Competitive bidding's impact spreads

Thursday, April 21, 2011

FRANKLIN, Tenn. – If you still think competitive bidding doesn’t affect you because you’re not in a Round 1 or Round 2 CBA, here’s a wakeup call.

HealthSpring, which owns and operates Medicare Advantage plans in 11 states and Washington, D.C., notified its contracted DME providers in an April 6 letter that it plans to adjust its rates based on the new competitive bidding rates. The kicker: The company states that “this is a corporate initiative to standardize our DME fee schedules across all states and markets.”

“This is the first indication of a rate reduction based on the bid,” said Michael Hamilton, executive director of the Alabama Durable Medical Equipment Association, whose members were among those who received the letter. “This is a shot across the bow.”

In its letter, HealthSpring explains that the new competitive bidding rates represent 68% of the current Medicare allowable. As such, it plans to reduce its rates to 70% of the allowable, down from 80%.

The news came as a surprise to Mobilcare Medical. The Theodore, Ala.-based provider thought the changes were specific to Alabama, where it’s not a contract provider for HealthSpring. But it is in Tennessee, one of the other states where the company operates plans.

“I can’t believe they’re going to use competitive bid rates,” said Tony Tice, vice president. “Their rates are already low.”

In its letter, HealthSpring asks providers to notify them in writing whether they accept or decline the change. Wetumka, Ala.-based Quality Home Healthcare, a contract provider for HealthSpring in Alabama, plans to tell the company thanks but no thanks.

“We were happy to see HealthSpring come to our area because we liked that they did prior authorizations—it made things easy,” said Susan Czapla, president. “But we’re not going to accept this reduced rate.”

While several Medicaid programs have threatened to adopt the new competitive bidding rates, none have to date, so industry stakeholders fear HealthSpring will set a dangerous precedent for other payers.

“This is quickly becoming a race to the bottom,” said Walt Gorski, vice president of government affairs for AAHomecare. “That’s why we have a golden opportunity with H.R. 1041 (a bill that would repeal competitive bidding). That’s why we can’t squander it.”

In addition to Alabama, Tennessee and Washington, D.C., HealthSpring operates plans in Delaware, Florida, Georgia, Illinois, Maryland, Mississippi, New Jersey, Pennsylvania and Texas.