Competitive bidding: Conference re-energizes repeal or reform debate

Monday, April 4, 2011

BALTIMORE – It doesn’t matter how you slice it and dice it. Some providers say they don’t think competitive bidding is a good way to set pricing for home medical equipment products and services—period.

Providers were among the attendees of an April 1 conference organized by Prof. Peter Cramton, a vocal critic of the current competitive bidding program. One of the purposes of the conference: To stage a mock auction based on an alternative model for the program he has designed.

“Whether it’s CMS’s model or Cramton’s model, it still doesn’t address the services we provide,” said Robert Miller, president of Bach’s Home Healthcare in Hackettstown, N.J., who attended the conference. “Cramton’s model has the product element down to a science, but it still misses the entire service element. Repealing the program is the answer.”

More than 100 stakeholders attended the conference, including big names like Jonathan Blum, deputy administrator of CMS, and Tom Bradley, chief of Medicare cost estimates at the Congressional Budget Office (CBO).

As part of the mock auction, Cramton told attendees they should include in their bids all of their costs, including those associated with the services they provide. The problem: Not all providers know their costs, stakeholders say. (That’s a point that was hammered home when Paul Gabos of Lincare, one of the largest and most efficient providers in the country, pointed out that his company was nearly locked out of the program by low-ball bidders. It received only two contracts.)

“If more providers understood what their costs were, we wouldn’t have seen a 32% reduction for Round 1,” said Gary Sheehan, president and CEO of Cape Medical Supply in Sandwich, Mass., who attended the conference. “That kind of bidding would continue under any plan.”

But some providers feel reforming competitive bidding, as Cramton’s model sets out to do, may be the industry’s best bet at derailing the current program.

“It’s a starting point for a sincere conversation,” said Robert Lee, director of government relations and health policy analyst for Care Medical in Portland, Ore., who attended the conference. “Competitive bidding, in one way or the other, is going to stick around, so we can either help drive the program in a way that’s not detrimental to providers or be the victims of it.”

The big question now: What does CMS make of Cramton and his alternative model? Providers were surprised to hear Blum and Bradley admit to attendees that not all was perfect with Round 1 of the program. Bradley went so far as to say that the program, in its current form, would fail. But whether that translates into meaningful changes is anyone’s guess, stakeholders say.

Some providers say both a repeal and reform are needed.

“I realize I’m fence straddling when I say this: A repeal is still the No. 1 priority, but I don’t expect a repeal to make the program go away,” Sheehan said. “But to make the changes that need to be made, there needs to be a repeal. That seems to be the only language CMS speaks.”

For a recap of the conference, including videos, go here.