CMS: 'We're comfortable, when we look at the prices that we see'

Thursday, July 1, 2010

WASHINGTON - CMS officials, during a media call on Thursday afternoon, tried to spin Round 1.2 of competitive bidding as a new and improved program.

First, officials pointed out the increased savings. Their second stab at the program will result in reimbursement that's, on average, 32% below the current Medicare fee schedule in 2011 compared to reimbursement that was, on average, 27% below the fee schedule in 2008.

Officials also pointed out that they will offer 1,287 contracts to 364 suppliers, with 72% of those suppliers having a market presence in bid areas and 48% of them being small suppliers (those that have gross revenues under $3.5 million per year).

Additionally, they pointed to improvements to the online bidding process and supplier and beneficiary education.

As a result, when asked whether Congress, once again, would delay competitive bidding, Jonathan Blum, deputy director of CMS and director for the Center for Medicare, said: "We have worked very hard to address the concerns that Congress has had in the past. Given the fact that this program will produce tangible savings, both for taxpayers and beneficiaries...and given the improvements that we have made, (it) gives me great confidence that the program will go forward."

Other questions asked during the call:

When does CMS plan to release the financial standards that they used to judge bidders?

"We have, of course, put out a lot of different information with respect to the types of information that we could collect, exactly how it would be used, and what particular types of financial ratios or measures we would use to judge financial viability," said Laurence Wilson, director of the chronic care policy group at CMS. "We, of course, did not put out the particular thresholds with respect to those measures because we wanted to guard those as audit standards."

Does CMS's financial analysis of bidders ensure that they will be able to sustain operations at 32% below the fee schedule?

"We do screen bids that are on the low side (to) determine whether or not the supplier can actually provide the service or the item at that price," Wilson said. "That includes looking at invoices...and the supplier's financials, including their liquidity and credit, and their ability to expand into a market area. Where we do not feel comfortable, we may not count their capacity at all, or to the degree that they wish us to, in determining the number of winning suppliers. In fact, we did that 30% of the time. So we have been very careful in selecting suppliers and in scrutinizing these bids, in terms of prices and sustainability. I think we're comfortable, when we look at the prices that we see."

Does CMS have any plans to allow any willing provider to participate in the program if he agrees to do so for the bid amount?

"It's our belief that in order to have the most competitive bids, we also have to ensure that we have a process that awards a contract to the best possible bid and if we were to change that and allow any willing provider, I believe we would see less savings," Blum said. "(Also), the current rules don't provide for that scenario."

If a bidder turns down a contract, wouldn't that be an indication that the bid amount is too low and possibly unsustainable?

"We expect bidders who have submitted a bid will accept it," Blum said. "Now, in the event that is the case, CMS will continue to offer contracts to the next bidders to ensure that we have sufficient capacity to meet market demand. I'm confident that our review process will ensure that suppliers who submitted bids will stand behind them."