Defective Medicare Bidding Program for Medical Equipment Forces Hardships on California Business Owners

Name of Publication: 
Reuters
Excerpt of Article: 

LOS ANGELES,  April 2, 2013  /PRNewswire-USNewswire/ -- The controversial
Medicare bidding procurement program for home medical equipment is forcing many
small and large providers in  California  to lay off employees or close their
businesses, developments that will likely disrupt the quality of service and
products received by Medicare beneficiaries, says AAHomecare.

Under the defective and dangerous program, the Centers for Medicare & Medicaid
Services (CMS) is reducing reimbursements to providers an average of 45 percent
when the bidding program expands to 91 new locations in July. Due to these
arbitrary cuts, many providers say they can no longer supply Medicare patients
with durable medical equipment (DME), which includes critical medical devices
such as power wheelchairs, hospital beds, oxygen, and diabetic supplies. Some of
their stories are heartbreaking.

"Medicare has completely mismanaged the design and implementation of this
bidding program," said  Tyler Wilson, president of the American Association for
Homecare (AAHomecare). "It is creating havoc for providers in  California  and
across the country. And it is jeopardizing the health of some of the most
vulnerable people in our society. It is time Congress and the Administration end
this bad experiment and create a program that guarantees quality service, while
offering businesses fair, market pricing."     

Wilson called the current program "a sham." CMS basically imposes a contract
price anywhere between the lowest and highest bids that are made by providers.
But at the same time, all the bids are non-binding, which has led some suppliers
to make desperate "suicide" low bids in an effort to win contracts in enough
equipment categories to stay in business.    

What destroys the integrity of the process is that even these ridiculously low
bids are utilized by CMS to establish their unrealistic prices. "The entire
process lacks transparency because CMS never discloses how these unrealistic
prices are calculated," Wilson said. "This is government imposed pricing, not
competitive bidding, and it is eliminating competition rather than increasing
it."

More than 240 economists, two dozen consumer groups, almost 200 members of
Congress and the National Federation of Independent Business have sharply
criticized the bidding program. After a request from AAHomecare, the US
Department of Health and Human Services Office of Inspector General (OIG) has
agreed to investigate the program.

CMS has been harshly criticized by prominent economists and auction experts such
as Dr.  Brett Katzman, Interim Chair of the Department of Economics, Finance &
Quantitative Analysis at Kennesaw State University.  "While the CMS system does
involve bidding, it is far from competitive," Katzman 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."

Throughout  California, the dangerous and defective program is impacting
providers, beneficiaries, and even entire communities. Here are some of their
stories.