Study finds fundamental flaws in new Medicare bidding program

From: Memphis Business Journal

Cole Epley

Come July 1, the Centers for Medicare & Medicaid Services will implement a new process through which businesses that service and sell durable medical equipment and supplies will compete for Medicare business.

The program is designed to foster more competition and, in turn, influence more cost-effective supplies and service for Medicare beneficiaries.

But local businesses in the space have already sounded off on the so-called competitive bidding program — one of whom told MBJ the program is a “de facto way of not providing services” — and study results published in the May issue of the Quarterly Journal of Economics are likely to add fuel to those entities’ opposition of the program.

According to a review of the study by Pasadena Now, researchers stated the design of the program led to “pretty disastrous” behaviors on behalf of bidders, who are not bound by their initial bids; that means they can bid one amount for a particular contract but change the price later on.

Such behaviors can, and already have, had an equally disastrous effect on businesses in the space. Other studies have found bidders were forced out of the market due to unsustainably low pricing, for example.

That’s something Tom Webb, president and CEO of Memphis-based VistaCare Health Services Inc., voiced as a concern when he spoke with MBJ in February.

“The fee schedule is already lower than the suppliers’ cost, in many instances,” he said. “In response (to Medicare’s actions), private insurers will come back with even lower rates and that’s absolutely scary.”