Senate Binding Bids Legislation Aims To End Speculative Bidding In Major Medicare Procurement Program

WASHINGTON, Dec. 4, 2014 /PRNewswire-USNewswire/ -- Bi-partisan legislation was filed in the US Senate today that would help deter the speculative bidding that has marred the Medicare bidding program for durable medical equipment (DME), announced the American Association for Homecare. The legislation, sponsored by Sens. Rob Portman (R-Ohio) and Ben Cardin (D-Maryland), would ban non-binding bids, one of biggest problems with the controversial program.

Since the Centers for Medicare and Medicaid Services (CMS) began implementing the bidding program in 2011, critics have maintained that the process is more like price-fixing than competitive bidding.  CMS arbitrarily assigns prices somewhere between the lowest and highest bids for home medical equipment, such as power wheelchairs, oxygen therapy and diabetic supplies.

But the process has been tainted by non-binding bids that have allowed providers to submit "suicide low-bids" with no obligation to provide the services or products if they win.  In a move that greatly diminishes the integrity of the program, CMS has used all of the bids, including those of providers who did not accept a contract, to establish median bid prices.  CMS estimates that seven percent of providers rejected contracts in Round 2. This skewed reimbursement amounts because even one flawed bid disrupts the payment calculations.  Furthermore, the entire process has been cloaked in secrecy because CMS never discloses exactly how the reimbursement rates are determined.

The Senate legislation, similar to the House legislation filed in June, is a major step towards addressing the flaws in the bidding program.

"Loopholes in the bidding process have allowed speculative bidders to game the system," said Tom Ryan, president and CEO of AAHomecare. "This bill will help restore accountability, alleviate artificially low prices and deter unlicensed providers. AAHomecare is proud to support Senators Portman and Cardin as they fight to bring common sense to the Medicare bidding program."

Ryan said that it's clear that disability advocates, economists and auction experts are correct in criticizing the bidding program.  "It has dismantled much of the provider network across the country, while simultaneously delaying or denying access to critical medical equipment to Medicare beneficiaries," Ryan said.  "Some of the most vulnerable people in our society, seniors and people living with disabilities, are having a difficult time accessing home medical equipment prescribed by their physicians. And, Medicare patients say it is nearly impossible to get their wheelchairs and other equipment repaired because of the conditions set in place by the bidding program."

Moreover, Ryan said the prices set by CMS are the product of a "profoundly flawed" program and do not reflect the true cost of doing business.  As a result, he said, hundreds of providers across the country have gone out of business or reduced their workforce because of the bidding program. 

Dr. Brett Katzman, Chair of the Department of Economics, Finance & Quantitative Analysis at Kennesaw State University, has been a strong critic of the program.  "While the CMS competitive bidding system does involve bidding, it is far from competitive," he said.  "Yes, there are winners and losers, but winners are chosen based on their willingness to game the system rather than their cost competitiveness.  The problem is that the CMS system entices providers to "low-ball" bid whereas a true competitive bidding system would reward providers for being cost efficient." 

Agreeing that problems with the bidding process had to be fixed, Reps. Pat Tiberi (R-Ohio) and John Larson (D-Conn.) introduced House legislation in June that would curtail speculative bidding, and address other issues.  Both the Senate and House legislation contain provisions that would make all bids binding and require proof of licensure for the next rounds of bidding. The legislation would:

• Require providers to prove licensure before they submit bids.
• Make bidders obtain bid bonds.
• Allow for bond forfeiture if a winning bidder declines a contract at or below the bid price.

Stephen Ackerman, CEO of Spectrum Medical Inc. in Maryland, said that non-binding bids have been the single biggest problem with the current competitive bidding program. "A high prevalence of winning absentee providers, the result of this procedural flaw, has created a serious shortage of local providers in any given bid area," Ackerman said. "The result has been serious delays in access to home medical equipment for many Medicare beneficiaries. Curing this problem will also result in bids that are serious and sustainable; fundamental components missing from the existing program."

Cara Bachenheimer, senior vice president of government relations at Invacare Corp. in Ohio, said, "Providing strong financial incentives for bidders to honor their bids, and having an outside third party financially vet bidders will significantly strengthen the Medicare bidding program.  We are grateful to both Senators for their hard work on this important measure."  

And, Ann Horton, executive director of the Maryland-National Capital Homecare Association (MNCHA), said, "This bill is a critical step in bringing much needed accountability to the competitive bidding process. We applaud the House and Senate for their bipartisan action toward improving this flawed program."

The American Association for Homecare represents providers of home medical or durable medical equipment and services who serve the needs of millions of Americans who require prescribed oxygen therapy, wheelchairs, enteral feeding, and other medical equipment, services, and supplies at home. Visit www.aahomecare.org.

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SOURCE American Association for Homecare

Related Links

http://www.aahomecare.org