CMS announces competitive bidding pricing

Sunday, March 23, 2008

BALTIMORE - CMS plans to slash prices for home medical equipment, on average, by 26% in the first round of national competitive bidding, a move agency officials say will save millions of dollars.

CMS announced the news at a Thursday, March 20, press conference.

Under competitive bidding, which kicks off July 1, CMS will pay, on average, $140.82 per month for oxygen equipment instead of $199.28. For standard power wheelchairs: $3,072.65 instead of $4,063.96. For mail-order diabetes supplies: $47.53 per month instead of $82.68.

CMS plans to cut pricing for complex power wheelchairs, on average, by 15%.

"It's clear we've been paying too much for medical equipment and supplies, and competition can serve as one tool to help improve Medicare's long-term funding situation," said CMS Acting Administrator Kerry Weems during the press conference. "At the same time, it will help to lower prices for beneficiaries who have to pay for these items."

From May 15, 2007 to Sept. 25, 2007, hundreds of providers submitted 6,300 bids to CMS, competing to provide 10 product categories in 10 areas. The agency used the bids to set the new prices.

CMS notified participating providers by overnight mail on March 20 whether they submitted winning or losing bids. Providers who received winning bids have until April 3 to sign and return contracts. Small suppliers, those with gross revenues of $3.5 million or less, won about 64% of the contracts, Weems said.

"We worked with small suppliers across the country because we know so many beneficiaries rely on small suppliers in their communities," he said.

CMS projects that both round one and round two of competitive bidding will save the agency $1 billion per year.

"The results of the first round of bidding are promising," he said.

Weems also addressed a number of other issues:

* Regarding House and Senate members who are concerned about competitive bidding's impact on small providers. "Well, first of all, in carrying out this competitive bidding program, we're carrying out the law," Weems said. "We're responding to a statute that was passed. Yes, individual lawmakers have concerns, but as I previously stated, 64% of the winning bids come from small suppliers, so we think this has been remarkably successful for small suppliers."

* On rolling out the new prices across the board. "Doing something like that would bring us back to another administered pricing scheme," Weems said. "These prices were competitively determined. We think when we open this up to additional markets, we think we're going to see savings like this or even more substantial, and we'll do it nationally. But it's better to determine prices through a competitive bid process rather than an administered pricing scheme."

* On low-ball bidders. "We have confidence in the accreditation process," Weems said. "We've also looked behind the bids in a couple of areas, with respect to the products being offered, and these are nationally known, brand name, high quality products."