A competitive bidding story in numbers

Medicare has finally released utilization records for Round 1 of its bidding program in home medical equipment and it did not take a Freedom of Information Act request or act of Congress to attain the records. Ironically, Medicare has included the 2011 allowable units, with a corresponding list of HCPCS codes, as part of the Round 1 recompete worksheets.

AMEPA has compared some of the most common codes to the 2008 utilization records published in the Round 1 rebid worksheets and it is easy to understand why Medicare ignored requests from bid design experts, congressmen and senators.

As a contracted supplier in oxygen I was forced to close my business because I could not afford to supply as many oxygen tanks that a beneficiary needed for less than $22 per month. The utilization records verifies this, because in 2008, 112,795 portable oxygen units and post-36-month refills were allowed in Miami and under the bidding program in 2011 that number was reduced to only 56,057. That is a reduction of more than 50%.

Unfortunately, this is not the only item or area where the bidding program has reduced patient utilization. In Miami, the only area to have support surfaces as a bid category, alternating pressure mattresses dropped from 932 allowed units in 2008 to only 248 units under the bidding program in 2011. That is a reduction of more than 73%. The other main HCPCS code in the support surface category is E0372, powered air overlay for a mattress. That item had 42 allowed units in 2008 reduced to 22 in 2011. The two items make up more than 96% of the support surface category.

It certainly did not help that Miami was part of a Region C prepayment review on alternating pressure mattresses that was initiated after the bidding program began. But how could the CBIC believe that a supplier could cut their reimbursement in half and still provide monthly ongoing documentation proving that a bed bound patient still has multiple decubitis ulcers on their backside. That is an operating cost that an inexperienced company would not have known or probably cared about before bidding—not to mention the sunk cost of discarding an alternating pressure mattress after only a month's use by a bed-bound patient.

Other standout utilization drops in Miami were from commonly used items where "bona fid" bid rules were clearly ignored. These include B4154 enteral formulas, which dropped more than 40% from 3.5 million 100-calorie units allowed in 2008 to less than 2.1 million 100-calorie units in 2011.

E0470 respiratory assist devices dropped 38.8% from 469 allowed units to 287. CPAP chin straps also saw a major decline from 2,676 allowed units in 2008 to 1,426 allowed units in 2011. These are relatively inexpensive items but who can purchase a chin strap, package it, ship it, collect documentation and bill it for the Miami reimbursement of $9.85. It should be no surprise the utilization dropped over 46%, but ask any board certified sleep or critical care doctor if a chin strap is an important accessory in respiratory therapy.

Walkers had the highest drops in utilization. The failure of the "bona fid bid" rule, requiring suppliers to not have rates below cost of goods and operating expenses, is apparent in many HCPCS item codes in all Round 1 areas. However, the most obvious are in the highly demanded walkers and power wheelchair batteries.

Folding and rigid walkers without wheels are among two of the top three walkers in the 17-item walker category. Nationally, compared to 2008, the utilization for the E0135 folding walker dropped an average of 56.7%. The worst cases were in Cincinnati where there were 822 walkers allowed in 2008 compared to 260 allowed under the bidding program in 2011.

In Miami the utilization dropped more than 54% and it was easy for me to understand. My office was located about a mile from the most prominent hospitals in north Miami-Dade County. Before the bid program stared we delivered at least three walkers a day to patients being discharged from Aventura Hospital. After the program began the hospital discharge planners could not find any contracted suppliers willing to deliver walkers so patients could be discharged.

As the general manager, I had to repeatedly tell case managers and families to purchase a walker at Walgreens a few blocks from the hospital for $79.95, because no "bid winner" would go through the process of providing it for $49.50 ($39.60 if they did not have secondary insurance). The beneficiaries and families understood that contracted walker providers could not collect the documentation, deliver the walker, set the walker height to the patient, train the patient how to use it, bill Medicare, wait a month to be paid, and pray that the patient actually leaves the hospital that day and not the next so the supplier would not refund the possible reimbursement back to Medicare because of a potential RAC audit sometime in the next three years for only $49.50.

They easily understood that if the nation's largest pharmacy chain was selling it for $79.99, then how could a supplier do the aforementioned for 40% less? Perhaps this is where those 54,000 "inquires" came from that Medicare received the first three months of the program.

The other code for E0141 rigid walker was even worse, as the utilization dropped nationally 65.1%. The highest drop was in Dallas, 110 allowed units in 2008 compared to only 2 (yes two) in 2011. Cincinnati had 76 allowed units reduced to only one, and that beneficiary probably does not know how lucky they are.

Rob Brandt works with the Accredited Medical Equipment Providers of America (AMEPA). Reach him at rob@amepa.us.