It can be done, but should it?

Monday, April 25, 2011

As an advocate for the repeal of competitive bidding, I wanted to attend Dr. Peter Cramton's mock auction on April 1 at the University of Maryland. When I first received the invitation to attend his conference, I have to admit I was surprised that he was taking it this far. After all, he had written a compelling letter late last summer that was signed by 167 renowned auction experts, two of them Nobel Prize winners, laying out the major flaws with CMS's DME competitive bidding program.Wasn't that enough? Apparently not.

I understand now why Dr. Cramton is so excited and enthusiastic about his ideas. Being able to participate in this mock auction gave all the attendees a "hands on" experience of what an auction could look like.  

All attendees were paired in groups of two. I was partnered with an economist. Each "company" was given a list of the nine MSAs and six product categories. Our cost, per MSA and product, was listed on a grid and included service costs. We went through about six rounds where we were bidding against a "high" and a "low" amount until the auction ended with a list of the top companies that won. My company, "John Tyler Co.," finished in the top 10.

I would imagine that those that participated who are not in the DME industry played it like a game. And although Dr. Cramton's model is much better than CMS's, it raised a few red flags.

His model encourages bidding in as many categories as possible in order to win more contracts and guarantee more referrals. Providers would be encouraged to bid for products that they don't currently supply and for which they don't know the costs (similar to Round 1). It was not clear to me how his auction guaranteed quality products and service. And last but not least, as with any auction, there would be winners and losers.

As an advocate for HME providers that range from large national/regional companies to small "mom and pops" for the past 13 years, I cannot support any program that eliminates true competition and puts companies out of business. For me, the question is, even if a DME auction could be done, should it be done? In light of the masses of baby boomers heading toward our industry in the next decade, efforts should be made to shore up this industry, not dismantle it.

Karyn Estrella is the executive director of the New England Medical Equipment Dealers association.