Medical devices bidding program gets passing grade

Washington -- Some of the problems that derailed a Medicare competitive bidding program for durable medical equipment more than two years ago have been fixed, according to a report the Government Accountability Office released in September.

In November 2009, GAO noted problems with the bidding process of the competitive durable medical equipment program, including poor timing, lack of clarity in bid submission information, and an inability to inform suppliers about vital paperwork that might have been missing from their bids.

At a House Committee on Energy and Commerce hearing Sept. 15, 2010, GAO touched on these problems again. But since its initial report, GAO said the Centers for Medicare & Medicaid Services has made positive changes to the program. For example, CMS provided bidding information to suppliers before the bid window opening and clearer financial documentation instructions and additional tools to help guide suppliers.

Medicare pays for DME -- including wheelchairs, oxygen equipment, diabetic testing and infusion drug therapy -- based on a fee schedule. However, beginning Jan. 1, 2011, Medicare will pay DME costs established under round one of the competitive bidding program in nine metropolitan areas, which include Miami, Cincinnati, Cleveland and Dallas-Fort Worth.

An additional 91 areas are scheduled to start the bidding program later in 2011 as part of a second round.

The competitive bidding program was required as part of the Medicare prescription drug law of 2003. It came about after the GAO and HHS' Office of Inspector General discovered that Medicare and its beneficiaries had sometimes paid higher-than-market rates for medical equipment and supply items.

"Competitive bidding can reduce Medicare program payments by providing an incentive for suppliers to accept lower payment amounts for items and services to retain their ability to serve Medicare beneficiaries and potentially increase their market share," the GAO stated in a May 2008 report.

Congressional moratorium

But just two weeks after the first round of the program started in July 2008, Congress stepped in and placed an 18-month moratorium on it, citing glitches with the bidding process as well as suppliers' concerns about patient access.

In October 2009, CMS began the round one rebid process and plans to announce the winning suppliers later this year.

Testifying before Congress on Sept. 15, CMS said it has learned from earlier mistakes.

"Past experience has shown that competitive bidding of [DME] products and services can provide savings, value, and benefits to both beneficiaries and the Medicare program, while ensuring delivery of quality items and services," said Laurence Wilson, director of the CMS chronic care policy group.

"CMS understands the concerns of Congress and stakeholders, and ... has taken care to improve and implement the program in a way that emphasizes the needs of beneficiaries while addressing the concerns of suppliers," he said.

Changes in the process

GAO highlighted the new electronic bid submission system that CMS has installed, calling it "more user-friendly and easier for suppliers to navigate and providing a logical flow of the requested data."

In addition, officials with CMS informed GAO that it plans to send letters to all disqualified suppliers stating the reasons why their bids were excluded.

If the agency discovers that it made a mistake, however, it is still possible that a contract would be awarded to the supplier.

Lawmakers at the hearing sounded optimistic about the bidding program's effectiveness.

"Based on what we've heard so far, it appears that the current round of competitive bidding will save beneficiaries significant amounts of money in cost-sharing and premiums," said Energy and Commerce Chair Henry Waxman (D, Calif.).

The American Assn. for Homecare, which opposes the competitive bidding program, is still not convinced the concept will work to the benefit of suppliers or beneficiaries.

A new report commissioned by the association concluded that the program's design creates economic incentives that could produce unsustainably low prices for suppliers and lead to reduced quality of services for Medicare beneficiaries.

"Unintended consequences that could result include secondary medical complications, increased emergency department visits and hospital discharge delays, and, ultimately, a transition out of the home to more costly facility-based care," the report states.

The American Assn. for Homecare supports a bill introduced in October 2009 by Rep. Kendrick Meek (D, Fla.) that would repeal the competitive bidding program. The bill had 257 co-sponsors as of late September.