What should the industry do: Push to repeal competitive bidding, or work to reform it?

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01/07/2011

There's a lot of outrage these days about competitive bidding, about how messed up the program is and how bad it is for providers and beneficiaries. Despite these complaints and the industry's continuing efforts to repeal the program, not everyone believes those efforts are the wisest use of time and resources. I received an email recently from one such person, and I've included it below.

This person believes that competitive bidding is here to stay. The best course of action, he says, is to stop trying to repeal it and work to reform it. No doubt, this is an unpopular position to many, but I think he makes some good points. Many people in the industry like to point to the 167 economists who consider the current bidding program a terrible failure. But these same people, when asked if they would accept a bidding program that eliminated the current flaws--a program like economist Peter Cramton has proposed—typically look like a deer in the headlights. My question is this: Can the industry have it both ways? Can it embrace the economists when they say the current program is greatly flawed, but give them the cold shoulder when they propose what, in their opinion, is a workable alternative?

As I see it, the industry has four options (feel free to add your own). It can continue to push for repeal of competitive bidding. It can push to reform the program. It can let Round 1 run its course and let the chips fall where they will. (If all out disaster doesn't occur, what then?) Or it can suggest an alternative. With the clock already ticking on Round 2, this important strategic decision can't be made soon enough.

Mike Moran

Now here's the letter:

Despite years of effort by the industry to derail competitive bidding, the flawed program has been implemented in the first nine markets. And implementation of the program will begin in an additional 91 markets in the next six months. Some in the HME industry predict the program will fail in the first nine markets. Unfortunately, I believe those people are wrong.

No doubt, beneficiaries will be impacted by the program. Some will be impacted more than others. But collectively the contracted suppliers will do just enough to allow CMS to claim success. Let's not kid ourselves: Did we collectively delight every beneficiary every time before competitive bidding? Why do three of the 30 Supplier Standards address beneficiary complaint resolution (#13, 19, & 20)?

As much as it pains me, it is time for the industry to drop the banner of "repeal" competitive bidding and pick up the banner of "reform." Changing banners is not the same as waving the white flag. The leaders at AAHomecare, VGM, Invacare and other industry organizations and manufacturers need to hear that the industry is behind reform so they can dedicate their resources to reforming the competitive bidding program in an open and forthright manner. The leaders of those organizations cannot and will not take action until they are confident their membership and customers will not abandon them if they push for reform.

Economist Peter Cramton, Ph.D., is a credible and independent voice about the flaws in the competitive bidding program. He is also a leading expert in auction design. He has developed the framework of an auction design that addresses many of the flaws in the current competitive  bidding program. His design will also achieve significant cost savings for the Medicare program. He has invited the industry and CMS to talk with him or other auction experts to finalize a new design. Efficient suppliers will prosper under a well designed auction system.

Repeal has fallen on deaf ears for years at CMS and Congress. Isn't it time the entire industry throws its weight behind a program like Dr. Cramton's that will result in a sustainable program for beneficiaries, suppliers and CMS? Good business is making change before change gets crammed down your throat. The leaders at your associations and manufacturers need to hear that you support reform before competitive bidding is crammed down the throats of beneficiaries and suppliers in the next 91 markets.

Scott Lloyd
Co-Founder & President
Extrakare LLC

Comments

What about proposing an alternative, one that doesn't destroy an industry, then advocating repeal. My own preference for alternative cost-saving is for Medicare to utilize their existing price setting authority and still maintain "any willing provider" participation. Set the fee by averaging the fees charged by all providers in each DME region but every provider must extend to Medicare their "best" price of all the third party payors with whom they do business. No more charging Medicare 30% more than you do for the HMO's and hospice. Medicare would calculate a "weighted" average based upon number of beneficiaries served at each provider's price and set the regional fee. Done. Another bonus would be an industry diversified by service level and size, just as it should be.