Medicare bid process drawing flak


10:48 PM CDT on Tuesday, May 6, 2008

By BOB MOOS / The Dallas Morning News
bmoos@dallasnews.com

Change never comes easily with Medicare. After catching flak for its confusing prescription drug benefit, the agency is now drawing complaints about a system of competitive bidding it will begin using this summer to pay for oxygen equipment, power wheelchairs, walkers and other medical devices.

Medicare says that seniors and others with disabilities will see an average 26 percent savings in North Texas and nine other markets, but that message is being drowned out by medical equipment providers that say the bidding process was riddled with errors. They warn that Medicare's beneficiaries will suffer in the end.

The providers' trade organization, the American Association for Homecare, is pleading its case to Congress and seeking a delay in the program's launch, now set for July 1. Without a postponement, the group says, the new payment system will punish high-quality providers, compromise service and limit patients' access to care.

Medicare administrators say the bidding process went relatively smoothly, but they're reviewing individual providers' complaints. If a company was mistakenly excluded, it will be offered a Medicare contract, said Laurence Wilson, director of the agency's chronic care policy group.

Medicare pays for durable medical equipment according to a fee schedule set by the government. Congress approved the use of competitive bidding so that market forces can play a bigger part in determining prices. Many lawmakers hope the new system will help rein in Medicare's escalating costs.

Medicare spent $8.5 billion on durable medical equipment last year.

"The idea behind competitive bidding may be sound, but the rules Medicare is using to implement it have gone awry," said Evelyn Herndon, chief executive of Ellis County Home Medical Equipment in Ennis. "They've got to be fixed. This isn't about bidding to build a backyard fence; our business affects people's lives."


Two-thirds lose out

The suppliers' concerns center on the fact that about two-thirds of the applicants weren't offered a contract.

Of 6,209 bids submitted, 3,043 were excluded because of a lack of accreditation or documentation, while 1,831 bids lost primarily due to price, Mr. Wilson said. The remaining 1,335 bids won.

Because Medicare usually represents half of a provider's business, the losing bidders are likely to suffer a big blow to their bottom lines. They'll be forbidden to sell or lease certain equipment to new Medicare customers for three years. Those suppliers that can't find customers elsewhere may be forced to scale back or close.

"I doubt that the winning bidders will be able to accommodate all the demand for equipment," said John Skoro, managing partner of XMED Oxygen and Medical Equipment in Addison. "Only 35 contracts were offered for oxygen therapy in North Texas, which means there may be access problems in outlying areas."

Medicare officials say they took into account the area's past demand for oxygen equipment and other medical supplies, and are confident there are enough winning bidders to meet the need.

"Every company that got a contract is also required to serve the entire region through subcontractors or other means," Mr. Wilson said.

Businesses have complained they were disqualified on technicalities, such as failing to provide some financial documents. Some say they were certain their bids were complete, and others say Medicare led them to think they would be notified early of any missing information and allowed to submit it.

"I felt like my heart had been ripped out when I found out I had been disqualified," said Ray Ferri, who owns Metroplex Medical Services in Fort Worth. "I got into this business because my dad had Lou Gehrig's disease and I wanted to help others like him. Now I'm being told by the government I can't. It's not right."

Sen. John Cornyn, R-Texas, has joined six Senate colleagues in calling on Health and Human Services Secretary Michael Leavitt to get to the bottom of the medical equipment suppliers' complaints.

Although supporting competitive bidding, the senator asked Medicare to resolve the issue before expanding the program to more markets.

Mr. Wilson said Medicare's accreditation and documentation requirements for bidders were reasonable because "this program was put in place partly to make sure we don't do business with fly-by-night outfits and to eliminate abuse and fraud." The agency intends to broaden the bidding to 70 more areas next year.


Home care at risk

Tyler Wilson, president of the American Association for Homecare, said Medicare's rush to launch competitive bidding threatens to dismantle the current system of home-based care, which experts agree is more popular and economical than nursing home care.

"It's what most people want, and it's cheaper," he said.

Stuart Guterman, a policy analyst for the Commonwealth Fund who studies Medicare reforms, said any competitive bidding produces winners and losers. "The question that needs answering is: Did the losers lose because they couldn't cut it, or are they losing their Medicare business because the process didn't work as intended?"

A pilot project, which included San Antonio, found that competitive bidding resulted in substantial savings without generally hurting patients' access to services, he said.


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