CMS, Roberts exchange words over competitive bidding

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Sunday, August 19, 2007

WASHINGTON - A senator who was key in getting CMS to extend the deadline for national competitive bidding continues to barrage the agency with questions about the program. Sen. Pat Roberts, R-Kan., has exchanged a series of letters with Kerry Weems, the nominee for CMS administrator. The Midwest Association for Medical Equipment Services (MAMES) plans to share their correspondence with members this week:

Pat Roberts: I am concerned that the program has no mechanism to review or assess patient impact and quality of care as a result of the program. Shouldn't a program that will impact some of the frailest seniors track how they fare under it?

CMS: First and foremost, CMS is committed to protecting beneficiary access and quality of care. Toward that end, CMS conducted a demonstration program, in which patient impact and quality of care were assessed before continuing with widespread implementation of DME competitive bidding. The Medicare DMEPOS Competitive Bidding Program was mandated by the Medicare Prescription Drug, Improvement and Modernization Act of 2003, after demonstration projects in Texas and Florida produced significant savings for beneficiaries and taxpayers without hindering access to DMEPOS and related services. In designing the competitive bidding program, CMS built on the experiences from those demonstrations.

Roberts: This answer fails to address the question of needing a system by which patient access and quality of care is provided under this program. While the question references the demo, it does nothing to address what will happen to patients in the 10 MSAs now.

Many would question the "assessment" of patient impact and quality under the demo. The demo only reviewed general survey responses. No baseline was established before the demo began, and no extensive clinical review was done of patient records to compare clinical outcomes at the end of the demo.

In addition, the program starting now is very different from the demo. Different and more complex products and technologies are now being bid. The methodology for setting payment is different. For example, the program now will involve product codes that have notable ranges in technologies. You could see a shift in usage from the higher end of the spectrum to the less expensive items in that same category, and there is no way to assess clinical impacts from these shifts.

I would like another response stating CMS's plan of action for a system to monitor patient access and quality of care, especially considering the concerns I raised above.

CMS: Senator, I agree that patient access and quality of care are of the utmost importance, and I commit to you, that if confirmed, I will closely monitor the competitive bidding implementation process to ensure the protection of both. I also commit to keeping you apprised as we proceed. Our plans for assessing patient impact and quality of the competitive bidding program include an ombudsman program that will be established to identify, investigate, and resolve complaints made by or on behalf of beneficiaries, suppliers, or referral agents. The competitive bidding implementation contractor (CBIC) will monitor and evaluate the activities and performance of the ombudsmen in accordance with education and outreach program specific goals, objectives and standards.

In addition, a beneficiary survey will be conducted to rate the services received from contract suppliers. Claims data will be monitored to identify trends, spikes or decreases in utilization and changes in utilization patterns within a product category.

CMS is planning site visits relating to the early operations of the accreditation program in September 2007. The accreditation process and responses to it provide additional information to evaluate the impact of the DMEPOS competitive bidding and accreditation on the quality of DMEPOS goods and services.

The MMA requires the secretary to submit a report to Congress evaluating the competitive bidding program. The report, due in July 2009, will provide evaluative information from site visits and other sources covering beneficiary satisfaction, quality, access and program savings. A subsequent study will add evaluative information from two waves of survey data. Data will be collected in the beneficiary surveys and supplier surveys to evaluate changes in beneficiary satisfaction, service, quality, access and cost-sharing as a result of the new competitive bidding program. The baseline survey is scheduled to go into the field this summer.

In addition, contract suppliers are required to submit quarterly reports to the CBIC, which will ensure that items supplied by contract suppliers are the same quality as the items for which the contract supplier submitted a bid and was awarded a contract. CMS will also post on its Web site a list of brands each contract supplier furnishes. As a term of contract, suppliers must furnish the same products to Medicare beneficiaries under the competitive bidding program as they do to their non-Medicare customers.

Furthermore, the final rule for DMEPOS Competitive Bidding established numerous beneficiary protections. For example:

-- Competitive bidding will reduce the amount Medicare pays for DMEPOS and bring the payment amounts more in line with that of a competitive market. Also, contract suppliers must submit claims for competitive bidding items on an assignment basis. These factors will help limit the burden on beneficiaries by reducing their out-of-pocket expenses.

-- Contract suppliers will meet the newly established DMEPOS quality standards and accreditation requirements and will follow a business model that is beneficial to beneficiaries (such as meeting financial standards). The independent accrediting organizations play a key role in ongoing monitoring of supplier quality.

-- A sufficient number of contract suppliers will be selected to meet beneficiary demand.

-- The performance of contract suppliers will be monitored through beneficiary satisfaction surveys that measure their level of satisfaction with the services they receive under the competitive bidding program.

-- Beneficiaries are protected from financial liability when a non-contract supplier furnishes them with a competitively bid item.

-- When a physician specifically prescribes a particular brand name product or mode of delivery to avoid an adverse medical outcome, contract suppliers are required either to furnish that item or mode of delivery, to assist the beneficiary in finding another contract supplier in the competitive bidding area that can provide that item or service, or to consult with the physician to find a suitable alternative product or mode of delivery for the beneficiary.

-- Beneficiaries will be able to obtain repairs of equipment they own from either a contract or non-contract supplier.

-- Replacement parts needed to repair beneficiary owned equipment may also be obtained by a beneficiary from either a contract or non-contract supplier, even if the parts are competitively bid items.

-- Contract suppliers are required to make available the same range of products to beneficiaries that they make available to non-Medicare customers. For transparency, we will post on our Web site a list of brands furnished by each contract supplier.

-- Under the grandfathering rules, a beneficiary will have the opportunity to make arrangements with a non-contract supplier that will allow the beneficiary to continue to receive a rented item from the same supplier (grandfathered supplier) that had been furnishing the item to the beneficiary before the implementation of a competitive bidding program, provided the supplier is willing. If a supplier agrees to furnish "grandfathered" items to one beneficiary, it must furnish those items to all.

-- Beneficiaries will be allowed to use an Advance Beneficiary Notice (ABN) to make informed consumer choices regarding whether to agree to be financially liable for special deluxe features that Medicare does not consider medically necessary.

As administrator, I would work to enforce these important protections.

Roberts: I have strong reservations about how this program will work--especially for patients in small and rural MSAs. Mr. Weems, can you guarantee to me that patient access and choice to DMEPOS items and services will be the same for beneficiaries in small and rural MSAs as they currently experience?

CMS: CMS has the discretion to exempt from DMEPOS competitive bidding, rural areas and areas with low population density within urban areas that are not competitive unless there is national mail order market for a particular product. CMS has already used this discretion in the Riverside-San Bernardino-Ontario metropolitan area for non-mail-order products, including densely populated zip codes in the western part of Riverside County and the southwestern region of San Bernardino. Both counties also include sparsely populated areas in the mountains and desert. These areas are not included in the competitive bidding area for non-mail-order products because they have low population and allowed charges, are predominantly rural, are geographically distant from the center of the competitive bidding area and are served by few suppliers.

The competitive bidding final rule also established a methodology for selecting contracting suppliers that requires the selection of a sufficient number of suppliers to meet the expected demand for the competitively bid items within a competitive bid area.

Roberts: This answer fails to give any sort of commitment that small and rural MSAs will all be carefully assessed as to whether it is appropriate to include them in the program. CMS is relying solely on its own discretion instead of designing criteria on when to exempt small/rural MSAs. If there is no patient or quality care tracking, how will they know if patient needs are unmet or poorly met once the program starts in the area? If CMS does detect problems, this answer fails to provide a contingency plan to address those problems in small or rural MSAs. I would like a follow-up response detailing what kind of criteria CMS will use to know when to exempt small/rural MSAs, rather than just relying on CMS's "discretion," and a contingency plan if problems arise in small and rural areas.

CMS: I commit to you, that if confirmed, CMS will carefully assess whether or not small and rural MSAs should be included in the competitive bidding program and to work to ensure that patient needs in these areas are met. The competitive bidding final rule established a methodology for selecting contracting suppliers that requires the selection of a sufficient number of suppliers to meet the expected demand for the competitively bid items within a competitive bidding area. CMS will ensure that access to medically necessary items and services is not hindered in any area, large or small, in which a competitive bidding program is implemented. Although CMS is confident that the methodology will ensure that there are sufficient suppliers to meet demand, if additional suppliers are needed, CMS would use its authority to quickly award additional contracts.

As previously indicated, CMS has already used its authority to exempt areas with low population density within urban areas from competitive bidding in several MSAs being phased in as part of the initial phase-in of programs in 10 MSAs. For the remaining competitive bidding area within each of these MSAs, each contract supplier is required to furnish items to any beneficiaries residing in the competitive bidding area, regardless of where they are located geographically.

Because the competitive bidding program is initially being phased in the largest MSAs, there will not be a need to exempt rural areas or small MSAs from competitive bidding until after this initial phase-in period. Specifically, the statute requires us to phase in competitive bidding in additional areas after 2009.

In general, before phasing in competitive bidding for a specific product category in a rural area or small MSA, CMS must first determine if there would be significant savings in those areas. If that is the case, then we must determine that there would be a sufficient number of suppliers available to participate in the area. However, if CMS determines that the number of suppliers available in a rural area creates a situation in which the area is not competitive, or if other information is available that results in a determination that the area is not competitive, CMS can use its specific authority to exempt the rural area from competitive bidding. If the area is a small MSA rather than a rural area, CMS may decide to delay implementation of competitive bidding in the area altogether or use our authority to exempt specific product categories for which competitive bidding is not likely to result in significant savings.

CMS will gain valuable insight and information as it phases in programs first in 10 and then 70 additional MSAs. CMS will use this information in making decisions about further program implementation, including selection of competitive bidding areas and product categories.

Roberts: How can the bidding process proceed while a number of potential suppliers' applications for accreditation--which is needed to participate--are still pending?

CMS: CMS is working with suppliers and the accreditation organizations to ensure that accredited suppliers are participating in the competitive bidding program. I understand that the accreditation organizations have the capacity to accredit the number of potential suppliers who are participating in the competitive bidding program.

Roberts: While it is good that CMS has the capacity to accredit the potential bidders, this is really an issue of time. A 60-day delay in the bidding window will help, but the concern is that you still may not have them all complete in time and important participants in the program could be shut out. If potential bidders submit bids, but do not receive accreditation in time, their bids may still affect the median price. I would like a follow-up response on how you plan to address this concern if potential bidders do not have accreditation in time.

CMS: The MMA required the establishment of quality standards for all DMEPOS suppliers. These standards will be particularly important in ensuring that supplier quality is maintained during competitive bidding. CMS believes suppliers have had ample advance notice and time to apply for accreditation. Preliminary education on quality standards and accreditation began well over a year ago.

CMS posted the new quality standards on Aug. 14, 2006. A final rule published Aug. 18, 2006 established the process for approving independent accreditation organizations to apply the MMA-required DMEPOS quality standards established by CMS. On Nov. 22, 2006, CMS announced the independent accreditation organizations. These accrediting organizations have been available to accredit DMEPOS suppliers since Dec. 2006. Since the accrediting organizations have been approved, CMS has repeatedly urged suppliers to get accredited.

For the first round of competitive bidding, suppliers must be accredited or be pending accreditation to submit a bid. The first 10 competitive bidding areas and product categories for bidding were announced on April 2, 2007. The deadline by which suppliers must be accredited to be awarded a contract was announced on April 17, 2007. Suppliers were strongly urged to get accredited immediately to ensure adequate time to process their applications.

CMS cannot accept a bid from any supplier that is not accredited or that has not applied for accreditation. Suppliers will need to be accredited to be awarded a contract. The accreditation deadline for the first round of competitive bidding was originally Aug. 31, 2007. We extended the deadline, which is now Oct. 31, 2007, which we believe will give suppliers enough time to get accredited for the competitive bidding program.

Roberts: It is important for the program that small suppliers participate. CMS would allow them to form networks to bid and provide services within an entire MSA. However, formation of networks is seriously impeded by antitrust prohibitions. Why hasn't any guidance been issued to help suppliers overcome these barriers? What will CMS do to ensure guidance is issued to ensure these small providers can participate?

CMS: The MMA requires that, in developing procedures relating to bids and the awarding of contracts, CMS "take appropriate steps to ensure that small suppliers of items and services have an opportunity to be considered for participation in the program." In the development and implementation of this program, CMS has created numerous provisions to protect small suppliers and ensure they have an opportunity to participate. For example, many commenters on the competitive bidding proposed rule expressed concern about potential antitrust violations that could occur under the proposed network policies. In fact, one commenter submitted a specific example of a supplier attempting to form a network for the purpose of manipulating Medicare's price.

Roberts: If CMS received a comment about the antitrust concern, why did you not do anything to respond or help address this problem? This answer does not provide any information on how they are truly helping the small suppliers to participate. Please provide a detailed response on the "numerous provisions" that CMS has created to protect small suppliers.

CMS: I agree that it is important to the program and to the overall delivery of health care that small suppliers participate, and I believe that CMS has created numerous provisions to protect small suppliers and ensure that they have an opportunity to do so. If confirmed as Administrator, I would continue to work to protect the ability of these small businesses to compete and continue to provide important services to beneficiaries. The MMA requires that, in developing procedures relating to bids and the awarding of contracts, CMS "take appropriate steps to ensure that small suppliers of items and services have an opportunity to be considered for participation in the program."

The final rule for DMEPOS Competitive Bidding established numerous beneficiary protections such as:

-- Working with the Small Business Administration to establish a new definition for small suppliers reflective of the healthcare industry,

-- Not requiring suppliers to submit bids for all product categories because it may be difficult for small suppliers to furnish all of the product categories in the competitive bidding program,

-- Setting a 30% target for contract awards to small suppliers for each product category, and

-- Permitting small suppliers to form networks if they cannot service an entire competitive bid area.

In addition, CMS recently held a bidder's conference to specifically focus on small supplier issues.

As mentioned above, one opportunity available to small suppliers is the ability for them to join a network. Many commenters on the competitive bidding proposed rule expressed concern about potential antitrust violations that could occur under the proposed network policies. In fact, one commenter submitted a specific example of a supplier attempting to form a network for the purpose of manipulating Medicare's price. We considered these comments carefully and worked with the Antitrust Division of the U.S. Department of Justice to develop the requirements related to forming networks that appear in the final rule. These requirements take the federal antitrust laws into account. In particular, the final rule applies the network provision to small suppliers only, in contrast to the proposed rule, which provided the option to all suppliers. In addition, the final rule ensures that multiple suppliers (or networks) will be awarded contracts under the program. Finally, the rule ensures that suppliers have a legitimate need to form a network by requiring that each network member sign a statement certifying that the supplier joined the network because it is unable to furnish all of the items in the product category throughout the entire geographic area of the competitive bidding area.

Roberts: Suppliers that are denied participation for reasons other than the bid amount do not currently have any recourse to allow them to address the concerns and allow them to participate. Will CMS provide any written explanations/remedies for providers whose applications for participation were rejected due to technical reasons?

CMS: CMS is working continuously with suppliers providing technical assistance during the bid window to ensure that their bid applications are complete and accurate.

Roberts: This answer does not provide any insight in to how suppliers should learn about why they were rejected or what remedies are available to them to correct any errors and participate. CMS has no mechanism to provide information or remedies. I would like another response detailing how CMS plans to inform or work with suppliers whose applications are rejected due to technical reasons.

CMS: As indicated, CMS is working continuously with individual suppliers providing technical assistance during the bid window to ensure that their bid applications are complete and accurate. Bids are considered final after the bidding window closes; however, CMS has also instructed suppliers that it has the discretion to request clarifications or corrections to submitted bid applications. CMS does not believe it would advance competition or savings by rejecting bid applications on the basis of incomplete information. CMS will notify those suppliers that do not win that they have not been selected as a winning supplier and indicate the general reasons why they were not selected, (e.g., their bids were too high).

Roberts: Can and will CMS provide any detailed data on the administrative cost of creating this new bureaucracy to implement this program? Can CMS provide data showing that this program will in fact provide significant savings in the Medicare program?

CMS: As CMS has shown in the impact analysis in the competitive bidding final rule, they anticipate that this program will provide significant savings to the Medicare program and to beneficiaries. That was certainly the experience in the demonstration projects conducted in Texas and Florida.

Roberts: This answer fails to address my question on the administrative costs of setting up the program. CMS refused to provide such information during the demos, as well. There is no mechanism to assess the costs of having beneficiaries forced in to higher care settings (hospitals or acute care) due to access and quality issues that could arise. In addition, CMS has failed to address my underlying concern that there should be an assessment of value--that patient access, well-being, and quality of care must be part of the consideration, not just gross savings. It is important to know the net savings when you are considering a new program that impacts beneficiaries with special needs.

CMS: CMS believes quality of care in competitive bidding areas will be protected and will actually improve because contract suppliers will meet quality standards and be accredited for the first time in the history of the Medicare program. In addition, CMS believes that the number of beneficiaries that may require higher care settings (hospitals or acute care) due to access and quality issues will decrease as a result of quality standards and accreditation. Since quality standards and accreditation are being phased in initially in competitive bidding areas, the decrease in costs associated with assurance of quality suppliers will first be shown in competitive bidding areas. Furthermore, implementation of quality standards and accreditation will work to decrease rampant fraud and abuse that has lately been found in the DMEPOS industry. This will protect beneficiaries and taxpayers alike. That said, I agree that patient access and quality of care are of the utmost importance and I believe that the program must continually be monitored to ensure these protections.

As CMS has shown in the impact analysis in the competitive bidding final rule, they anticipate that this program will provide significant savings to the Medicare program and to beneficiaries. CMS estimates that this new program will save over $1 billion annually once fully implemented. Both the Congressional Budget Office (CBO) and the CMS' Office of the Actuary (OACT) have estimated that the DME competitive bidding program would provide significant savings to the Medicare program, over billions of dollars. The OACT has recently estimated savings of about $6 billion from 2008 through 2013 for the competitive bidding program.

OIG and GAO reports have highlighted numerous instances in which Medicare is paying too much for DMEPOS items and services. Retail prices or the cost to general consumers for DMEPOS items and services are also good indicators that Medicare is paying too much. For example, CMS recently made an informal comparison of retail prices to Medicare payments for some of the most expensive DMEPOS items. The prices Medicare pays are substantially higher than the retail prices available online for these items. The comparison showed that Medicare is paying from two to five times, or approximately $1,000 to $2,000, more than the average price available from online suppliers.

Four of these durable medical equipment items are among the top five most commonly used and include #1 oxygen concentrator ($2,380 CMS fee vs. $677 online price), #3 standard power mobility device/wheelchair ($4,023 CMS fee vs. $2,174 online price), #4 hospital bed ($1,825 CMS fee vs. $754 average online price), #5 continuous positive airway pressure (CPAP) device ($1,452 CMS fee vs. $281 online price) and #18 respiratory assist device BIPAP ($3,335 CMS fee vs. $1,348 online price).

In the President's Budget for fiscal year 2008, CMS estimates the administrative costs to be about $45 million.

However, in spite of the costs to administer the program, CMS estimates that the potential savings of the competitive bidding program are significantly more than the administrative costs. As CMS has highlighted, they believe the program will improve access to quality of items provided to Medicare beneficiaries and decrease the number of beneficiaries that may require higher care settings. The program will reduce the rampant fraud and abuse in this industry. The competitive bidding program will also save billions of dollars for Medicare and taxpayers, in addition to savings for beneficiaries in coinsurance.

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