Competitive bidding analysis

Sunday, June 3, 2007

The Medicare Modernization Act (MMA) requires CMS to take steps to ensure that small suppliers have an opportunity to be "considered for participation" in competitive bidding. CMS interpreted this language narrowly in the proposed rule, noting that its obligation is only to ensure that small suppliers can be considered for participation. However, in response to comments, CMS modified the final rule to include provisions specific to small suppliers in the bid submission and selection process.

For example, suppliers are not required to bid on every product category. CMS notes that allowing suppliers to limit the product categories on which they bid is an accommodation to small suppliers who may not be able to furnish items in every product category. Similarly, CMS has given unaccredited suppliers, many of which qualify as small suppliers, a grace period to submit bids. Small suppliers that certify that they cannot individually serve an entire competitive biding area may also form networks. The final rule contains specific requirements that networks must meet, including a limit on the number of suppliers that can join a network and the number of bids that network members can submit on a product category. To qualify as a small supplier, the supplier can have no more than $3.5 million in total revenue.

The final rule also sets a target number of small suppliers that must be selected as contract suppliers. Thirty percent of contract suppliers will be small suppliers. If there are not enough small suppliers with bids at or below the pivotal bid to meet the target number, CMS will include additional suppliers whose bids are above the pivotal bid until the target number is reached. Finally, other aspects of the program, such as the opportunity to subcontract and the grandfathering provisions, may help small suppliers remain in business during the first contract period.

Attorney Asela Cuervo is based in Washington, D.C.