As expected, the ten product categories that will be affected by competitive bidding included CPAP and respiratory assist devices (RADs). The full list of categories includes: 

1. Oxygen supplies and equipment;
2. Standard power wheelchairs, scooters, and related accessories;
3. Complex rehabilitative power wheelchairs and related accessories;
4. Mail-order diabetic supplies;
5. Enteral nutrients, equipment, and supplies;
6. CPAP devices, respiratory assist devices (RADs), and related supplies and accessories;
7. Hospital beds and related accessories;
8. Negative pressure wound therapy (NPWT) pumps and related supplies and accessories;
9. Walkers and related accessories; and
10. Support surfaces (Group 2 and 3 mattresses and overlays) – Miami and San Juan only
    

“The final rule we are announcing today is focused on improving both service delivery and the quality of care, while getting savings for beneficiaries and taxpayers,” CMS Acting Administrator Leslie V. Norwalk said in an official CMS statement. However, an analyst quoted in the April 2, 2007, issue of Congressional Quarterly said the new rule would lead to business closures and hurt—not help—Medicare beneficiaries’ access to services. “There will be hundreds of small businesses in these 10 cities put of business next year—an election year—with two cities located in each of the key states of Ohio and Florida,” said Fred Graefe, a health care lobbyist whose clients include HME manufacturers and hospitals. “Moreover, an untold number of Medicare beneficiaries who are on oxygen now may lose their access to home oxygen.”

By 2010, CMS hopes to save Medicare $1 billion annually through  competitive bidding. Does that figure include administration costs? Some providers are not so sure. “Will they actually save money or just pass those savings on to administrators in the form of fees for contract administration?” asks Larry Rice, CFO for In Home Products Inc, Dallas. “Cost over-runs seems to be the norm for all bureaucracies. As for the 60 days to properly prepare a bid—can that really be done? After all, it took CMS 90 days or more this year just to release the final rule.”

“The final rule encompasses more product categories than we expected,” says Joel Mills, CEO of Advanced Home Care (with 16 locations in North Carolina and two in Virginia). “I appreciate the delay in implementation to April 2008, but do not feel it is fair to the providers who win the bid to only receive 13 months of payment for oxygen if patients transfer to their service. Can the winning bidder reject these patients?”

To lessen the impact on small providers (defined as yearly gross revenues of $3.5 million or less), CMS has set a 30% target number for small supplier participation and will allow small suppliers to form networks to participate in the bidding process. “I don't understand where CMS determined that small providers do less than $3.5 million in revenue—that number seems a bit arbitrary and hard to defend and verify,” says Mills. I do think that our company is well prepared to bid. We have locations throughout the MSA, we are accredited, and we know our costs. My biggest fears with competitive bidding are the bids from companies that do not know their activity costs. Those companies that know their costs will make fair bids to produce a fair margin based on good knowledge. I fear the companies that do not have good data who may end up bidding below reasonable costs. It is those types of bids that will end up in failure for those companies and for the industry. Time will tell.”

Jeffrey S. Baird, JD, chairman of the Health Care Group at Brown & Fortunato PC, Amarillo, Tex, says the 30% target for small supplier participation is not enough. "With the exception of a small number of 'nationals' and 'regionals,' the HME industry remains a 'mom and pop' industry," says Baird. "The final rule includes a 30% target number for small provider participation. In my mind, this should be at least 50%, if not higher. Also, is a network limited to providers that have $3.5 million gross revenue or less? I anticipate that there will one or more lawsuits against CMS that challenge the constitutionality of competitive bidding."

First 10 MSAs for 2007 Competitive Bidding

1. Charlotte-Gastonia-Concord - NC-SC
   
2. Cincinnati-Middletown - OH-KY-IN
3. Cleveland-Elyria-Mentor - OH
   
4. Dallas-FT Worth-Arlington - TX
5. Kansas City - KS-MO
6. Miami, Ft Lauderdale, Miami Beach - FL
7. Riverside, San Bernadino, Ontario - CA
8. Orlando, Kissimmee - FL
9. Pittsburgh - PA
10. San Juan, Caguas, Guaynabo - Puerto Rico
    

If you are in any of the ten regions mentioned above, CMS has designated 11 entities as qualified to accredit DME suppliers, based on quality standards that were posted on the CMS website in August 2006. To participate in competitive bidding, you must be accredited or have an application for accreditation pending. The deemed accrediting agencies are:

• The Compliance Team Inc
• Joint Commission on Accreditation of Healthcare Organizations
• Community Health Accreditation Program
• Healthcare Quality Association on Accreditation
• National Board of Accreditation for Orthotic Suppliers
• Board of Certification in Pedorthics
• Accreditation Commission for Healthcare Inc
• Board for Orthotist/Prosthetist Certification
• National Association of Boards of Pharmacy
• Commission on Accreditation of Rehabilitation Facilities
• American Board for Certification in Orthotics and Prosthetics Inc
  

IMPORTANT DATES AND EVENTS

•  April 11, 2007: CMS will host an open door forum for participants who wish to ask questions on competitive bidding. To participate, Dial: 1-800-837-1935 & Reference Conference ID: 2739332
•  Late April 2007 – Bidding begins and lasts for 60 days.
•  Through Fall 2007 – CMS and its contractors review bids.
•  December 2007 – Announcement of winning bids.
•  April 2008 – Implementation begins.
•  2009 - The program will expand to 70 additional MSAs
•  After 2009 – Program expands to additional areas and items
•  By 2010 – CMS hopes to save $1 billion annually through CB

For more on competitive bidding reaction, see the Top News article at HME Today.