Medicare Compliance & Reimbursement

Suppliers nationwide are catching a glimpse of their Medicare future, and it looks bleak.

The Centers for Medicare & Medicaid Services (CMS) sent out round one competitive bidding contract offers March 20. Round one will take place in 10 cities and will begin July 1.

Round two will expand to 70 more metro areas and is scheduled for summer 2009.

Round one bidding for durable medical equipment will cut Medicare spending 26 percent on bid items, CMS Acting Administrator Kerry Weems said in announcing the payment amounts.

The amounts range from 14 percent less than current reimbursement for negative pressure wound therapy devices and accessories to up to as much as 43 percent on mail-order diabetic supplies, notes Competitive Bidding Implementation Contractor (CBIC) Palmetto GBA.

(For a list of round one bid payment amounts by competitive bidding area, go to http://www.dmecompetitivebid.com/SPA.)

The lower prices will result in lower out-of-pocket expenses for Medicare beneficiaries too, CMS stressed in its announcement.

Suppliers receiving bid offers had 10 days to accept or decline the contract, notes the American Association for Homecare. AAHomecare asked CMS for an extension on the acceptance window, but at press time CMS had not granted that request.

Suppliers who didn't win contracts received letters of non-acceptance.

CMS will announce the final suppliers who accepted bid contracts once all the contracts are "executed," it says. That will probably be in May, AAHomecare expects.

Disaster: "The costs savings that CMS predicted ... for round one gloss over serious issues of patient access to care, quality of service for Medicare beneficiaries, and the cost of limiting patient choice in the DME marketplace," AAHomecare insists in a release. "The reality is that the bidding program is a severe cut to the DME industry on top of numerous other reductions."

"No one should be satisfied with the outcome of the bidding process, neither bid winners nor losers," maintains Wayne Stanfield of the National Association of Independent Medical Equipment Suppliers.

"It is clear that the impact of this ill-conceived program will be devastating to Medicare beneficiaries and suppliers," NAIMES says in a release.

"Some of the most seriously ill and disabled Medicare patients in Southwestern Pennsylvania will be profoundly affected by this ill-considered program," says John Shirvinsky of the Pennsylvania Association for Medical Equipment Suppliers. "Competitive bidding will greatly reduce the number of providers who can serve Medicare beneficiaries and will eliminate community-based suppliers for many." Pittsburgh is among the round one CBAs.

Round one bidding will result in more than 2,600 full-time jobs lost in the DME sector, predicts The Weeks Group in Melbourne, FL.

For round two, that figure skyrockets to more than 14,000 jobs cut, AAHomecare reports.

Suppliers who don't win bid contracts are at high risk of going out of business, health care lobbyist Fred Graefe told Congressional Quarterly.

Suppliers who do win contracts are likely to take away non-winning suppliers' business for non-bid items based on convenience for the beneficiary. It's just easier for a bene to get all her DME in one place.

Exception: Providers of certain oxygen items will be allowed to continue servicing existing patients under bidding's grandfathering clause, CMS notes.

"The real losers in this program will be the Medicare beneficiaries," says Rose Schafhauser of the Midwest Association of Medical Equipment Services. They'll have to go to different suppliers for their bid items, when they need more than one bid item at once, instead of getting all their equipment from one source. That could even lead to longer hospital stays as beneficiaries try to line up all the DME they'll need at home.

The industry isn't taking round one bidding lying down. Suppliers are reaching out to their elected representatives for help.

Congress recently sent a letter to CMS expressing concern about bidding's impact on small DME businesses and patients' access to equipment. Bidding in its current form "will result in a number of small medical device providers going out of business, severely impacting patient access to necessary equipment and quality care," said the letter signed by 120 House members and 17 senators.

CMS fights back: But CMS refuted that charge in its round one announcement.

"The bid evaluation process ensures that there will be a sufficient number of suppliers, including small suppliers, to meet the needs of the beneficiaries living in the competitive bidding areas," CMS maintains. "Small suppliers, those with gross revenues of $3.5 million or less, make up about 64 percent of the suppliers offered contracts in the first round."

Industry reps are also readying lawsuits based on the bidding process, particularly errors CMS made in not accepting bids. Both NAIMES, in conjunction with VGM, and AAHomecare have announced legal proceedings.

"AAHomecare will be reaching out to other organizations and companies in the industry that may have enlisted legal teams," says the association's Tyler Wilson in a release. "Cooperation and coordination within the industry is critical to our collective success."

Online resource: More bidding information is at http://www.cms.hhs.gov/CompetitiveAcqforDMEPOS and http://www.dmecompetitivebid.com.