Lincare joins industry chorus: Competitive bidding is 'fundamentally flawed'

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Monday, July 19, 2010

CLEARWATER, Fla. - Lincare announced yesterday that it has been offered contracts to provide oxygen in only two of the nine competitive bidding areas: Charlotte and Miami.

Lincare has accepted the contracts–but it's not happy about it.

"We have executed these contracts even though the composite bid prices submitted by Lincare in those markets exceed the new rates established by CMS in Charlotte by 19% and in Miami by 16%," stated CEO John Byrnes. "We decided to execute the contracts we were offered because we believe we can support the Medicare beneficiaries in those markets by subsidizing their care with the resources we have available to us as a national company. We have serious concerns about the care that will be available to similar patients in the other seven markets."

These comments, among others, were made in a press release announcing Lincare's financial results for the second quarter and first half of 2010.

Lincare took CMS to task for the way it determined the bid amounts, which, on average, will reduce reimbursement by 32%.

"We believe that the pricing mechanism used by CMS to determine the payment rates within each of the nine markets is fundamentally flawed," Byrnes stated. "We believe that many providers submitted bids at rates that are unsustainably low (expecting that the median price established by CMS would be higher) to 'make the list' of winning bidders, encouraging a 'race to the bottom' and the sacrifice of critical patient services."

Later in the release, Byrnes continued: "CMS should reduce the risk of artificially low bids by accepting contracts for each selected bidder at the actual bid rates submitted by those bidders. Such changes are essential to ensure that the expected savings generated by the competitive bidding program are not overwhelmed by increases in aggregate health care expenditures for the Medicare program."

Even though it has been offered contracts in only two areas, Lincare has no plans to "acquire contracts" from winning bidders in the other seven areas.

Lincare reported net revenues of $418.4 million for the quarter ended June 30 compared to $380.4 million for the same period last year, a 10% increase. It reported net income of $46.4 million vs. $33.5 million, a 38.7% increase.

The provider reported net revenues of $828.4 million for the six months ended June 30 compared to $752 million for the same period last year, a 10.2% increase. It reported net income of $90.1 million vs. $59.5 million, a 51.5% increase.

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