Changes to the Competitive Bidding Network Rules

In its final rule on competitive bidding, CMS made a number of changes from its draft proposal. Some of these changes are welcome and offer further insight into CMS' reasoning. Others are surprising and troublesome.

• Network member eligibility

  Network eligibility has been changed significantly under the final rule, and for the worse. Networks may comprise from two to 20 “small suppliers,” defined as those that generate gross revenue of $3.5 million or less in annual receipts including Medicare and non-Medicare revenue.

  In a special Open Door Forum on April 11, CMS confirmed that a supplier who does $2 million in business for each of two different product categories, or $4 million in total revenue, would not qualify as a small supplier and could not join a network.

  This rule change is perplexing. Network participation should be allowed whenever the services offered by a network enable a supplier to provide better services under competitive bidding than it could otherwise. There is no reason why this must be a function of size.

  Further, why should suppliers who exceed the $3.5 million cap be excluded when they generate a small amount of revenue from certain products or in certain locations? These entities' low volume by Medicare census, geographic location or product puts them at the same competitive disadvantage as “small suppliers.”

  Further, every network member must now attest that it is joining a network because it cannot otherwise satisfy its competitive bidding obligations. But if the supplier already must swear that it needs the network structure, why should aggregate gross revenues matter?

• No more than 20 members

  Another significant change limits network participation to 20 small suppliers. CMS' rationale seems to be that this “max 20” rule limits networks' market share leverage.

  But this reasoning makes little sense. Anti-trust law already deals with unfair market share leverage by looking at a network's market share. In fact, the final competitive bidding network rules specifically require a network to assess its market share percentage, limiting the network to no more than 20 percent of the Medicare market share for the relevant product categories. We are unaware of any other situation where anti-trust law focuses on how many entities are involved; only their market share matters.