CLEARWATER, Fla. — In announcing its second quarter
financial results July 19, Lincare Holdings said it had accepted
two oxygen contracts in Round 1 of competitive bidding in Miami and
Charlotte. The company bid in all nine MSAs.
"We decided to execute the contracts we were offered because we
believe we can support the Medicare beneficiaries in those markets
by subsidizing their care with the resources we have available to
us as a national company," Lincare CEO John P. Byrnes said in a
release.
"We have serious concerns about the care that will be available to
similar patients in the other seven markets," he continued, adding
that the company "has no current plans to acquire contracts from
winning bidders in those seven markets."
Lincare's bids were 19 percent higher in Charlotte and 16
percent higher in Miami than the new payment rates CMS set in those
competitive bidding areas. Rates for oxygen supplies and
equipment across the nine CBAs average a 31 percent reduction
off current reimbursements; the average reduction across all
product categories in the bid is 32 percent.
Byrnes also included a lengthy warning that low reimbursements
resulting from the bid were the result of a flawed pricing
mechanism and could mean "the sacrifice of critical patient
services:"
"We believe that the pricing mechanism used by CMS to determine
the payment rates within each of the nine markets is fundamentally
flawed. Rather than contracting with each winning bidder at the
actual bid amounts submitted by those providers, CMS sets rates for
each item within the bid markets at the median bid prices submitted
by the winning providers.
"We believe that many providers submitted bids at rates that are
unsustainably low (expecting that the median price established by
CMS would be higher) in an attempt only to 'make the list' of
winning bidders, encouraging a 'race to the bottom' and the
sacrifice of critical patient services. Further, CMS has stated
that a significant number of contracts were awarded to companies
that do not currently provide the contracted equipment and services
to patients in those markets.
"We are concerned that the 32 percent price reduction is an
indication that such providers may not understand the specific
state regulations which require clinical support and intervention
for patients in conjunction with the equipment provided. We
encourage CMS to release all appropriate bid information used to
set the median prices for all of the items in each of the nine
markets so the bidding process is fully transparent for review by
the Congress, patients and caregivers, and providers."
Continued Byrnes, "We urge CMS, prior to expanding competitive
bidding to additional markets, to implement simple changes that
would bring additional protections for patients and integrity to
the bidding process.
"Specifically, CMS should reduce the risk of artificially low
bids by accepting contracts for each selected bidder at the actual
bid rates submitted by those bidders. Such changes are essential to
ensure that the expected savings generated by the competitive
bidding program are not overwhelmed by increases in aggregate
health care expenditures for the Medicare program (and for Medicare
beneficiaries)."
In its announcement, Lincare reported net income of $46.4
million for the second quarter of 2010, compared with net income of
$33.5 million for the same period a year ago. At 47 cents a share,
earnings were a penny better than the 46 cents expected by Lincare
analysts.
Revenue for quarter ended June 30 was $418.4 million, a 10
percent increase over revenue of $380.4 million for the same three
months in 2009.
For the six months ended June 30, net income was $90.1 million,
a 51.5 percent increase over net income of $59.5 million for the
first half of 2009.
"We are pleased with Lincare's operating and financial
performance in the first half of 2010," Byrnes said.
Separately, Lincare announced that CMS' average sales price
(ASP) data for the third quarter of 2010 includes reductions in the
Medicare payment rates for inhalation drugs that will result in a
reduction in the company's net revenues of approximately $7 million
per quarter.
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