CMS does not plan to redesign the competitive bidding program for durable medical equipment (DME) because 92 percent of suppliers offered contracts accepted them, CMS Deputy Administrator Jonathan Blum said Wednesday (Nov. 3). The DME industry responded that the agency is using faulty logic and pointed to a new laboratory experiment on the CMS auction that stakeholders suggest shows the situation will worsen the longer the program runs. The health reform law calls for an expansion of the bidding program.
CMS officials met recently with University of Maryland academics who worry that the design of the program will lead to failure, Blum said during a phone call with reporters. Industry had speculated that the meeting could lead to changes in the design of the program for the second round bid.
Blum said, despite the specific qualms with the design, the overriding concern of the academics is that winning bidders would not sign contracts. Given the 92 percent bid-acceptance rate, he said the design must be good, though CMS will monitor the program for signs of problems and make changes if needed. Blum added that the academics did not make considerations for small suppliers. CMS wanted at least 30 percent of the contracts to go to small suppliers, and the program far surpassed that goal with 52 percent of the contracts going to small businesses.
The Center for Regulatory Effectiveness, which represents oxygen suppliers, said neither the acceptance rate nor the percentage of small-supplier participants are indicators that the program will run smoothly or save Medicare and beneficiaries money. Auction experts worry that non-binding bids encourage low-ball bids, the CRE states, and if suppliers have accepted contracts they cannot fulfill, the program is in for trouble. If suppliers accept unsustainably low payment for products and services, that strengthens the concern expressed by the academics who specialize in auctions. CRE contends. The academics said suppliers will likely raise prices for other products to make up for loses on contracts with CMS, which would negate the savings that CMS says will result from the competitive bid program.
“Faced with the choice of either going out of business or accepting a low-ball contract offer, it is not surprising that the suppliers do what they need to stay in business a little longer,” according to a CRE release.
Over 10 years, the program is expected to save Medicare $17 billion and beneficiaries $11 billion with lower copays and premiums, Blum said.
“Because beneficiaries pay 20 percent coinsurance on the payment amount for DMEPOS, they will directly benefit from the lower prices,” according to a notice CMS sent to Congress that refers to the DME competitive bid program. “Based on bids submitted by these suppliers, beneficiaries and Medicare will see prices, on average, 32 percent lower than Medicare currently pays for the same items.”
Peter Cramton, the University of Maryland professor who industry says spearheaded the meeting with CMS, presented results from an experiment run by California Institute of Technology economists (see related story). That experiment shows that, over time, the performance of CMS’ competitive bidding program gets worse.
CMS delayed announcing the winning bidders by more than a month because of program integrity concerns. Blum assured reporters that all of the suppliers in the program meet their financial standards, but he declined to say whether CMS had to cancel contracts because of fraud concerns.
The CRE, which is suing CMS for not releasing its financial standards, said without knowing the standards, CMS’ assurances mean nothing. CRE adds that CMS did not address the academics’ concerns about the lack of transparency in the program. — John Wilkerson