
stocks all major manufacturers and formulas. The LTC distributor has
the ``safety stock'' to respond to multiple emergency requests for
DMEPOS from multiple SNFs within hours. Home care providers do not have
the storage, or the ``safety stock,'' to respond in less than several
days. These shortcomings are a clear detriment to the patient.
DMEPOS suppliers that serve these two separate and distinct end-
users are well-qualified and experienced in their specific markets. To
force one or the other to serve both end-users will result in
confusion, errors, and the failure to serve patients adequately. In
addition, CMS allowed LTC facilities to ``opt out'' of the DMEPOS
competitive bidding 3-year demonstration projects in the chosen MSAs.
Given this information, it appears clear that CMS recognizes the
difficulties in requiring LTC facilities to adhere to the same
requirements as a home care setting.
6. The citing of competitive bidding site demonstrations as
beneficiary ``quality and access success stories'' for the program is
inaccurate. The bidding that occurred during the demonstration projects
in the Polk County, Florida and San Antonio, Texas MSAs were served by
current beneficiaries that were grandfathered in using their current
supplier. This is the reason that no complaints or problems with
beneficiary access were recorded, as the demonstration project only
affected new patients in these areas. HIDA strongly believes that
without implementation of the changes above, the competitive bidding
program is poised to limit the ability of suppliers to continue to
serve key providers and patients--a dangerous process that will have
negative effects on patient and provider choice and the downstream
quality of care. CMS needs time to examine the issues that HIDA has
risen on behalf of our member companies participating in competitive
bidding. The integrity of the competitive bidding system, Medicare
beneficiary access, and the financial viability of medical-surgical
distributors are at stake.
HIDA appreciates the Subcommittee's proactive approach and we look
forward to working with Congress and CMS on this critical issue. Thank
you for taking the time to review our concerns and consider our
comments.
Sincerely,
Matthew J. Rowan
President and CEO
Statement of National Association for the Support of Long Term Care
(NASL)
The National Association for the Support of Long Term Care (NASL)
submits this statement for the record in connection with the Ways and
Means Subcommittee on Health hearing on May 6, 2008 regarding the
Medicare competitive acquQisition program for Part B items and
services.
NASL is a national trade association representing providers of
ancillary products and services to the long-term care and home care
industries. Our member companies provide medical equipment, as well as
therapy services, diagnostic services, software systems and other
ancillary services, to those care settings.
The focus of this hearing was the new competitive bidding program
for medical equipment, prosthetics, orthotics, and supplies (DMEPOS),
created by Congress in the Medicare Prescription Drug, Improvement, and
Modernization Act of 2003 (MMA) (Public Law 108-173). The Centers for
Medicare & Medicaid Services (CMS) in the Department of Health and
Humans Services (HHS) issued final regulations in April of 2007
implementing the program. Currently, the first phase of the program
(Phase 1) is slated to begin on July 1, 2008 for ten product categories
in ten of the largest metropolitan statistical areas (MSAs) in the
country. The program is scheduled to be expanded to seventy additional
MSAs in 2009 and to additional areas after 2009.
Our statement may be summarized as follows:
1. The competitive bidding program is likely to impair beneficiary
choice and access to care because the limited number of ``winning''
suppliers probably do not have the capacity to serve all beneficiaries
in the competitive bidding areas. CMS grossly miscalculated the number
of suppliers that would submit bids and we are concerned that many of
the ``winning'' suppliers may lack the expertise, knowledge of the
localities and overall capacity to adequately serve entire competitive
bidding areas.
2. Long-term care facilities should not have been included in the
program. Despite the fact that Congress's clear intent and the entire
legislative debate on the competitive acquisition provisions of the MMA
were focused on home care, CMS decided to include the nation's long
term care facilities (``LTC facilities'' or ``nursing facilities'') in
the very first phase of the new, largely untested program. In
particular, this will affect the provision of enteral nutrition (tube
feeding for patients who cannot take food orally and/or digest and
absorb adequate nutrition from traditional nutrient sources), the
product area where there would be the biggest impact on LTC facilities
in the first phase of the competitive bidding program.
3. The median price methodology utilized to determine the
``winning bids'' is flawed. Under the median price methodology, half of
the ``winning bidders'' will be reimbursed at a rate below what they
bid. This untested method is dramatically different from the approach
used in the pilot programs and has the potential to negatively impact
both access to and quality of DMEPOS items and services.
NASL supports fully the Congressional goals of promoting high-
quality care for Medicare beneficiaries while achieving improved
management of costs. However, we are worried that immediate
implementation of the program without modification likely will limit
beneficiaries' access to and choice of quality DMEPOS. We also are
concerned that application of this program to DMEPOS provided to
patients in LTC settings will not only fail to meet the goals set by
Congress, but will unfairly disadvantage small suppliers that have
special expertise in supplying these necessary items to LTC patients
and thereby harm patient care. We believe that Congress should rethink
the competitive bidding program, and at a minimum, we appeal to
Congress to delay its implementation.
1. Medicare Beneficiaries' Access to and Choice of Quality DMEPOS will
be Limited because the Low Number of ``Winning'' Suppliers Lack
the Established Capacity to Fully and Effectively Provide
DMEPOS Items and Services.
NASL believes that beneficiaries' access to and choice of quality
DMEPOS will be impaired if the competitive biding program is
implemented on July 1. Only 1,335 bids across the ten product
categories in ten MSAs were ultimately selected as ``winning bids,''
representing 22 percent of the 6,209 bids received by CMS. The number
of bids actually received and selected by CMS pales in comparison to
the 15,973 bids that CMS anticipated receiving and CMS' estimation that
a bidding supplier would have a 60 percent chance of being selected as
a winning bidder in at least one product category. See 72 Fed. Reg.
17992, 18069, 18080 (April 10, 2007). Beneficiaries' access to care and
choice of suppliers will be limited due to the small number of
suppliers that will be involved in the program.
In addition, it appears that many of the suppliers that have been
offered contracts are not the current primary providers of DMEPOS in
the competitive bidding areas. For that reason, it appears that CMS is
in effect turning the DMEPOS program over to suppliers that were
previously unable to succeed in the market. As a result, many
beneficiaries will experience a disruption in their services as they
are forced to transition their care to new DMEPOS suppliers in less
than two months. The capacity of these suppliers to provide quality
items and services remains largely unknown and therefore poses an
excessive and unnecessary risk to Medicare beneficiaries.
In reviewing the suppliers' capacity issue, we look at three
elements: 1) a supplier's expertise, 2) a supplier's experience in
particular geographic areas and 3) whether a supplier can adequately
service an entire competitive bidding area. Several of the suppliers
awarded contracts have admitted that they do not have the expertise in
the product category that they were selected to service. Due to the
complexities involved with providing DMEPOS items and services,
expertise in supplying one product category does not translate to
proficiency in supplying other types of items and services. In
addition, a surprisingly high number of the suppliers that were awarded
contracts do not have experience with the geographic regions they will
be serving. This lack of familiarity with the locality has to affect
their ability to effectively serve the beneficiaries in the area.
Finally, the ability of each ``winning'' supplier to provide quality
DMEPOS items and services to an entire CBA is still an open question.
Many of the suppliers awarded contracts are small in scope and may not
have experience providing items and services across a broad service
area.
Clearly, there does not appear to be a nexus between the suppliers
that were awarded contracts and their expertise, experience in
particular geographic areas or whether they can adequately service an
entire competitive bidding area. This raises serious questions about
the suppliers' abilities to successfully service the beneficiaries in
their competitive bidding areas. It is puzzling how CMS can be sanguine
with respect to access, quality and choice in light of its
miscalculation related to the bidding process and its aftermath.
As a trade association representing suppliers with experience in
providing DMEPOS to Medicare beneficiaries, NASL is highly skeptical
that the items and services can be provided as anticipated due to basic
uncertainties related to the number of suppliers and the overall
capacity of participating suppliers. It seems unreasonably risky to
gamble with beneficiaries' access to and choice of medically necessary
DMEPOS, as well as the quality of items and services that they will be
receiving, by having the vulnerable elderly and disabled populations
participate in a program with so many untested and unknown aspects.
CMS, and Congress, should act on the basis of facts, not assumptions
that have no precedence.
2. The Competitive Bidding Program Presently Cannot Address the Unique
Challenges of Providing Medical Equipment and Services to
Patients in Long Term Care Facilities.
Most Part B items and services within the scope of the competitive
bidding program are provided in a home care setting by suppliers who
focus on the home care market and may not have the familiarity or
expertise to service residents of a nursing facility. As a result, the
program was developed based on a home care model, which generally
involves a distribution process designed for beneficiaries who are
mobile and not institutionalized. However, the clinical needs of
patients using enteral products in LTC facilities, how these products
are distributed in the LTC setting, and the particular quality
standards applicable to nursing facilities are quite distinct from the
home care setting.
LTC Facility Patients Have Special Needs.
Residents in LTC facilities are usually older and more impaired
than home care patients, often admitted after an acute care stay or
unsuccessful home stay, and require a different regimen of care. For
example, more than 80 percent of all enteral patients residing in LTC
facilities require an enteral pump for safe delivery of nutrition,
while less than half of all enteral patients residing in their home
have such a need. LTC facility residents often have multiple clinical
conditions, significant physical limitations, and the need for
assistance with activities of daily living. In short, they often
require a range of services beyond enteral nutrition.
LTC Facilities Have Special Relationships With Patients and Third-Party
Suppliers.
LTC facilities have a special relationship with their residents.
These facilities assume responsibility for coordinating the work of an
array of clinicians, providers and suppliers to meet residents'
healthcare needs. Indeed, LTC facilities are subject to Federal
requirements mandating that ``each resident must receive and the
facility must provide the necessary care and service to attain or
maintain the highest practicable physical, mental, and psychosocial
well-being, in accordance with the comprehensive assessment and plan of
care.'' 42 C.F.R. Part 483.
Items furnished to LTC facility residents typically are furnished
by either the facility itself or by highly specialized suppliers
working in a close clinical relationship with the facility's nursing
personnel. The level of clinical management and services related to the
furnishing of DMEPOS to patients in institutionalized settings is
substantially higher than that for non-institutionalized patients. In
fact, the Joint Commission on Accreditation of Healthcare Organizations
(JCAHO) publishes separate Standards for Tube Feeding for the home care
versus nursing facility setting. As a result, LTC facilities working
with third-party suppliers traditionally have established longstanding
relationships with selected suppliers based on experience, trust and
respect for their level of professionalism. We believe it is critical
that these facilities continue to have the ability to select a supplier
that meets performance and service criteria necessary for the needs of
their patients. The competitive acquisition program could force nursing
facilities to use unfamiliar suppliers and potentially interrupt
ongoing relationships and established and functioning care plans that
have worked to the benefit of their residents.
Applying the Competitive Bidding Program to Products Supplied to LTC
Patients Will Not Fulfill the Purposes of the Program.
The use of competitive bidding to set prices and pay for therapies
provided primarily in a LTC setting has not been tested sufficiently or
successfully. CMS previously conducted a DMEPOS competitive bidding
demonstration to test the feasibility and the program impacts of using
competitive bidding to set prices for DMEPOS. CMS included only one
therapy in the demonstration where the majority of patients are in a
setting other than the home (i.e., enteral nutrition). The agency
ultimately removed enteral nutrition from the first demonstration
project and concluded it was not well suited for competitive
acquisition in its final report to Congress, due to the complexity of
the nursing home setting. Importantly, there was no conclusive evidence
that competitive bidding would produce any clinical benefits for
residents of nursing facilities.
There is Precedent for Treating the Long Term Care Setting Differently
Under Medicare.
There is precedent for treating the coverage and payments of items
and services provided to residents in LTC facilities differently than
those provided to other beneficiaries--namely, in the Part D
prescription drug benefit. CMS' regulations implementing this benefit
artfully distinguish between providing drugs to the general Medicare
population and providing those same drugs to Medicare beneficiaries in
a LTC facility, subjecting pharmacies that serve LTC facilities to
different quality and performance criteria than other pharmacies and
providing distinct payments. According to CMS, providing drugs to LTC
residents requires ``special attention to ensure the unique needs of
the vulnerable population are met without compromising the quality of
pharmaceutical care.'' Issue Paper #26, High-Quality Access to Long
Term Care Pharmacies (Jan. 21, 2005). Until now, CMS has consistently
recognized the unique needs of nursing facility residents in receiving
covered benefits under Medicare law.
3. The Median Price Methodology Utilized to Determine the ``Winning
Bids'' is Untested and Unsound.
Under the median price methodology used to determine the ``winning
bids,'' half of the ``winning'' suppliers will be reimbursed at a rate
below their bid. The median price methodology is dramatically different
from the approach used in the pilot programs, which averaged the
adjusted bids in the competitive category to determine the payment
amount. Final Report to Congress: Evaluation of Medicare's Competitive
Bidding Demonstration For Durable Medical Equipment, Prosthetics,
Orthotics, and Supplies (2004). Additionally, the median price
methodology is not observed in any other Federal bid construct.
Therefore, contrary to CMS' continuous assertion that the pricing
methodology has been proven effective, the median price methodology is,
in essence, an untested initiative. Additionally, the demonstration
project included a vigorous ombudsman and beneficiary response
mechanism, which cannot be replicated in the competitive bidding areas.
Although many of the ``winning'' suppliers may choose to
participate, beneficiaries' access still could be negatively affected
if ``winning'' suppliers are unable to provide quality items and
products to all of the beneficiaries requiring services at amounts
below their submitted bid prices. Additionally, it would be tragic if
the quality of DMEPOS items and services were sacrificed in order for
suppliers to meet the demand in each MSA at an insufficient price. The
potential for harm to beneficiaries due to reduced access and quality
is heightened by the absence of the beneficiary protections that were
present in the demonstration.
Request for Congressional Action
NASL and several other organizations have raised the concerns
outlined above with CMS in detailed comments responding to the proposed
rule to implement the competitive bidding program. Unfortunately, CMS
did not effectively address these concerns in finalizing the rule and
is clearly determined to implement Phase 1 on July 1. Because of the
enormous risk the competitive acquisition program imposes on
beneficiaries, we ask Congress to delay Phase 1 until the Government
Accountability Office has conducted an analysis of the impact of the
reduced supplier pool and capacity issues on beneficiaries' choices and
access to quality care.
We also ask that Congress act to limit this competitive bidding
program to those services where it makes sense and to exempt nursing
facilities. This exemption would be consistent with congressional
intent and the plain language of the Social Security Act creating the
competitive bidding program. LTC facilities already purchase DMEPOS
through what is essentially a private competitive bidding process.
There is nothing to suggest that Congress intended to undermine
institutional purchasing power or replace the current private system
with a public system.
For further information, please contact Peter C. Clendenin,
Executive Vice President, NASL.
Statement of National Association of Chain Drug Stores
INTRODUCTION
Thank you for allowing the National Association of Chain Drug
Stores (NACDS) the opportunity submit a statement on the impact of
Centers for Medicare and Medicaid Services' (CMS) competitive bidding
program for Durable Medical Equipment, Prosthetics, Orthotics and
Supplies (DMEPOS) on Medicare beneficiary access to life-saving DMEPOS
items and services from their local community pharmacies. NACDS
represents approximately 200 companies operating retail pharmacies in
virtually every community in the country. NACDS represents national
companies with thousands of retail pharmacies as well as local chains
that operate as few as four pharmacies. Regardless of their size, all
NACDS members are very concerned about the competitive bidding program
and the potential impact it will have on Medicare beneficiaries'
health.
Medicare patients obtain coverage for DMEPOS through the Medicare
Part B program. Durable medical equipment includes such items as
diabetic testing supplies and monitors, walkers, hospital beds, wheel
chairs, and oxygen equipment and supplies. Many Medicare beneficiaries
obtain these supplies from their local pharmacies. In fact, a recent
study conducted by HealthPolicy R&D found that nearly two-thirds of
older diabetic patients obtain their diabetic test strips from their
retail-based community pharmacies.\1\ Retail pharmacies are the largest
providers of DMEPOS services to Medicare patients and are in a unique
position to assist patients with their care and treatment and to
monitor disease trends and therapy outcomes. In many cases, a
pharmacist is the most readily accessible health care provider in the
community for the Medicare beneficiary. One-on-one patient-pharmacist
consultations can often provide the first opportunity to identify
chronic illnesses and changes in patient conditions, and these
consultations often result in early detection, referral, and treatment.
In addition to helping to preserve the patient's health, early
detection and treatment provides tremendous savings for the Medicare
program. For many of these patients, the pharmacist serves as a
gatekeeper assisting them and their caregivers in their health care
management needs. Continued participation of community retail
pharmacies in serving Medicare patients should therefore be an
important consideration in the Medicare program.
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\1\ HealthPolicy R&D, Medicare's New Competitive Acquisition
Program for Durable Medical Equipment: Policy Considerations Involving
Beneficiaries with Diabetes, Community-Based Retail Pharmacies and
Blood Glucose Monitoring, Washington, DC, January 2006.
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RECOMMENDATIONS TO ENSURE BENEFICIARY ACCESS TO HIGH QUALITY PRODUCTS
AND SERVICES IN THE MEDICARE DMEPOS PROGRAM
We raise the following concerns and offer our recommendations to
help the Committee ensure that Medicare beneficiaries have access to
high quality products and services from their pharmacies. First, CMS'
requirement for DMEPOS supplier accreditation creates significant
administrative and financial burdens for pharmacies. Congress should
require CMS to exempt state-licensed pharmacies from this onerous
requirement. Second, expansion of the competitive acquisition program
for DMEPOS to include diabetic supplies sold at retail, or CMS' plan to
establish national or regional competitive bidding areas for mail-order
diabetic testing supplies, could limit participation by pharmacies and
reduce diabetic patients' access to life-saving supplies and services.
Thus, diabetic supplies sold at retail should not be subject to the
program and CMS should not expand the mail-order program to include
these products. Third, we ask Congress to reject any cut and/or freeze
to the DME fee schedule update as an offset for a delay of the
competitive bidding program or as a pay-for for other initiatives under
consideration. We are deeply troubled any proposal to cut and/or freeze
to the DME fee schedule as that will create significant confusion,
frustration, and access problems for Medicare beneficiaries and their
healthcare providers. Fourth, we urge Congress and CMS to monitor and
review beneficiary experiences and quality of products and services as
it moves forward with the competitive bidding program. Experiences from
the first round will help secure beneficiaries' interest and enhance
the program as CMS moves forward. Finally, we are very concerned that
beneficiaries in the competitive bidding areas may mistakenly believe
that they are required to utilize a mail-order pharmacy to obtain their
diabetic products and services. Thus, we urge Congress to require that
CMS involve pharmacists and other providers in creating patient
communication materials to ensure that beneficiaries are properly
educated about the program.
State-licensed pharmacies should be exempt from the accreditation
requirement. The MMA requires DMEPOS suppliers to be accredited to sell
covered items to Medicare patients and to participate in the
competitive bidding program.\2\ The goal of this requirement is to
reduce fraud, waste and abuse in the Medicare program. While we agree
with CMS on the importance of eliminating fraud, waste and abuse from
the Medicare program, we do not believe that requiring accreditation of
state-licensed pharmacies will accomplish this goal. CMS has at its
disposal a variety of tools to ensure provider integrity in the
Medicare program, which CMS could pursue instead of the onerous
accreditation requirement. Accreditation of state-licensed pharmacies
is an unnecessary requirement that could threaten patients' access to
DMEPOS supplies from their most accessible health care provider
---------------------------------------------------------------------------
\2\ CMS has announced that all suppliers must be accredited by
September 30, 2009 to maintain billing privileges under Medicare Part
B. Those participating in the competitive bidding program are required
to be accredited even sooner.
---------------------------------------------------------------------------
We are concerned that requiring accreditation of pharmacies could
result in reducing the number of pharmacies that are available to
supply DMEPOS to Medicare beneficiaries. The costs associated with the
accreditation process, which can amount to several thousand dollars and
hundreds of man-hours for each pharmacy, creates a tremendous financial
barrier for pharmacies that provide DMEPOS items to their patients.
Pharmacies already struggle to minimize operational expenses to remain
competitive in the marketplace, and are skeptical of the accreditation
process because even if they undergo the accreditation process, they
have no guarantees that they will ultimately be allowed to participate
in the DMEPOS program. Combine this requirement with the proposed
reimbursement cuts in Medicaid and other state programs and pharmacies
are forced to closely examine their expenses.
Accreditation of state-licensed pharmacies is unnecessary due to
the comprehensive licensure requirements for pharmacies and
pharmacists. Pharmacies are licensed by the board of pharmacy of their
respective states to provide services to patients. As part of their
licensing process, pharmacies submit to rigorous requirements for their
operations and compliance with Federal and state laws. Further, state
pharmacy laws mandate that each pharmacy have a designated pharmacist
who is responsible and accountable for the operation of that pharmacy
in compliance with appropriate laws and regulation. Today's pharmacists
are highly educated, licensed experts in the use of medications and
medical devices who advise patients and health care providers. These
pharmacists are ideally situated to provide Medicare patients using
diabetic supplies and other DME items with appropriate counseling and
information on the proper use of these items. These qualifications
clearly distinguish pharmacies and pharmacists from other unlicensed
and unregulated suppliers.
While we believe that accreditation should not be required of
pharmacies, we understand the mandate on CMS to implement the
accreditation requirement under Medicare Prescription Drug, Improvement
and Modernization Act (MMA) of 2003. Nevertheless, CMS' recent
implementation of the accreditation requirement through different
deadline dates for suppliers with less than 25 locations has resulted
in inequitable and unfair treatment of smaller suppliers. On December
19, 2007, CMS announced that existing DMEPOS suppliers enrolled in the
Medicare program must obtain and submit an approved accreditation to
the National Supplier Clearinghouse (NSC) by September 30, 2009. New
DMEPOS suppliers who are enrolled for the first time before March 1,
2008 must obtain and submit an approved accreditation to the NSC by
January 1, 2009. However, new DMEPOS suppliers with less than 25
locations submitting an enrollment application to the NSC on or after
March 1, 2008 are required to be accredited prior to submitting their
Medicare enrollment application.
The accelerated accreditation requirement for existing chain
suppliers with less than 25 locations that open new stores on or after
March 1, 2008 is arbitrary and unfair. The tiered accreditation
deadline based on number of locations creates differential treatment
for suppliers. Because CMS has conditioned the Medicare supplier
numbers for new locations of an existing supplier on accreditation of
the entire chain, the accelerated accreditation deadline also creates a
back-log for accrediting organizations. Although CMS provided
additional time, until September 30, 2009, for new and existing
locations of chain suppliers that have 25 or more enrolled locations to
become accredited, CMS retained the unfair tiered approach for
suppliers that do not meet the 25 location threshold. While we
appreciate the extension provided to suppliers with 25 or more
locations, CMS should treat all existing chain suppliers with the same
degree of fairness and create a single accreditation deadline.
Recommendation: To reduce the difficulties posed by the
accreditation requirement on pharmacy providers and to ensure patients'
continued access to DMEPOS items, we urge Congress to specifically
exempt state-licensed pharmacies from the accreditation requirement. We
also urge Congress to ensure careful oversight of CMS' administration
of this and other elements of the DMEPOS program to ensure fair
treatment of small providers.
Congress should not allow CMS to expand the competitive bidding
program to include diabetic supplies sold at retail or to create
national or regional competitive bidding areas for mail-order diabetic
supplies.
The DMEPOS competitive bidding program was mandated by the MMA. The
program is currently limited to 10 metropolitan statistical areas
(MSAs) during the initial round and includes bidding for ten categories
of medical equipment and supplies. CMS has also recently announced the
second round of the program, which expands the program to an additional
70 MSAs. While CMS has excluded diabetic supplies sold at retail from
both rounds of competitive bidding, we urge Congress to require CMS to
continue this exemption in the future.
Currently, Medicare beneficiaries can obtain their diabetic glucose
monitors and testing supplies from any retail pharmacy that
participates in the Medicare program, allowing beneficiaries to obtain
all of their covered equipment, supplies, and prescription drugs for
managing their diabetes from the same qualified pharmacist. As
mentioned earlier, the majority of older diabetic patients rely on
their retail pharmacies for their diabetic supplies. Evidence shows
that pharmacist-based programs can result in clinically significant
improvements in health outcomes for diabetic patients. Through programs
such as the ``Asheville Project,'' the pharmacy setting has been shown
to provide a successful platform for initiatives to improve adherence
to testing and treatment regimens for patients with diabetes.\3\ Other
private and public health care programs have also placed the pharmacist
in a central role in the management of diabetes and other chronic
diseases. It would be ill-advised to risk disrupting these pharmacist-
patient relationships while further experience is being gained in the
effectiveness of community-based pharmacies in promoting adherence to
blood glucose treatment and monitoring regimens.
---------------------------------------------------------------------------
\3\ Pharmacy Times, The Ashville Project: A Special Report
(October, 1998), available at http://www.pharmacytimes.com/files/
articlefiles/TheAshevilleProject.pdf (last accessed May 12, 2008).
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Unlike other DME supplies, CMS did not evaluate the effects of
competitive bidding of diabetic supplies during the competitive bidding
demonstration projects. Thus, expansion of the competitive bidding
program to diabetic supplies sold at retail pharmacies will create
significant confusion and frustration to diabetic patients and their
providers. At a time when Medicare is attempting to move away from
fragmented care, competitive bidding is likely to interfere with
patient access and could adversely affect diabetes management.
Further, the study conducted by HealthPolicy R&D examined issues
related to competitive bidding of diabetic products and associated
services under Medicare Part B and noted the following:
Costs to the Medicare program will increase if access to
the full range of monitoring options is lost or if the frequent in-
person counseling by retail pharmacists is disrupted.
The complexity of using glucose monitors, particularly
for an elderly beneficiary, is a major concern. Pharmacists play an
important role in helping beneficiaries select the optimal monitors and
in the correct use of such monitors, both in terms of initial
instruction and subsequent reinforcement of that instruction over time.
Much of the professional support originates from the ongoing
relationship between beneficiaries and pharmacists.
CMS excluded blood glucose monitors and supplies from the
DME competitive bidding demonstration project, due, in part, to
concerns regarding the complexity of matching glucose monitors with the
appropriate testing supplies.
The competitive bidding program could operate contrary to
Medicare's current and future initiatives that are designed to promote
adherence to blood glucose regimens and reduce overall costs in
managing diabetes.
Although CMS excluded diabetic supplies sold at retail from the
first and second rounds of competitive bidding and diabetic supplies
sold anywhere from the second round, CMS continues to maintain that it
will soon create a national or regional mail-order program for diabetic
supplies.
CMS' decision to expand the mail-order program for diabetic
products would not be supported by any evidence that mail-order program
would ensure quality products and services or guarantees as to
patients' access to life-saving diabetic products. As CMS' primary
motivation appears to be financial savings, it is quite likely that a
winning mail-order supplier may limit access to high quality products
and eliminate patients' choice in their diabetes care in order to cover
reduced reimbursement under the mail-order competitive bidding program.
Further, CMS has not engaged in any study or evaluation of the
impact of a mail-order diabetes program on patients' health outcomes
and overall increase in cost to the Medicare program from patients'
failure to abide to their prescribed testing regimen. As mentioned
earlier, proper match between diabetic test strips and monitor is
critical to optimal diabetes management. If patients are unable to
access proper diabetes test products or find it difficult to manage
their diabetes with low-quality products, they are much more likely to
stray from proper testing regimen or stop testing entirely. These
behaviors are likely in a program that denies access to retail
pharmacies and could harm patients and increase Medicare spending.
Like many other chronic diseases, diabetes has a disproportionate
impact on minority and low income patients. These populations are less
likely to be able to navigate a competitively bid mail-order market for
their diabetes products. As retail pharmacies and providers are
selectively forced out of diabetic supplies business through the
expansion of the mail-order program, minority and low income
populations will find it increasingly difficult to access these
products. Expansion of the mail-order program will effectively compel
these vulnerable populations to go without proper diabetes management.
As previously stated, the majority of older patients prefer to
obtain DME supplies for conditions such as diabetes from their local
pharmacist with whom they have an ongoing relationship. The presence of
a licensed pharmacist at their community retail pharmacy gives patients
the opportunity to discuss the best glucose test monitors for their
individual needs and the proper matching of the test strips to the
glucose test monitors. This individualized attention is critical to
helping increase patient compliance with therapy regimen and improving
health outcomes for diabetic patients. The benefit of such interaction
should not be taken lightly as it provides a valuable patient care
forum for early awareness and treatment of diseases, and translates
into substantial savings for the Medicare program. Expansion of the
mail-order diabetes program will make it more difficult for Medicare
patients to gain access to the community pharmacist they trust creating
a likelihood for miscommunications and misunderstandings and eroding
the benefits of the pharmacist-patient relationship that has been
proven to improve health outcomes and reduce overall health care
spending.
Congress should reject proposals to cut and/or freeze the DME fee
schedule.
Despite inflation and increased costs in providing DME services,
some have proposed that the DME fee schedule be cut or the fee updates
remain frozen as an offset for a delay of the competitive bidding
program or as a pay-for for other initiatives under consideration.
Foremost, Congress should recognize that DME fee schedules have not
been updated to reflect the true cost of providing these products and
services. We urge Congress to evaluate the administrative costs
incurred by providers in the DMEPOS program and require the update of
these schedules accordingly. Absent meaningful reforms, a delay of the
program funded through cuts to providers will harm Medicare
beneficiaries and small businesses.
CMS excluded diabetic products sold at retail pharmacies from the
first two rounds of the Medicare competitive bidding program in part
because of the unique nature of this disease and the potential harm to
beneficiaries. Management of diabetes requires very careful monitoring
of blood glucose and pharmacists serve in a team comprising of doctors,
patients and diabetes educators to help patients properly manage the
disease. Medicare beneficiaries understand that interaction with a
pharmacist is critical in proper diabetes management, and therefore a
vast majority of beneficiaries rely on their community pharmacies for
their diabetic products and services. Therefore, we urge Congress to
preserve these relationships by ensuring patients have access to their
local pharmacies and reject any proposal that would cut and/or freeze
DME fee schedule updates.
CMS should monitor and review beneficiary experiences and quality
of products and services.
NACDS is concerned that CMS' focus on reducing costs of the DMEPOS
program may force many suppliers to substitute lower quality products
and services to cover reduced reimbursement under the competitive
bidding model. We urge Congress to require that CMS evaluate
experiences from the implementation of the first round of the program
as it moves forward. In particular, CMS should carefully monitor and
evaluate whether contract suppliers are able to satisfy demand. CMS
should also be required to evaluate the impact of the program on
beneficiaries' access to high quality products and services. All
results from CMS' evaluation or surveys should be made available to the
public.
We also urge Congress to require the Government Accountability
Office (GAO) to conduct a thorough analysis of beneficiary experiences
in the program. These analyses should include, among other things,
impact on health outcomes and increased costs to the Medicare program
from missed therapies due to beneficiaries' inability to access
products or navigate a competitive bidding program. We believe that a
thorough analysis of round one is necessary in advance of implementing
further rounds of the program.
CMS should involve pharmacists and other providers in drafting
patient communication materials.
With less than two months remaining before first round mail-order
diabetic supplies contracts go into effect in the 10 MSAs, CMS has yet
to embark upon an effective patient outreach program. As the first
round becomes effective on July 1, 2008, patients are likely to be
confused about where they can obtain their DMEPOS products and
services.
In particular, diabetic patients in the 10 MSAs may mistakenly
believe that they are required to utilize a mail-order facility for
their diabetic supplies. CMS should be required to clearly state on any
beneficiary communication material that patients in the 10 MSAs may
continue to utilize their local pharmacies for their diabetic test
supplies. As mentioned earlier, interaction with licensed pharmacists
at retail pharmacies provides benefits that are not achievable when
patients receive their diabetic products through mail-order. Congress
should require CMS to work with pharmacists and other healthcare
providers in developing proper communication materials to ensure that
patients are not steered away from retail pharmacies, depriving them of
professional counseling of their pharmacists.
CONCLUSION
NACDS appreciates the opportunity to work with Congress to ensure
that our seniors have access to the best healthcare products and
services. We thank you for this opportunity.
Statement of National Coalition for Assistive and Rehab Technology
The National Coalition for Assistive and Rehab Technology (NCART)
appreciates the opportunity to submit the following written comments
regarding Medicare's Durable Medical Equipment, Prosthetics, Orthotics,
and Suppliers (DMEPOS) Competitive Bidding Program. NCART is a
coalition of suppliers and manufacturers of assistive and rehab
technologies. The coalition's mission is to ensure proper and
appropriate access to rehab and assistive technologies, which CMS
classifies under durable medical equipment (DME). We sincerely
appreciate the consideration of the committee and its concerns
regarding the implementation of the competitive bidding program.
Throughout the planning through today we have been advocating for
the exemption of complex rehab products from Competitive Bidding.
Complex rehab products are medically necessary adaptive seating,
positioning, and mobility devices that are evaluated, fitted,
configured, adjusted, or programmed to meet the specific and unique
needs of an individual with a primary diagnosis resulting from injury
or trauma or which is neuromuscular in nature. A good example of these
products is the type of power wheelchair and seating system used by the
late Christopher Reeve These represent a very small subset of the
Medicare expenditures yet have a major impact on Medicare beneficiaries
who are severely disabled.
The Program Advisory and Oversight Committee (PAOC) advised CMS to
exempt complex rehab from competitive bidding due to the fact that none
of the demonstration projects included customized items. Because of
this, CMS lacked the necessary knowledge regarding the impact to
consumers. In addition, the PAOC believed that competitively bidding
complex rehab devices would produce insufficient savings and would
negatively impact the clinical outcomes of beneficiaries. NCART as well
as clinical groups and consumer advocacy groups have advised CMS that
complex rehab technologies are not appropriate for competitive bidding
and our position on this has not wavered. However, this advice was
generally ignored and many items classified as complex rehab are
included in Round 1. Many groups involved in protecting access to this
technology for Medicare beneficiaries with disabilities are involved in
on-going efforts to exempt these items from the competitive bidding
program.
The exemption of complex rehab has a solid base of support. Major
disability advocacy groups have held meetings with Congress and
provided written support. These include the Muscular Dystrophy
Association, the ALS Association, and the National Council for
Independent Living. In addition, legislation has been introduced in the
House and the Senate to provide for this exemption, H.R. 2231 and S.
2931.
Complex Rehab Should be Exempt
There are a variety of essential reasons that complex rehab
technology should be exempt from the competitive bidding program:
The original Legislation specifically exempted custom orthotic
devices because they require individual evaluation and fitting. The
items falling under complex rehab meet this same definition and we
believe Congress did not intend that these types of items be included.
Moreover, these items are a very small subset of the Medicare DME
expenditure, for example less than 10% of the total dollar spent for
power mobility, yet they are critically necessary for those Medicare
beneficiaries with diagnoses such as spinal cord injury, traumatic
brain injury, cerebral palsy, muscular dystrophy, spinal muscular
atrophy, spina bifida, amyotrophic lateral sclerosis, and multiple
sclerosis.
Decreased access to individually prescribed devices will lead to
poor clinical outcomes--This level of customization does not lend
itself to competitive bidding. Current HCPCS codes do not adequately
define or distinguish technologies. Devices that vary in intended use,
clinical application, technology and price are amalgamated into single
HCPCS codes with a single payment amount. In many cases the current
Medicare fee schedule does not allow access to the full range of
technologies within a code; the reduced single payment amount will
further block access to critical technologies. Items within a single
HCPCS code are not interchangeable and therefore will not meet the
identified medical needs of the Medicare beneficiary. Complex rehab
devices are individually fit, measured, adjusted, programmed and
otherwise modified to meet the specific needs of an individual.
Insufficient savings--Complex power mobility is an extremely small
portion of power mobility utilization, less than 10 percent of the
power mobility benefit, according to a CMS contractor. Furthermore, an
analysis completed by The Moran Company estimated exempting complex
rehab from competitive bidding would only reduce savings by $46 Million
over five (5) years.
Implementation Issues Providing Further Evidence of the Need to Exempt
Complex Rehab from the Competitive Bidding Program:
Inexperienced suppliers are allowed to bid--Suppliers that were
accredited prior to the release of the Quality Standards are considered
to be accredited and compliant with the quality standards even though
the criterion used to survey these suppliers at the time does not meet
the current standards. As a result, inexperienced suppliers, suppliers
who have never provided complex technology and who do not employ
knowledgeable or credentialed staff are being allowed to contract under
competitive bidding. This will impact the clinical outcome of Medicare
beneficiaries. In addition, these suppliers do not have the needed
knowledge of the HCPCS codes and the range of technology represented by
the codes to submit a reasonable bid.
Suppliers are not required to have a physical location--The
cumulative effect of Medicare policy and regulation is that suppliers
are not required to have a physical location in a service area or CBA,
they are not required to have a technical support staff or credentialed
rehab technology supplier on their direct payroll. The ability to gain
market share with no direct costs; the ability to only incur cost
associated with the provision of a product certainly allows suppliers
to reduce their over-head and therefore submit a lower bid price.
However, the impact to individuals with severe disabilities will be
reduced local presence and reduced access to the critical services
associated with complex rehab technologies.
Supplier's express two basic reasons for bidding in an area they do
not currently have a presence:
The opportunity to move into a new market and rapidly
gain market share. With current market leaders potentially eliminated
combined with the mandatory requirement for beneficiaries to receive
product from contracted suppliers, there is a strong opportunity to
gain market share with no financial investment. However, these
suppliers lack an understanding of the market and the cost to properly
service the market.
Opportunity to ``practice'' the bid process. This allows
suppliers to be prepared to submit a bid in subsequent bidding rounds.
These bids offered an opportunity for these bidders to understand the
bid evaluation and to understand how to improve the chance of winning
contracts in their market. They did not have to worry about the impact
of their bid amount on the ultimate payment.
Suppliers are not required to provide service and repair--Because
contract suppliers knew they would not be required to service and
repair the devices on which they bid, they had an incentive to lower
the bid on these parts to strengthen their overall bid. However, the
bid did establish the single payment amount that will apply to all
suppliers. Noncontract suppliers will be unable to ensure ongoing
access to service and repairs because the contracted bid price is too
low.
Claimed Savings is Erroneous
CMS used 2005 utilization data to establish item
weighting--This did not allow a distinction between standard and
complex power mobility bases and did not identify accessory utilization
by category. As a result, substantial errors were made in the savings
calculation:
2006 coverage and coding changes established a ``Basic
Equipment Package''--revised code-set and coverage policies were
implemented in November 2006. The coding changes also added a ``Basic
Equipment Package''. This package contains many items which had been
highly utilized with standard power mobility. This package is included
in the base fee schedule for the power wheelchair and the items are no
longer separately billable. As a result, there are no additional
savings for these items; therefore, they should not be included in the
savings calculation.
Rarely used or non-covered items included in savings
calculation--CMS was not able to distinguish accessory use by category
(standard v complex rehab). As a result accessories were included in
the complex rehab category bid which are not billed with these complex
bases. An example is U1 batteries, with an item weighting of
0.128529214, were included in the complex rehab bid. These batteries
are not used in complex rehab power mobility bases due to the fact that
they do not provide enough power to meet the performance requirements
of the code-set. These smaller batteries are routinely utilized in the
smaller bases characteristic of standard power mobility. This item and
others like it should not be included in the calculation of savings.
Conclusion
It is critical that complex rehab devices be exempted. The strong
support of the disability groups such as the Muscular Dystrophy
Association, the ALS Association and the National Council for
Independent Living.provide solid evidence that Medicare beneficiaries
are very concerned about the negative impact that is sure to come. The
legislation introduced in Congress will provide for this relief and
protection for the Medicare beneficiaries with the most severe
disabilities. We urge members of the Committee and all members of
congress to support the passage of HR 2231 and S 2931 at the first
opportunity.
Statement of National Competitive Bidding
National Competitive Bidding is a way for the Centers for Medicare
and Medicaid Services (CMS) to reduce the number of providers who will
be able to deliver and bill for services which are patient preferred
and provided in the home setting.
CMS uses Fraud and Abuse as the initiative for reducing the number
of providers. What is wrong with this? Let us ask you to have CMS
address the following issues:
First and foremost over the last 15 years HCFA and now
CMS has implemented more stringent requirements to become a provider of
durable medical equipment. One needs to ask; if there is fraud and
abuse who is overseeing the CMS contractors who implement the
requirements?
CMS has the authority to reduce prices through inherent
reasonableness. Why reduce the number of providers at an expense yet to
be determined to implement this program?
Services of Durable Medical Equipment Providers are not
reimbursed, but they are provided. In order to continue those services
providers must do business locally. The Competitive Bidding Program has
few providers in a large geographic area and although the winners are
permitted to subcontract, who will oversee the quality of services
delivered? The contracted provider must guarantee quality. If CMS
cannot control their own perceived fraud and abuse now, how will they
oversee multi-tiered services?
Accreditation is mandatory at an expense to the provider.
In essence CMS has implemented a program where someone will see to it
that standards are met, at the provider's expense. Most providers were
voluntarily accredited for years and those who are scrambling to do it
now are providing minimum services. Many will no longer participate in
the program leaving the beneficiary with limited choice. Has that been
considered?
Gasoline prices were not what they are today when the
initial bids were submitted. This will certainly impact the service
component that is not reimbursed, who will oversee that deliveries are
coordinated and timely?
CMS pronounces that Beneficiaries will save since their
co-pay will also be reduced when reimbursement is reduced. The majority
of Beneficiaries have supplemental insurance or Medicaid. It is those
on the border of being eligible for Medicaid with an out of pocket
expense. Will CMS, or Congress ask those supplemental carriers to
reduce their premiums, because it is they who benefit from a reduction
in co-pay amounts? The beneficiary saves nothing.
Limiting the number of providers just limits the
beneficiary's access to local services. Many are accustomed to going to
the provider of their choice and have developed a relationship with
them. Has that been considered?
Competitive Bidding could and will result in the
beneficiary receiving services from multiple providers. How will they
cope with all of that? Did anyone consider that?
Referral sources handling the continuum of care in the
home will have to juggle multiple calls to multiple providers to
coordinate this care. Did anyone consider that?
While the savings that CMS anticipates are not guaranteed and are
speculative at best; services to beneficiaries will be negatively
impacted. There is no doubt that will happen. The beneficiary is not
considered at all in this obsession to reduce costs at the expense of
the providers that are relied upon by many. This is especially true
when CMS could reduce reimbursement without the added cost of
overseeing yet another contractor and this program.
If the winning provider fails, what does the beneficiary do then?
By the time CMS finds out there is a problem you can be guaranteed
there will not be another provider so eager take over, if there is one
available at all.
New Jersey is listed in two MSAs in Round Two, but we have yet to
receive the area of the state. Is it northern NJ, or all of NJ? The CMS
Contractor states they do not have the information. Will a provider be
expected to deliver services from Montauk Point, NY to Cape May, NJ? Or
is it Allentown, PA to Camden, NJ? We are listed with PA locations and
NY locations. How could this crucial information not be available?
With the questions that remain unanswered, we believe that the
Congressional Oversight Committee should ask specific questions of CMS
detailing its own oversight of their own contractors. Ask yourself if
there is fraud and abuse, who pays the claim, who does an on-sight
inspection of the provider's location, who writes the rules and
policies, how does CMS measure the quality of service these contractors
provide? Maybe we should start there before we reduce reimbursement,
access and the quality of care beneficiaries currently require to
remain in their homes. The alternative is institutional care, at a far
greater cost to the program, the patient's family, and ultimately the
beneficiary that CMS tells us they are protecting. This is a systematic
dismantling of the program under the guise of reducing fraud and abuse
and achieving costs savings.
Statement of National Home Oxygen Patients Association
The National Home Oxygen Patients Association (NHOPA) welcomes the
opportunity to comment on competitive bidding as it affects our
members, users of home oxygen therapy.
Our comments focus on what we have seen so far as implemented by
the Centers for Medicare and Medicaid Services (CMS), what we have not
seen, and what we anticipate will occur July 1st and thereafter based
on competitive bidding for home oxygen therapy.
First and foremost, we must strongly emphasize that bidding for
oxygen and related services is, by definition, a flawed process because
the current payment methodology for home oxygen is seriously flawed.
Competitive bidding for oxygen will likely exacerbate the situation,
not improve it. Under current statute, payment for new technologies
such as lightweight liquid systems, portable oxygen concentrators, and
transfilling systems is based on the pricing for stationary
concentrators. Simply stated, the statute that ties the payment of
devices that today cost approximately $2500-$3500 to devices that cost
$450 is irreparably flawed. Access to these lightweight technologies is
critical to the oxygen user population, and any effort to reduce
payment for these devices will unquestionably put a greater strain on
access to these technologies.
For example, in non competitive bidding areas, stationary
concentrators trigger a $199 payment, with an ``add-on'' of either $31
or $51 for the newer technologies. The former costs a supplier around
$450, while the latter costs $2500-$3500. The very appropriate downward
pressure on payment for stationary concentrators has the unfortunate
effect of reducing payment for other devices, making access to them
even more problematic.
Secondly, we were quite chagrined by CMS' claim at the public
hearing on May 6th indicating that its advisory committee, the PAOC,
served as an important liaison for input from the consumer community.
Oxygen is far and away the largest single component of the durable
medical equipment benefit, yet CMS did not include either an oxygen
user or a pulmonary physician as part of its advisory board. Our views
have, bluntly, been ignored by CMS.
Additionally, in 2007 we were approached by CMS contractor Abt
Associates to assist in the development of a questionnaire/survey
instrument to help assess the impact of competitive bidding, yet Abt
ended that process before completion. It is very difficult to believe
that there will be an accurate and appropriate assessment of
competitive bidding unless there is an accurate picture of access and
quality prior to competitive bidding in the 10 MSAs where competitive
bidding is slated to begin July 1st, 2008. Simply, one cannot assess
impact unless one has a fair picture of the provision of oxygen and
related services prior to July 1st.
With competitive bidding less than 8 weeks away, to our knowledge
there has been no direct outreach to oxygen users in any affected MSA.
If we understand the program correctly, a beneficiary whose supplier is
not a winning bidder and chooses not to accept the winning bid under
the ``grandfather'' provisions, will be required to find a new
supplier. That new supplier is unlikely to provide the identical oxygen
system, and we understand and appreciate that some educational
information will need to be provided regarding new stationary systems,
new portable systems, and new oxygen conserving devices. NHOPA has
already begun that effort, but we see no movement by CMS to educate
beneficiaries.
The beneficiary who must find a new supplier will likely have a
chaotic July 1st as new equipment arrives and old equipment disappears.
While a seamless process is possible, we are not exactly confident that
such a transition will occur. Once the old supplier pulls his equipment
from the home, unless the new equipment is present and ready for use,
there could be significant clinical risk.
In terms of replacement equipment by the new supplier, CMS' own
pilot study of competitive bidding/oxygen usage in Polk County, FL and
San Antonio, TX saw a reduction of 30% in access to lightweight oxygen
systems. CMS has never pursued our concerns regarding that matter, and
implementation of this program absent such program changes will
unquestionably trigger similar, dramatic access issues. There is
already some evidence that access to liquid oxygen systems in
competitive bidding areas may be problematic, and this is of major
concern to NHOPA.
There has been important discussion within the oxygen community
regarding a slow down of Phase Two of competitive bidding. We believe
that it is appropriate to implement Phase Two once there has been a
reasonable and accurate assessment of the impact of Phase One of
competitive bidding AND time for CMS to adjust the program based upon
that assessment. We find it hard to believe that such an assessment
could occur in time for a January 1, 2009 commencement date. We also
believe that there are ways to achieve ample savings within the
Medicare home oxygen therapy benefit that would, in the aggregate, save
Medicare, and the Congress/taxpayers, millions. By establishment of a
payment system that bases payment on a patient's clinical need as
determined by the prescribing physician rather than the supplier, and
basing those payments to align on the cost associated with acquisition,
delivery, etc., significant savings could be achieved. It would take,
however, aggressive action by the Congress to implement such changes.
Statement of Pennsylvania Association of Medical Suppliers,
Mechanicsburg, PA 17050
Introduction
The Pennsylvania Association of Medical Suppliers (PAMS) is
America's oldest state advocacy organization representing the interests
of home medical equipment (HME) providers. Our membership is comprised
of companies that are overwhelmingly small and independently owned. Our
members are in the business of helping people with serious health
conditions live comfortable lives in their own homes. In doing this,
our members help the health system save substantial dollars.
We are able to introduce savings to an ever-more-expensive health
system because homecare is a low-cost alternative to some of the most
expensive forms of health care, such as long-term care and
hospitalization.
Homecare is Cost Effective
In Pennsylvania alone, the cost to the state's Medical Assistance
(Medicaid) system to place a single individual in a long-term care
facility runs an average of about $56,000 per year. In comparison, it
costs about $23,000 per year to give that person the same level of care
in their own homes.
But the savings potential from HME providers doesn't end as an
alternative to long-term care facilities. People with long-term
respiratory problems, such as COPD, can receive home treatment for an
entire year for less than the cost of a single day's visit to the
hospital. That's an average of about $6.65 per day for in-home oxygen
care vs. a national average in excess of $4,600 per day for a hospital
stay. Our home infusion therapy providers offer a variety of life-
sustaining intravenous medications, including chemotherapy, which are
far more cost-effective than the alternatives of in-patient or out-
patient treatments. The average cost per day of home therapy was $122,
compared to $798 in the hospital and $541 in a skilled nursing facility
setting.
PAMS would respectfully urge you to remember these numbers as
Congress searches for ways to find savings in the Medicare and Medicaid
systems. Our industry, in conjunction with home healthcare
professionals, can provide individual, in-home care for roughly 40
percent of the cost of long-term institutionalization. We challenge you
to find another healthcare sector that is capable of making a similar
claim. And who wouldn't want to remain in their own home given the
choice?
Competitive Bidding
The National Competitive Bidding (NCB) program for Durable Medical
Equipment, Prosthetics, Orthotics and Supplies (DMEPOS) as designed by
CMS is a fatally flawed and highly unusual version of government
competitive bidding programs. It is a program that has managed to
disqualify more than six out of ten bidders for technical reasons not
related to pricing. The fact that these hearings are even necessary
should serve as fair warning that CMS managed to do something terribly
wrong to an exercise that is commonplace at virtually every level of
government.
We all know that competitive bidding is normally a simple,
straight-forward and cost effective process. It is utilized by local
governments to ensure that trash is collected reliably and at the
lowest cost possible. It is used by state governments for cost-
effective highway construction and maintenance projects. Our nation's
military preparedness is largely dependent on a series of defense
contracts supplying everything from meals and boots to fighter jets and
aircraft carriers.
Why is it that these government-run competitive bidding projects
seem to work flawlessly and yet the CMS DMEPOS competitive bidding
program has been subject to problems, complaints and criticisms since
its inception?
The problems with the CMS bidding process are numerous, but we can
point to three major problems that differentiate it from successful
competitive bidding programs and form the foundation for our claim that
the program is fundamentally flawed--that is, that the program is
incapable of operating successfully and that it will jeopardize patient
care if not delayed immediately and thoroughly overhauled.
The three major problems that create the fundamental flaws in the
CMS bidding process are as follows:
It is anti-competitive;
It misunderstands the nature of successful bidding
programs; and
It is conducted at the retail level.
It is anti-competitive.
The first major flaw with the CMS bidding process is that it was
designed to eliminate competition rather than promote it. In the
Pittsburgh MSA, for example, CMS reported the presence of 289 DME
providers. In Round One, CMS reported that it offered contracts to 52
bidders. This means that 82 percent of the competitors in this market
have been frozen out of competing for Medicare business. More
importantly, it means that Medicare beneficiaries have lost eight out
of ten choices for finding the best and most convenient DME suppliers
to serve their in-home medical needs.
Eliminating community-based competition on an order of this
magnitude makes very little sense. Policy makers like the idea of
competitive bidding because experience has taught us that competition
is a good thing--especially for consumers. But how can we call a
program ``competitive'' when one of its chief purposes is to eliminate
competitors from the marketplace?
According to the report The Impact of Competitive Bidding on the
Market for DME (copy attached) by Robert Morris University economics
professors Brian O'Roark, PhD and Stephen Foreman, PhD, JD, MPA,
``interference with competitive markets inevitably leads to higher, not
lower, prices. Indeed, the customer base for medical equipment and
supplies is expected to grow dramatically during the next 20 years.
Artificially restricting the market now will lead to substantial market
failure in 10 to 20 years.''
Drs. O'Roark and Foreman note that there are many reasons why
competition is desirable to consumers and the overall public welfare:
``Prices tend to be lower and consumer options greater.'' The study
concludes that there may be ``a short-run advantage to CMS if
successful bidders are willing to cut price (or pay a premium) to gain
market power, and it may be easier to regulate fewer firms. However, in
the long-run, the bidding scheme will have traded a competitive market
for a government-mandated concentrated market. As a result, we will
have traded small, short-run benefits for major, long-run problems--
poor public policy indeed.''
The study further points out that the selective capture of such
major, competitive and established markets runs counter to the most
fundamental standards of fairness governing the normal operation of
U.S. markets. ``United States antitrust laws promote and maintain
competition in the marketplace. Artificial limits on competition are so
serious that collusion to limit competition is a criminal offense and
may result in the award of treble damages.''
The CMS bidding program blatantly manipulates the market for DME,
eliminates a large number of well established and reputable DME
providers, and further erects an impenetrable barrier to new entries
into the market. If privately owned companies were to attempt this
level of market manipulation, it would be illegal because it would be
anti-competitive.
Real competition keeps prices low, gives consumers choices, and
holds competitors accountable for the quality of their products and
services. Open markets and competition deliver lower prices and better
service. The current competitive market for home medical equipment
works well for consumers and patients and should not be traded for a
government-mandated scheme that compromises patient care.
It misunderstands the nature of successful bidding programs.
The CMS bidding process is radically different from successful
government competitive bidding programs in its incredibly broad scope.
Normal competitive bidding programs tend to deal with a single and well
defined product or service. The DMEPOS bidding program, by comparison,
deals with hundreds of widely varying products that were thrown
together into a stew in order to arrive at what CMS refers to as a
``composite bid'' price for each bid category.
In a peer-reviewed economic study that appeared in the January 2008
issue of prestigious Southern Economic Journal (copy attached),
researchers studying the DMEPOS competitive bidding demonstration
projects in Polk County, FL and San Antonio, TX said that the CMS
program design demonstrated ``a fundamental misunderstanding of
auctions.'' In other words, CMS doesn't know how to run a competitive
bidding program (auction).
The study said that it is a ``common misconception is that the
desirable properties of single-unit auctions extend to multi-unit
auctions. However, recent theoretical breakthroughs show that there are
actually very few multi-unit auctions that possess the famous
efficiency and revenue-generating properties of single-unit auctions.
In fact, the majority of multi-unit auctions are inefficient and can
deliver vastly different expected outcomes.''
It should come as no surprise to the authors of the study that the
CMS bidding program for Round One experienced problems at virtually
every level and at every stage. The only thing that should surprise
anyone at this point is CMS's stubborn insistence on pushing through
such a thoroughly flawed and discredited program. Even the so-called
``successful'' results invite serious skepticism from anyone familiar
with this industry. But CMS has not exhibited any curiosity as to how
it is that the smallest companies with lesser competitive advantages
were able to outbid the largest companies with superior competitive
advantages and the greatest incentive to capture market share by
``purchasing the franchise'' for the markets bid in the form of
artificially low prices. Although this result may have been an
undesirable outcome, it at least would have been an economically
predictable and understandable outcome. The actual outcome of the
DMEPOS bidding process was neither predictable nor understandable from
an economic standpoint.
In addition to the complexities created by the ``multiple units''
that were put out to bid in the CMS DEMPOS bidding program, bidders had
very little guidance on how many units were to be bid. It is standard
operating procedure for such bids to provide this basic detail so that
bidders can determine optimal pricing.
When a local government bids trash collection, the number of
households and the square mileage of the municipality are known to
bidders. When a state highway department bids a roadway construction
project, the length of roadway, number of lanes and materials to be
used are known quantities. When the Defense Department bids fighter
jets, the design specifications and number of aircraft to be
manufactured are known. Again, these are all examples of successful
government bidding programs.
By contrast, the CMS program, in addition to the ``multiple units''
problem, provided wide latitude on quality specifications and no
direction on the number of units to be supplied. The latitude on
quality standards creates an incentive to use low-cost, foreign-made
medical equipment from foreign manufacturers, such as China, where
quality control issues in other areas have been widely reported as
problematic. The lack of specificity on the number of units to be
supplied created the untenable situation where vendors were left to
literally guess at how many of any given product they actually would be
supplying if successful. The fact that anyone bid at all is an
indication of the extreme duress that the world's largest purchaser of
medical equipment and supplies placed on the overwhelmingly small
community-based DME suppliers who populate this industry.
To make matters worse, CMS and its Competitive Bidding
Implementation Contractor (CBIC) created the impression that bids would
be granted in intervals ``not to exceed 20 percent.'' Most bidders and
other industry observers assumed that contracts were to be assigned to
five or six providers in each product category. It came as a surprise
to most to learn that contract awards were offered to 20, 30 or more
bidders in different MSAs for different product categories. It is a
very big difference for a bidder to seek product pricing on the
assumption that someone would be supplying 20 percent of a market only
to be offered five percent of that market. This is a very significant
flaw for a competitive bidding program.
The CMS bidding process was both unusual and unprecedented in its
scope, sheer size and complexity. This created confusion for most at
virtually every stage of the process.
It is conducted at the retail level.
Finally, it is highly unusual for a national product procurement
process of this magnitude to be conducted at the local retail level.
Because of the enormous purchasing power of the Federal Government, its
competitive purchasing programs are typically conducted among a
relative handful of very large national competitors.
As has already been noted, retail providers of medical equipment
and supplies are overwhelmingly small, independently owned and locally
operated. Such small retailers do not control the costs of production
or wholesale distribution. Our members are at the very end of the
distribution chain. They deliver these products and services and make
sure that patients are properly trained in the safe and proper use of
the equipment and further ensure that the equipment is properly
maintained. DME providers are in a very poor position to guarantee
product pricing for three years since they do not establish product
pricing.
It is no more appropriate to ask local DME retailers to bid
competitively for Medicare business than it would be to ask local
physicians or dentists. Medicare beneficiaries who utilize such medical
equipment and supplies are typically elderly, disabled or both. They
look for DME providers who are competent, reliable and conveniently
located--just as most would look for a physician. Eliminating
conveniently located providers, while simultaneously eliminating market
pressures to provide quality care, is simply wrong-headed.
Federal bidding programs are normally structured to protect small
business interests from both larger competitors and the massive
purchasing power of the Federal Government. CMS is quick to point out
that 64 percent of its DMEPOS contract offers went to small providers.
This number is terribly misleading. A large percentage of a small
number of winning bidders simply covers up the fact that an even higher
percentage of the overwhelming majority of small retail operations
serving communities and Medicare beneficiaries throughout the country
are being placed at the risk of financial failure as a result of this
program. As already mentioned, 82 percent of DME providers in the
Pittsburgh MSA will be excluded from participating in the Medicare
program as a result of this program.
It is simply wrong for CMS to run roughshod over so many small
businesses as a matter of administrative ease--the only possible reason
to seek to eliminate an established and reliable network of retail
providers of these important medical goods and services. This is a
network that came into existence because it provides ease of access and
quality care to Medicare beneficiaries, no different than the network
of local and independent physicians and dentists throughout the
country.
Everyone understands the need to save money in the Medicare
program. This is an inappropriate and unworkable means toward that end.
Program Viability
Pennsylvania is home to the Pittsburgh CBA in Round One of NCB and
the Scranton/Wilkes-Barre and Allentown/Bethlehem/Easton CBAs in Round
Two. As such, PAMS is greatly concerned about the impact that the CMS
bidding program will have on our Medicare beneficiaries and the DME
providers who serve their medical needs.
At best, we believe that the program savings reported by CMS as a
result of Round One bidding are questionable. CMS, at the urging of the
Small Business Administration, once felt certain that it was necessary
to carve out a guarantee that 30 percent of contract offers would go to
smaller providers earning less than $3.5 million in gross annual sales.
The assumption was clear: smaller providers could not compete against
the overwhelming advantages of the large national and regional
providers. No one disputed that assumption. Yet, somehow, the smallest
suppliers managed to not only survive the bidding process, but to
substantially dominate it, winning 64 percent of Round One contract
offers according to CMS.
How did that happen? One theory holds that smaller suppliers were
fearful that larger suppliers had a competitive advantage in the
bidding system and didn't trust CMS to recognize them as part of the
program small business set-aside. The result was that smaller suppliers
felt compelled to remain viable by bidding at levels that were
unsustainable. This theory further assumes that bids from larger
suppliers would reflect more-accurate pricing and would serve as a
moderating influence on the final composite bid price.
What, in fact, is likely to have occurred based on the number of
small suppliers who ``won'' contracts, is that the small suppliers met
the CMS capacity requirements and larger supplier bids were not needed
to meet unspecified capacity requirements. The RMU study mentioned
previously cited the potential for such unfortunate ``favorable''
outcomes. It is known in economic literature as the ``winner's curse.''
In this case, the so-called winner's curse has led to pricing that is
not likely to be sustainable over the longer term.
Industry observers are highly skeptical of the final bid awards and
this Committee should be concerned about the viability of this
important segment of the Medicare program. According to Drs. O'Roark
and Foreman, ``Often the successful bidder will have the low bid
because it has made mistakes in estimating its future costs at the time
of bidding. In this case the firms that have won the bids have offered
to sell the products at inordinately low prices,'' perhaps lower than
affordable or sustainable--especially in light of skyrocketing gas
prices and current economic conditions. Consider that gasoline prices
have risen by more than 65 percent in the nine months since bids were
originally submitted to CMS in September of 2007. Considering that home
delivery is a critical component of this business, it should stand to
reason that something has to give.
Thus, ``winning'' firms must cut costs. ``The most likely targets
for cost reductions,'' according to the RMU study, ``are customer
service and product quality. Such reductions are made easier because
the NCB program has reduced the number of competitors in each market
and each of those competitors will be facing the identical cash flow
problems. ``Consumers will have few alternatives available, so poor
service is likely to become commonplace.''
In short, the service provided to Medicare beneficiaries will
probably fall victim to the proposed DME bidding scheme--as will future
prices paid by CMS and the public. This is simply the law of unintended
consequences at work.
Moreover, the argument that the pricing levels established through
bidding are indicative of market pricing is misleading. The purchase of
a commodity through an online internet vendor, for example, is void of
compliance with any healthcare insurance or accreditation system. It is
a cash commodity transaction without any regulatory obstacles and does
not account for any service costs such as 24/7 on-call service,
facility overhead costs, credentialed personnel, or the significant
costs associated with billing Medicare. Therefore, it is inappropriate
to make any comparison to the internet pricing and Medicare allowables.
Also, as we have previously noted, lesser quality items, reduced
and disrupted services, access problems and beneficiary confusion will
lead to additional program costs in the form of hospitals stays,
physician visits and an increase in 9-1-1 emergency calls in the
absence of the high quality, around-the-clock service provided by most
HME providers operating in the current competitive environment. None of
these factors has ever been identified by CMS in its presentation of
savings that can be achieved through bidding.
PAMS strongly urges this committee and this Congress to immediately
impose a significant delay the implementation of this program, which
otherwise will be implemented on July 1, 2008. The wide range of
problems and questions about the program must be independently
evaluated, and an alternative process to determine payment rates for
home medical equipment must be explored.
Homecare is part of the solution for Medicare. It is not the
problem.
Statement of Robert Brant
To addresses and raise the specific issues of the hundreds of
companies affected by the turmoil of the bidding process, and to speak
on behalf of the millions of patients whose care will be significantly
negatively affected by the roll out of this process, We formally
request a representative of the Accredited Medical Equipment Providers
of America, Inc. (AMEPA) speak at the Hearing HL-24.
This ongoing bid process was begun in 10 MSA and is slated to be
rolled out across the nation over the next two years. The initial
process has been a fiasco, there was a serious manipulation of
applications' rules after a majority of applications were submitted,
REGLFEX policies (though required by Federal law) were rejected, and 63
percent of the applicants were erroneously disqualified with no ability
the appeal. Senators, Congressmen and senior legislative staff have
identified these problems as ``gross negligence'' by the Center for
Medicare and Medicare Services (CMS). The results of which will be a
limiting of access by patients to much needed care, unqualified
companies will be providing incomplete services and major metropolitan
areas will be grossly underserved during times of emergency. In
addition 17,000 to 21,000 gainfully employed Americans will lose their
jobs.
AMEPA is an organization founded by medical equipment providers
affected in the initial 10 MSA's and is now gaining strength in the
next 70 MSA's soon to be subject to this flawed process. We are working
with 100's of providers who were disqualified erroneously or have
failed to win a bid due to the poor implementation of the program by
the Competitive Bidding Implementation Contractor, Palmetto GBA, LLC.
They have joined AMEPA in the hope to communicate with Congress on this
issue.
We have included two attachments; the information below is related
to them and to new developments regarding the competitive bidding
process. Please review:
A provider from Texas, applied for and won the Oxygen
Category in 9 out of the 10 Metropolitan Statistical Areas (MSA's).
This bid winner has never provided the item before outside of their own
area. According to Florida State records, the company is not licensed
by Florida's Agency for Healthcare Administration as a Home Medical
Equipment Provider. The bid winner does not have a License to deliver
Oxygen from the State's Department of Health either. They are not
licensed.
The first line in the Rules For Bid (RFB) states that
``All suppliers must--meet any local or state licensure requirements,
if any, for the item being bid''. Clearly this bid winner did not meet
the requirements for the bid he won in Miami and Orlando. We believe
that it was not the intent of Congress to allow something like this to
happen.
According to the Rules For Bid (RFB) companies were
required to prove that they could cover the complete geographical area
of the MSA prior to bidding. The attachment proves this Bid Winner did
not have any subcontract agreements in place before they bid, as they
are currently attempting to find existing providers to do their work.
This bid winner and other out of state bid winners should
clearly not have won the bid for oxygen and CPAP. Their bid should have
been disqualified for not meeting proper licensure requirements. If
their bid was properly disqualified, their bid price would have been
removed from the Composite Bid, and all pricing would be affected, and
other bid losers should take their place.
Another attachment is from a bid winner in Miami and
Orlando. This winner has changed their policy and as of April 1, 2008
(not July 1, 2008) they are refusing to deliver a commode or other bath
safety products unless the order accompanies Oxygen or another rented
item. Providers currently compete in the market by providing equipment
at a low margin in order to keep the referral source happy. Now the bid
winner does not have to compete for business and is refusing to provide
these Medicare covered items which are not subject to the bid as they
are considered inexpensive. If the Bid winner will not provide these
bath safety products then who will provide them?
This proves that the program will limit the patient's
access to care. If the patient cannot get their prescribed medically
necessary equipment from a bid winner they are unlikely able to get the
equipment else where as the typical Medicare patient that needs a
commode cannot travel to a store to purchase a 24 inch by 24 inch by 24
inch item on their own. It also typically does not fit in a standard
compact or mid-size automobile. This patient will most likely not pay
for the equipment to be delivered for an additional fee. The patient
may likely not get the prescribed equipment at all. It is conceivable
that this patient may have a home fall due to the lack of proper
equipment, placing extra costs and utilization in Medicare Part A
programs such as Hospital, rehab and or future Home Health nursing.
This also brings into question the ability to discharge
the patient from the hospital in a timely manner. As liability issues
often do not allow for the patient to be discharged without the proper
home medical equipment in place. This will also create increased costs
and utilization for Medicare Part A. The program may save money in
Medicare Part B but again will substantially increase costs for
Medicare Part A.
There are many specific issues related to the process of bidding
and the expected results of once this process is in full effect.
Therefore we again we request the opportunity to have a representative
discuss these and other findings that AMEPA has discovered at the
hearing.
Statement of Robert Brant
The issue at hand is the Competitive Bidding for Durable Medical
Equipment, Orthotics, Prosthetics and Supplies. We have over 100
members that feel that they have been disqualified erroneously or have
failed to win a bid due to the poor implementation of the program by
the Competitive Bidding Implementation Contractor, Palmetto GBA, LLC.
There have been several problems with this new bidding process;
from manipulation of application rules, the rejection of standard
REGFLEX policies as required by law and the erroneous disqualification
of 63% of the applicants with no ability to appeal. Senators,
Congressmen and senior legislative staff have identified these problems
as ``gross negligence'' by the Center for Medicare and Medicare
Services (CMS). The results of which will be a limiting of access by
patients to much needed care, unqualified companies will be providing
incomplete services and major metropolitan areas will be grossly
underserved during times of emergency. In addition 17,000 to 21,000
gainfully employed Americans will lose their jobs.
I have included the following attachments and would like to discuss
the following developments:
A provider from Texas, which has won the Oxygen Category in 9
Metropolitan Statistical Areas, never provided the item before outside
of their own area. According to Florida State records, the company is
not licensed by Florida's Agency for Healthcare Administration as a
Home Medical Equipment Provider. The Bid Winner does not have a License
to deliver Oxygen from the State's Department of Health either. I am
not sure that the company has an Occupational License in the State
either.
The first line in the Rules For Bid (RFB) states that ``All
suppliers must--meet any local or state licensure requirements, if any
for the item being bid'' Clearly this bid winner did not meet the
requirements for the bid he won in Miami and Orlando. I also believe
that it was not the intent of Congress to allow something like this to
happen.
According to the Rules For Bid (RFB) companies were required to
prove that they could cover the complete geographical area of the MSA
prior to bidding. The attachment proves this Bid Winner did not have
any subcontract agreements in place before they bid, as they are
currently fishing for providers to do their work.
This bid winner and other out of state bid winners should clearly
not win the bid for oxygen and CPAP. Their bid should be disqualified
for not meeting proper licensure requirements. When their bid is
disqualified, their bid price should be removed form the Composite Bid
and all of the pricing would be affected and other bid losers should
take their place.
Another attachment is from a bid winner in Miami and Orlando. This
winner has changed their policy and as of April 1, 2008 (not July 1,
2008) they are refusing to deliver a commode or other bath safety
products unless the order accompanies Oxygen or another rented item.
Providers currently compete in the market by providing equipment at a
low margin in order to keep the referral source happy. Now the bid
winner does not have to compete for business and is refusing to provide
these Medicare covered items which are not subject to the bid as they
are considered inexpensive. If the Bid winner will not provide these
bath safety products then who will provide them?
This proves that the program will limit the patient's access to
care. If the patient cannot get their prescribed medically necessary
equipment from a bid winner they are unlikely able to get the equipment
else where as the typical Medicare patient that needs a commode cannot
travel to a store to purchase a 24 inch by 24 inch by 24 inch item on
their own. It also typically does not fit in a standard compact or mid-
size automobile.
This patient will most likely not pay for the equipment to be
delivered for an additional fee. The patient may likely not get the
prescribed equipment at all. It is questionable that this patient may
have a home fall due to the lack of proper equipment and that would put
extra costs and utilization in Medicare part A programs such as
Hospital, rehab and or future Home Health nursing.
This also brings into question the ability to discharge the patient
from the hospital in a timely manner. As liability issues may not allow
for the patient to be discharged without the proper home medical
equipment in place. This will also create increased costs and
utilization for Medicare Part A. The program may save money in Medicare
Part B but again will increase costs for Medicare Part A.
Statement of Ryan Stevenson
According to the MLN Matters #SE0807 about competitive bidding,
``Beneficiaries who are receiving oxygen, oxygen equipment or rented
DME at the time the competitive bidding program becomes effective may
elect to continue to receive these items from a non-contract supplier,
if the supplier is willing to continue furnishing these items''. It
also states ``if the beneficiary stays with a ``grandfathered''
supplier, he or she may elect to change to a contract supplier at any
time, and the contract supplier would be required to accept the
beneficiary as a customer''.
According to current Medicare guidelines, oxygen rents for 36
months, and then is capped. What happens to the contract supplier that
has a beneficiary come in to their store that has had oxygen for 35
months with a non-contract supplier and decides to switch to that
supplier? They are force to provide oxygen to a beneficiary for one
months rental, and then give the beneficiary that equipment because is
has capped.
Who is to stop non-contract suppliers from recommending to there
patients to do just that, so that after 35 months, they could get new
equipment?
Statement of Tennessee Association for Home Care
Views regarding the credibility and viability of the recent low bid
companies that saturated Round 1 are doubtful to dismal in the minds of
most industry leaders across the nation. Nearly everyone was surprised
by these prices. They were much lower than anyone expected and much
lower than most existing companies with heavy patient demand feel can
be safely managed. Even the national companies, some of which won no
bids in some of the MSA sites bid out, were surprised at the final
price of the bids. How did it happen that far too many of those who
studied the program the most, who know their business the most, and who
know better than anyone what it takes to provide the products and
services to patients in an efficient, cost effective manner now are
surprised and many cases eliminated by providers who say they can do it
cheaper? Even CMS forecasted savings 10% less than these prices as
recent as 2006 according to its final rule for Round 1.
Is this the great price savings that CMS has bragged about for
weeks, or is this actually a red flag that may already be signaling
some of the systemic deep problems with the competitive biding program?
This question is critically important and must be answered, especially
in light of the unexpected and radically wide range of prices received
in these 10 MSA Round 1 zones. We have to find out the answer to this
and several other questions before we go further into this uncharted
water. Although HME providers currently do not have the authority to
obtain this and other important information from CMS, Congress must
make sure that they receive and review these answers and represent the
effected Medicare population before this test program advances further.
It is relevant to know how many of the bid winners have never provided
services in the bid area before and how many intend to ship most of
their products to patients via UPS. It is important to know who these
companies were that sent in these low bids. What percentage of these
companies did not follow through and actually sign their winning bid
award that was used to calculate these low prices? For those that did
sign the contract, what percentage of them are not currently prepared
today to immediately take on significant amounts of business in the MSA
market they won?
We also need to know more about who did not get offered bids. We
need to know the number of small business bid losers as well as those
who simply did not try to bid knowing they could not keep up with the
added costs and reduced fees. If this program was intended to find the
true market price, why did so many bidders have their bids kicked out
and rejected entirely because their bids were higher than the
predetermined limits manipulated and set by CMS? In essence, CMS
imposed a superficial and unrealistic glass ceiling resulting in CMS
arbitrarily kicking out all bids that did not meet its contrived preset
charge limits, resulting in only an extremely small remnant of provider
bids surviving this arbitrary award process. These results have now
been disingenuously presented to Congress under the banner of true
competitive bid market prices that saves 26%. How can such a decision
of capriciously and recklessly eliminating large numbers of bidders
that submitted charges over this erroneous glass ceiling, who in good
faith submitted real market price bids, be allowed to be called a true
market prices from an open bid process? Since the original intent of
Congress with this competitive bid program was to find true market
prices available in each MSA community, all bids should have been
allowed in the setting of the price rather than only those bids that
were arbitrarily filtered and hand picked by CMS. If Congress had
wanted CMS to arbitrarily reset prices for these products this way
without regard to the true market prices submitted by all providers,
this could have been done much more simply without all the expensive
and burdensome process of a competitive bidding process which will cost
the government hundreds of millions of dollars a year to run. How many
previous small business providers (as defined by the Small Business
Association--not CMS) just got eliminated from the marketplace due to
this careless process, and what will be the impact on the patients in
those communities?
John Gallagher, Vice President of Government Affairs for VGM Buying
Group, who represents over 3,500 independent Home Medical Equipment
Providers, had some very interesting public comments about this at the
recent Tennessee Association for Home Care Spring Conference held on
April 1-3, 2008, in Nashville, Tennessee. He stated ``VGM believes that
although CMS has stated that small business providers won 64% of the
bids, by VGM's calculations, 95% of the small businesses in the
marketplace were actually eliminated.'' There are growing suspicions
now that far too many of the bid winners do not have locations within
the MSA market they have been awarded bids for. It is highly likely
that groups of products were actually bid by out-of-state bidders who
fully intend to ship the products into that marketplace rather than
offer them via an existing brick and mortar storefront with accessible
staff. This begs the obvious question. Just how many bid winners are
not currently operating in each MSA they won--and never will?
Several weeks ago I received a phone call from a Tennessee provider
who has inside information on a small local pharmacy in St. Petersburg,
Florida, who won the CPAP bid in 8 of the 10 bid areas for Round 1. The
pharmacy reportedly has no experience with this kind of volume of
business. The pharmacy owner reports that he is not planning to open
locations in each MSA but will drop ship all the products via UPS. In
Tennessee, CPAP items are one of six respiratory items that by state
law may only be fitted on a patient in the home by a licensed
respiratory therapist. Most patients require extensive training; over a
period of several months many need setting adjustments to their CPAP
equipment and often require a change of mask to for a better fitting to
obtain patient compliance with the therapy. Patients using this type of
product need a local provider available to them. Unless the patient
obtains a good fitting and works closely with their provider, the
investment in their product by Medicare will be of no value. There is
no savings on a product that has so poor a service component with it
that patient ends up not using it. Although this particular provider in
Florida can not be identified due to a confidentiality agreement
between the pharmacy owner and the source for this information, it can
certainly be used as a starting point for congressional investigation
into the over all nature of this competitive bid model that would
result in this type of bid award. It reveals just how these prices
actually ended up lower than expected and lower than what most industry
experts say is viably possible. I do not believe this type of scenario
was how Congress expected competitive bidding to be carried out by CMS.
This model also could very likely be imbedded in all the bids
throughout the country for several product categories. Whether these
companies whose winning bids are structured with plans to simply ship
the products in, later place a storefront there, or not even sign the
contract once offered, it is all the same in one regard: an extremely
large number of bid winners and price setters very likely are not tried
and true tested businesses that are capable and willing to provide
significant amounts of products and services into that local bid
market. Many are nothing but speculative start-ups or companies with
risky accelerated branch growth plans into these markets. Medicare
patients deserve better. For legitimate quality providers who want this
privilege and want the option of growing their business into these new
markets, the option may seem fair. However, a realistic view of the
players who did this might soon wipe out all the fairness in this
opportunity as it exists in this current competitive bid model. This
option may very well have opened the door to careless opportunists,
insincere players, and companies set on gaming the system causing
damage to the price formula. Companies new to a MSA can claim the
smallest of all capacities in order to qualify as a bid, yet their
price weighs as much as the largest company in the MSA. As currently
designed, the competitive bid program lacks the checks and balances
needed to separate these types of bidders from more capable, serious
providers. The bidding program must be delayed immediately to prevent
this from harming patients. The system as designed does not prevent
speculative type bidders from having as much weight and price effect as
those heavily invested and currently accountable to large patent
populations within the MSA. As result, bids from providers outside the
MSA should not be factored in the pricing of the MSA. Providers
currently with no operations inside the MSA should only be allowed to
be factored as eligible bidders from a capacity perspective if their
bid is low enough, but their bid offer should not be factored in the
final MSA price. Outside bids are too arbitrary, meaningless, and
unaccountable since they have no current or any guaranteed future
obligation to service patients in that MSA. As such, there is
absolutely no credibility in the 26% savings initially announced by
CMS.
New problems associated with this new phenomenon are plentiful. Too
many bidders were permitted to bid who have no significant current
investment cost--or any risk for that matter--related to the submission
of their speculative bid into these markets. Even if their lower bid
causes them to be offered a contract, they can simply say no to the
offer without losing any preexisting revenue or profit streams from
that market. The bid, however, remains in the formula for that MSA
affecting other providers as if it was valid. This careless
unreasonable decision is another example of why CMS must have more
accountability and Congress must permit judicial review for this
program. Should the low bidder from outside the market choose to sign a
contract, they would also be able to do so with unfair and unreasonable
options not available to the other bidders located in the area with
preexisting business revenue. In fact, under the current competitive
bidding rules, the new company could operate in a way that they could
choose to never take on any significant revenue by limiting their
marketing for their services. In essence, they become a bid winner with
nothing invested and nothing to lose, but they have equal power to
change the ``reasonable price'' of that market even though they have no
real accountability or risk to prove the price is in fact reasonable
(more reason to not factor their bid in the final price). If and when
they begin operations, if things do not work out, they can simply close
operations and leave before they make too sizeable investment into the
marketplace. The failure of this system is that the weight of their bid
is equally as heavy as the bid of an existing company who is fully
invested with the necessary overhead required to legitimately run a HME
program and already burdened with the heavy demand of existing
patients.
The real world cost of doing business is naturally and rightfully
factored into the bids of pre-existing providers in a MSA. In general,
their bids should in most cases be higher. Speculative bidders and
bidders who would have the right to enter the marketplace in a timid
and cautious manner do not have the same risk factors as existing
providers. This is unfair and unreasonable gaming of the system at its
worst. More importantly, they do not have the same responsibility or
accountability to immediately provide for the needs of the Medicare
patient community in ways that can predictably be assured or in ways
that preexisting companies must factor into their bids. Bid winners new
to a MSA with no current operation there should suffer significant
penalties if they fail to fulfill their bid capacity obligation
assigned to them at the expense of an existing provider who is
currently providing services to beneficiaries. No such penalties exist
under this competitive bid model. Their current lack of accountability
to the program and the patient community disrupts and discredits the
entire competitive bid system and puts patients at risk. This problem
and the fact that their low bids weigh the same as a high volume bidder
are two critical key issues that must be cured before the competitive
bidding program is allowed to continue. As the model is currently
designed, companies bidding in a new MSA are free and able to be bid
spoilers with no risk, no loss, and no consequences for placing a bid
that is below their actual ability and in many cases their will to
perform. This is simply wrong.
These speculative bidders who have nothing to lose may well have
damaged the integrity of the entire bidding process in Round 1 with
their low speculative bids, and they could lead to destroying the
entire viability of the competitive bidding program in the future
rounds if the model is unchanged. This should never have been
permitted. The model is flawed. Two separate competitive bidding
financial studies predicted such gaming of this system, and one
notified CMS as early as 4 years ago that this would occur. More
detailed information about both of these studies will be presented as
part of the comments to the House Ways and Means Committee today by the
American Association for Homecare. CMS has paid no regard to such
warnings and therefore has now permitted the systemic problems related
to the poor design of this competitive bidding model to begin to
recklessly and dangerously eliminate a large number of legitimate cost
effective providers in these Round 1 MSA communities. This is poor
public health management and irresponsible government at its worst, yet
there is no judicial review, no due process, and no regulatory
oversight in place to investigate, mitigate, or cure any of these
problems. Our legislators deliberately granted CMS the ability to run
this program unchecked as they saw fit regardless of its potential harm
to Medicare patients, their families, and the HME provider network.
This must be reversed. It is simply un-American.
I suspect if we could go further into the peeling off the onion, we
would find more and more areas that prove this program, in its current
format, stinks from one end to the other. Therefore, it is critically
important that Congress quickly recover from the initial intoxication
of the announced 26% savings and look at the real picture. Congress
must intervene immediately before it is too late, requesting a delay in
Round I and Round II and demanding needed transparency of these issues
so that these pitfalls can be identified and altered before they are
allowed to harm patients and destroy a large portion of the quality
providers throughout these MSA communities all over the country.
Statement of Wayne E. Stanfield
There is a crisis facing over 40 million Medicare beneficiaries
called Competitive bidding for durable medical equipment (DME). On
behalf of those patients served by over 113,000 DME suppliers, I am
writing to ask for your help.
The Medicare Modernization Act of 2003 (MMA03) included, in 10 of
its 415 pages, a sweeping change that is now being implemented. This
portion of the law, giving broad power to the Center for Medicare and
Medicaid Services (CMS) and removing all due process from suppliers,
will have a devastating impact on Medicare beneficiaries who need care
in their homes. This program puts the most needed categories of medical
equipment out to the lowest bidders. It will begin July 1, 2008 in 10
cities and will expand to 70 additional cities next July.
The outcry from this small but vital component of patient care has
not been heard and we ask for your support to end this pending disaster
about to affect millions of lives. CMS has turned a blind eye to the
true impact this ill-conceived program will have on the lives of our
seniors.
This is bad public policy and in reality there is nothing
competitive about a process that will reduce access to physician
ordered medical equipment for Medicare patients at a time when that
population is growing everyday by 7918 seniors who turn 65 year old.
For more than four years patient advocates, political leaders, DME
industry leaders, and economists have advised members of both the House
and Senate of this impending train wreck. Now is the time to act on
this matter and we ask you to intervene. Economic studies clearly
indicate that this program will harm patients and will decimate tens of
thousands of small businesses in every state.
Congress must stop the implementation of this program before it is
too late. I implore you to stand and be counted on this issue. The
enclosed disk has a petition with signatures and comments of over 5000
Americans who clearly see the human disaster this program will cause.
Included also are facts that have already come to light about the
problems with the program as well as the studies produced by two
leading universities.
We believe in our democratic process and know that Congress can act
to stop this travesty from happening. As a spokesman for the patients
and suppliers that will be so harshly affected by competitive bidding,
I ask you to join other members of Congress in telling CMS to STOP
implementing this program and I urge you to support legislation to
repeal this portion of the MMA03.
Thank you for your support for this time sensitive, critical issue
and look forward to hearing from you on this matter. Please contact my
office if I can provide any additional information.
Statement of Zachary A. Schiffman
My name is Zachary Schiffman. I am the owner of United States
Medical Supply, Inc., a licensed and accredited national durable
medical equipment (DME) provider of primarily mail-order diabetic
supplies employing over 170 people in Miami, FL. As an accredited DME
provider for over 10 years, we support Medicare's efforts to save money
and reduce fraud; however, CMS's (Center for Medicare & Medicaid
Services) Competitive Bidding Implementation Contractor (CBIC) has not
performed its fiduciary responsibility to run a fair process in the
DMEPOS Competitive Bidding Program mandated by Congress through the
Medicare Prescription Drug, Improvement, and Modernization Act of 2003.
I am requesting the committee petition to CMS to stop and reevaluate
the competitive bidding program due to the implementation contractor's
complete bungling of the bidding process. I urge this on behalf of
myself, my company, the Medicare program's integrity, the DME industry,
and all Medicare beneficiaries.
History of events
Medicare was charged by the MMA Act of 2003 to institute
competitive bidding program for DME items initially in 10 cities and
then to roll it out in phases nationally. To institute the program, CMS
hired a Competitive Bidding Implementation Contractor (CBIC). The CBIC
failed in its job to properly administer the program in many ways most
notable being 1) the bid price; and 2) the bid capacity; and therefore
this first round of bidding must be halted and reassessed immediately.
Bid Price
The CBIC was supposed to ensure the integrity of bids by ensuring
that low ball bidders did not corrupt the system. The CBIC failed to
perform this fiduciary duty. Case in point, mail order diabetic
supplies were dealt a 43% drop in reimbursement as proposed by the
CBIC. At first glance, this would appear to be a windfall savings for
the Medicare program. It is not. This low price is the result of low
ball bidding by unsophisticated mom and pop operations and a few
unscrupulous larger low ball bidders. We have personally conducted
interviews with some of the winning bidders and can attest that they
consciously bid below what they could realistically provide in order to
just ``win the bid.''
The CBIC requested financial statements from all bidders. A simple
analysis by the CBIC of these financial statements would have shown
that a 43% reduction in reimbursement was unsustainable and
unprofitable for even the lowest operating cost companies. This
analysis could have been easily been performed by the CBIC simply by
reducing a company's revenue line by said company's proposed percentage
discount of the company's bid versus the current allowable price paid
by Medicare. With keeping all expenses the same, a new ``post bid'' net
income could be attained. I can assure you that no legitimate company
in this industry would be in any way even close to profitable with a
43% revenue reduction. It could be said that perhaps some expenses
could be reduced such as marketing and some trimming of the fat, but
such cost savings would not nearly bring any company close to
profitable at a 43% revenue reduction. In fact, with the small number
of winning bidders, the winning bidders will have to make substantial
capital investment to handle such capacity increases (see capacity
section) and with such a cut in reimbursement, there would be no money
to pay for said expansion.
In example of the lack of proper vetting of low ball bidders,
Liberty Medical (owned by Polymedica and since purchased by Medco)
provides about 50% of the mail-order diabetic supplies to Medicare
beneficiaries. Due to their sheer size and market dominance, they
arguably have the lowest costs for product available. Their EBITDA
(earnings before interest, taxes, depreciation, and amortization; and a
close barometer of cash flow) margin is about 13% per SEC filings.
Therefore, Liberty, the lowest cost provider, could not bid more than a
13% reduction in reimbursement and be able to sustain its business.
Now, perhaps say they could trim some expenses and advertising. This
could not account for increasing the maximum discount they could bid to
more than about 20%. This is a far cry from the 43% reduction to be
implemented by CMS as per the CBIC's negligent handling of this
process.
Suffice it to say, Liberty (the 50% market share holder) did not
win a bid. Neither did any of the other public companies that had a
fiduciary responsibility to bid in such a way to run a sustainable
business. Proof positive that the CBIC failed in its job to not allow
low ball bidders.
The CBIC should have disqualified any bid that would have
bankrupted a company by negating its profit margin or at the very least
they should have changed said implied discount on low ball bidders bids
to be equal to their EBITDA margin thus to not allow them to submit a
price that they could not sustain.
The CBIC performed no such analysis. As per interviews we have
performed with said low ball bidders, the CBIC simply asked to see
invoices for products from extremely low bidders to determine if their
bids were too low. Said bidders simply submitted invoices for their
lowest cost, lowest quality off brands and the CBIC took the bids as
the gospel with no analysis of other basic operating costs such as
payroll, rent, etc., etc. In fact, the proposed bid price by the CBIC
is below the actual contract prices of 90% of the manufactured products
by market share such as those of Lifescan, Roche, and Bayer.
This in and of itself would be a travesty to let go further and
Medicare beneficiaries will suffer with low cost, low quality products
much less if these low ball bidders even remain in business.
Bid Capacity
The CBIC was supposed to ensure the integrity of bids by ensuring
that the selected providers would be able in total to service the
capacity demand of the markets they service. The CBIC failed to perform
this fiduciary duty. The CBIC requested all bidders estimate the
capacity increase that they could absorb if they won a bid. The CBIC
was supposed to assess whether this proposed capacity increase was
indeed accurate and throw out the bids of providers who overstated
their potential capacity to block out other providers. The CBIC appears
to have done no such analysis.
In mail-order diabetic supplies, there are over 500 providers. Only
about 20 companies won bids. What are the other companies to do? In
fact, the top 3 companies, Liberty, CCS Medical, and Access Medical,
totaling a market share over 75% did not win bids. In order to meet the
same capacity of these top 3 providers, the CBIC would have had to
select more than the next 50 providers. They obviously did not. The
drop off in volume of the providers past the top 10 drops off so
substantially that providers 11 to more than 200 would have to be
selected to reach the same capacity as the top 3 providers. Since less
than 20 providers won and none of the top 3 won AND at least 25% were
mandated to be small providers, it is obvious that the CBIC made no
efforts to ensure that unscrupulous bidders didn't bid low and grossly
over estimate capacity to knock legitimate companies out of the
process.
At the very least, the CBIC should have capped any provider's given
capacity increase to an arguably aggressive 20-50% over the capacity
for the previous year. They did no such thing. In fact, given that it
is obvious that the CBIC accepted tremendous capacity increase
estimates from its bidders, substantial capital investment will be
required by these providers. As per the extremely low bid prices (see
previous section) these winning bidders will have no resources to even
attempt to achieve these capacity increases let alone the fact that the
creation of a growth platform takes not only money, but time in
numerous regards such as acquiring space, training people, implementing
infrastructure, etc. In fact, The CBIC proposes that these winning
bidders (who will obviously have to substantially increase their
capacity beyond reason) begin to be the sole providers to Medicare
beneficiaries for the product categories they won in 3 months! Another
example of the bungling of this process by the CBIC.
In light of the above, I implore you to make all due haste in
stopping the DME Competitive Program until the CBIC can justify its
methods in light of the above obvious errors.