CMS scrutinizes diabetes bids

Friday, September 28, 2012

YARMOUTH, Maine – When it comes to awarding contracts in the national mail order bid for diabetes supplies, CMS may be doing its homework this time around, industry stakeholders say.

Several bidders last week received letters from the CBIC seeking further information on their bids.

"CMS took a lot of heat last time for awarding contracts to people that maybe weren't in the business or didn’t have their cost structure available," said one national mail-order bidder who didn't want to be named. "I think there probably are some people that put in numbers that they can't support and this may rule them out. We are happy to see it."

The letter states, in part: “To adequately assess your bid, it is important that you provide (1) a rationale … that describes your ability to furnish diabetic test strips for the bid amount listed on the chart on the enclosed Bona Fide Bid Verification Checklist, and (2) documentation that substantiates your rationale. This information will be used to verify that you are able to provide diabetic test strips to Medicare beneficiaries for the amount you provided on Form B in DBids, the online bidding system.”

In Round 1, the diabetes category was clobbered—an average cut of 56% compared to the overall average cut for HME of 32%. To try and avoid a replay of this in Round 2, CMS implemented a rule that requires bidders to include brands that have at least 50% marketshare and prohibits them from encouraging beneficiaries to switch brands.

"People were not providing the products they said they were going to provide," said Walt Gorski, vice president of government affairs for AAHomecare. "I think the documentation of costs for products in the 50% mix, including overhead; what the expected product mix is; and calculating an average cost to support the bid—I think those are things that they are looking at."

With competitive bidding for diabetes supplies jumping from nine cities to the entire country, along with several U.S. territories, CMS may be paying closer attention to the providers who submitted bids, including conducting site visits, stakeholders say.

"They came in and looked around," said the provider. "They are ensuring that the functionality that people claim to have actually exists."

As to whether the Round 2 bids came in at a more sustainable rate, it's hard to gauge, say stakeholders.

"I think everybody knows how the system works," said industry consultant Tom Milam. “They saw the pricing in Round 1 and what it took to be a winner, and I think they are playing the game again."

CMS did not respond to a request for comment.