Legislation Will End Defective Medicare Bidding Process And Provide Market-Based Prices

May 15, 2013, 07:00 ET from American Association for Homecare

WASHINGTON, May 15, 2013 /PRNewswire-USNewswire/ -- A bi-partisan group of House members have filed legislation that would prevent the expansion of the Medicare bidding process for home medical equipment and replace it with a more effective procurement system, one that would provide quality goods and services to Medicare beneficiaries and slow job losses in the industry, says the American Association for Homecare.

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The legislation, which is known as the Market Pricing Program (MPP), was introduced by Rep. Tom Price, M.D. (R-Ga.) and Rep. John Larson (D-Conn.) with 25 cosponsors. The measure would force the Centers for Medicare & Medicaid Services (CMS) to adopt a market-based approach to determine prices for home medical equipment prescribed for Medicare patients rather than relying on administrative price setting.

Moreover, the MPP legislation would address serious defects in the current bidding process that are jeopardizing the health of vulnerable senior citizens and people living with disabilities who depend on Medicare to prove a wide range of durable medical equipment (DME), including walkers, oxygen, power wheelchairs, and diabetic testing supplies.

CMS has designed a process that does not hold bidders accountable, does not ensure that bidders are qualified to provide the products for which they are given contracts, and sets reimbursement rates that are financially ruinous to providers. More than 240 auction experts and economists have warned that the Medicare bidding process is unsustainable in its current form. It will create significant barriers to access and will destroy the DME infrastructure upon which seniors and people with disabilities rely.

The bidding process was launched in nine geographic areas two years ago and is slated to expand to 91 new communities on July 1.  Already, the proposed expansion is causing apprehension among hospital administrators, beneficiaries, DME providers, and clinicians because of their experiences Round 1 and the steep cut in reimbursement rates in Round 2. After the announcement that prices would be cut by 45 percent with the expansion, DME providers around the country, especially those that did not win bids, predicted massive layoffs.

Meanwhile, access to critical DME equipment is the prevailing issue for many beneficiaries and their caregivers. CMS is dismantling much of the DME network that has been committed to serving Medicare beneficiaries for decades. Only 799 DME providers have been contracted to supply the wide range of home medical equipment needed by Medicare beneficiaries in the 91 new communities.

This concerns Medicare patients like Bunny Music in New Jersey.

"Competitive bidding is hurting people on oxygen because the best oxygen that we can have so we can get around is liquid because it lasts the longest and is carried in a shoulder bag," Music said. "I wouldn't be able to do the things that I do now without my liquid. I can do my own grocery shopping, my own laundry… I can drive my car and I don't have to wheel my oxygen tank at the same time that I am trying to carry groceries."

Across the country, some Medicare patients suffering from COPD and other respiratory ailments who need liquid oxygen are finding that their new suppliers under the bidding process are discontinuing liquid oxygen and utilizing stationary home concentrators and E-tanks, which are large cylinder tanks. Providers maintain that with the cut in reimbursements for Round 2 they can't afford to continue liquid oxygen service because it requires frequent deliveries and longer service calls.

Music, who provided a video about her concerns to People for Quality Care, is being allowed to continue with liquid oxygen after voicing her concerns. But that option is not available to her provider's new patients.

In Kansas, Deanna Markley, a physical therapist, worries about the level of service received by Medicare patients after some smaller mobility providers consolidated with larger firms or went out of business. The bidding process, she said, has made it difficult to get the right power wheelchair or scooter, especially since every mobility device has to be equipped and adjusted to address the needs of each specific Medicare patient.

For instance, Markley said that one of her patients was evaluated and a power chair was prescribed last June, but it took months before she received her equipment.

The bidding process has also complicated hospital operations. Danielle Sigler, a case manager at MidAmerica Rehabilitation Hospital in Overland Park, Kan., is concerned that patients no longer can choose their providers. "Before competitive bidding, patients had a choice," she said. "Competitive bidding takes that away. I am forced to tell the patient who they have to use." Furthermore, she said that hospital administrators that discharge patients make multiple phone calls to line up the right DME equipment for patients.

"Competitive bidding has taken away the competitiveness—it has taken away quality service," Sigler said.

Tyler Wilson, president of AAHomecare, said that lawmakers and providers believe that the MPP legislation can restore confidence in the procurement system.

"The MPP program will reimburse for home medical equipment using a market-based price," Wilson said. "At the same time, the legislation will create the framework for a well-structured auction that avoids the significant failures of the current process. It is a better system for beneficiary access to quality care and it will improve the business environment for companies that provide home medical equipment."

With MPP:

  • All bids would be binding. Currently, providers can submit low bids, then refuse to sign contracts to provide the services or goods. Yet, these bids are used in the formula that sets the reimbursement rates and contributes to making the rates unrealistically low. Under MPP, there are penalties for refusing to execute winning bids.
  • Rather than using median prices, the auction clearing price will be used to set reimbursement rates that will reflect actual market rates. The current reimbursement rates are administrative pricing-setting, not competitive bidding.
  • The bid process will be transparent because providers will have instant access to the status of their bids, including opportunities to adjust their bids at specific periods before auctions close. Currently, information about how the prices are set is cloaked in secrecy, with CMS unwilling to open the process to scrutiny.
  • Small businesses will be aided by provisions that limit the number of DME categories that a provider can bid on in a single market.

"This is a win-win process that will provide quality care and services for beneficiaries, while holding providers accountable," Wilson said.

DME Matters is published periodically to inform Congress, the administration, policymakers, consumer organizations, and the media about the dangers of Medicare's bidding program for home medical equipment. To learn more about the effort to end this dangerous and defective procurement process, visit www.aahomecare.org.

SOURCE American Association for Homecare