Tapping Academic Expertise: The Academic Community Has Made A Significant Contribution to Improving the CMS Competitive Bidding Program—More is Needed

 CMS is about to implement an unprecedented program dealing with the provision of medical products and services to senior citizens on Medicare. The program is the CMS Competitive Bidding program for durable medical equipment, oxygen tanks, beds, and related medical supplies.

Members of the academic community who specialize in these “bidding” programs have advised the federal government that the program if implemented as presently designed will result in an increase in prices and decrease in services.

CRE has established an Interactive Public Docket which allows all members of the academic community to participate in this important public policy issue by posting their comments on this Discussion Forum http://www.thecre.com/Forum/

CRE has written the following to leading members of the academic community who are working on this issue.

Professors Cramton, Katzman and McGeary:

We applaud the work you have done on the CMS competitive bidding program. We would like to take your study an additional step forward; we would like to demonstrate that other federal auction programs are in compliance with accepted economic norms for auctions nothwithstanding the fact that the CMS comeptitive bidding program fails  to meet these standards.. To this end please see the attached correspondence to CMS.

We are going to attempt to review various federal auction  programs  including  auction programs for  offshore leases, spectrum and treasury securties and hopefuly demonstrate that they are economically robust—your excellent work has demonstrated that  CMS’s is not. We are particularly interested in any information the academic communiity has on these programs; the said information can be posted at http://www.thecre.com/Forum/  Merely type and send the information in the Submit a post link on the right hand side of the page, no registration is needed.

An additional apparent violation of auction theory in CMS’ DMEPOS competitive bidding program that was not addressed in the letter drafted by Dr. Cramton is that bidders were not allowed to know the financial qualification standards they were required to meet.  Specifically, the CMS bidding rule required that bidder’s meet the “financial standards specified by the Secretary” in order for their bid to be valid.  CMS, however, has never publicly released their financial qualification standards.  Thus, 1) companies spent resources preparing bids without being able to determine if they were even eligible to bid; and 2) CMS is able to disqualify bids based on unstated standards.  The Center for Regulatory Effectiveness petitioned CMS to release the standards but never received a formal response.  DME providers subsequently sued CMS for not releasing the standards, the suit is still pending.

We would appreciate your providing any insights or comment on how the lack of transparent qualification standards for bidders affects the auction.  To be more succinct, how do potential bidders not knowing what standards they have to meet affect the bid process and outcome?  Please post your comments here http://www.thecre.com/blog/2010/10/cre-letter-cites-cms-unprecedented-federal-violation-of-auction-principles/#comments  and/or here at http://www.thecre.com/Forum/ 

CRE Petition

http://www.thecre.com/blog/wp-content/uploads/2009/11/cms-financial-standards-disclosure-petition-f.pdf

DME Provider Lawsuit

http://www.thecre.com/blog/wp-content/uploads/2010/05/dme-complaint.pdf

Respectfully,

Jim Tozzi

Center for Regulatory Effectiveness

bio     http://www.thecre.com/emerging/Jim_Tozzi_Bio.html

N. B. We have established an Interactive Public Docket  with a Discussion Forum on this important topic at http://www.thecre.com/Forum/  Please feel free to post relevant material at this site in that it is read frequently by federal  regulators.

In order that your  work be highlighted and that your colleagues in the academic community be able to participate in this important public policy decision, we are publishing this correspondence on the home site of the IPD dedicated to improving the  CMS Competitive Bidding Program at http://www.thecre.com/blog/

To this end we would appreciate your sending  this correspondence to others who signed the letter to Congressman Stark.  Federal regulators give considerable attention to Interactive Public Dockets that are “populated” with analytical information.