GAO sees improvement in CMS competitive bid process

Two years after Congress stepped in to stop a flawed Medicare competitive bidding program for durable medical equipment, the Government Accountability Office is expected to tell a House committee on Wednesday that HHS has improved the bidding process.

But medical equipment firms and hospitals are warning lawmakers that the program will have an adverse impact on businesses, jobs and patients.

At a House Energy and Commerce hearing on Wednesday, GAO's Health Care Director Kathleen King plans to report that the Centers for Medicare and Medicaid Services has made positive changes to the durable medical equipment program since the agency's 2009 report on the flawed bidding process.

"Problems were identified in the [first round] bidding process in providing suppliers with bid submission information, but some improvements were made in the [rebid] process," King says in prepared testimony obtained by CongressDaily.

CMS now pays for durable medical equipment, which includes hospital beds, walkers and wheelchairs, on a fee schedule based on 1986 prices that are adjusted for inflation. GAO and the HHS inspector general have found that this payment system leads Medicare to overpay for equipment, sometimes by an estimated three to four times over retail cost.

In 2003, Congress required CMS to implement a competitive bidding program for durable medical equipment and in March 2008 the agency awarded contracts to bid winners. But after reports of a flawed bidding process, Congress delayed the 2008 contracts and ordered CMS to repeat the process the following year.

On July 1, CMS announced 1,300 bids were offered as a result of the 2009 rebidding process, with contract awards expected to be announced in the coming weeks.

Some of the improvements made by CMS include providing interested bidders with application information before the bid-window opening, clearer instructions on what financial documents were needed, and a process that notified applicants if they were missing necessary documents. GAO also found that CMS implemented a more successful electronic bid-submission system, and planned to notify applicants who did not win bids of what had specifically disqualified them.

But interest groups have concerns over the competitive bidding process despite the improvements, especially as the program is slated to operate throughout the entire country by 2016, as stipulated by the recently enacted healthcare overhaul law.

Testimony from Karen Lerner of Allcare Medical, a New Jersey-based home medical equipment company, warns lawmakers that competitive bidding will lead to the loss of thousands of jobs and the disruption of enrollee's access to necessary medical equipment.

Some of the potential problems with the process highlighted by Lerner include the potential for speculative "low-ball" bids that will increase once contracts are awarded, and the difficulty of issuing a rational bid without guaranteed volumes from CMS.

Hospital groups also expressed concern that hospital-based durable medical equipment suppliers will not be able to win bids, limiting their ability to coordinate with in-house suppliers to quickly move patients out of the hospitals and home with the right equipment.

Former House Energy and Commerce Chairman John Dingell, D-Mich., introduced a bill in August to exempt hospital-based durable equipment suppliers from competitive bidding programs.

"We are willing to accept the pricing determined by competitive bidding, but we question the wisdom of a rule will prevent our ability to own and control post-acute care as a strategy to improve care and reduce costs," Nancy Schlichting of the Henry Ford Health System says in testimony prepared for the hearing.