Lone provider at congressional hearing challenges competitive bidding.
by Susanne Hopkins with Gail Walker
Friday, October 1, 2010

Karen Lerner went to Washington Sept. 15 to talk about competitive bidding — from the HME side.

"My goal is to explain why this competitive bidding program — as designed by CMS — will not achieve its desired outcomes and will in fact reduce access to care for Medicare beneficiaries, lower the quality of that care, increase costs and kill jobs," Lerner told members of the House Energy and Commerce Committee's Subcommittee on Health.

A registered nurse at Allcare Medical in Sayreville, N.J., Lerner was the only home medical equipment provider out of seven witnesses called to testify at the subcommittee's hearing on Medicare's DMEPOS bidding program.

Witnesses for the government included Laurence Wilson, director of the Centers for Medicare and Medicaid Services' Chronic Care Policy Group; Inspector General Daniel Levinson of HHS' Office of the Inspector General; and Kathleen King, director, health care, for the Government Accountability Office.

In addition to Lerner, a second witness panel included Alfred Chiplin, managing attorney of the Center for Medicare Advocacy; Nancy Schlichting, president and CEO of Henry Ford Health System in Detroit; and William Scanlon, a health policy consultant who has previously served as managing director of health care issues at the GAO.

Stakeholders had been dreading the outcome of the hearing after seeing the list of heavy hitters for the government, but instead said they were heartened by much of what they heard.

"It fortified my spirit," said Georgie Blackburn, vice president of government affairs for Tarentum, Pa.-based Blackburn's, who attended the Capitol Hill hearing. "With [only a few weeks] until competitive bidding rolls out in nine MSAs, our representatives recognize it may have flawed methodology, it may have unintended consequences just as providers and various economists have stated since the initial Round 1."

"This is something that should fire up our industry to press even harder," said John Shirvinsky, executive director of the Pennsylvania Association for Medical Services. "We have a big fight, and in spite of everything that is working against us, we came off pretty well."

Lerner Stands Up for Home Care

Representing the industry as a member of the Jersey Association of Medical Equipment Services and the American Association for Homecare, Lerner drew on Allcare's longtime experience serving mobility and respiratory patients to challenge the efficacy of the bidding program on a number of points.

Its "fundamental flaw," she said, is treating HME and attendant services as a simple commodity rather than as "an integral part of a continuum of care that helps move patients swiftly from hospital to the home."

As a wound care and rehab specialist, she noted, "It scares me to think of what will happen to these patients if this bidding program becomes a reality."

CMS' position that it has quality assurance and measuring tools in place is questionable, Lerner said. "Patients and even most physicians will not know if they are getting clinically appropriate equipment and services until negative outcomes appear. If every patient who needed a cushion or support surface were placed on the least-expensive skin protection device, most of those patients' pressure ulcers would worsen and they would end up in the emergency department or be admitted to hospitals for surgical debridement."

She also pointed out that despite its assertions, "CMS failed to make the necessary substantive changes to address the problems [from the initial Round 1]. They did not change how the single-payment amount was determined, nor did they listen to industry experts on how many home care providers were necessary to service the patient population."

Concluded Lerner, "This program cannot be fixed as designed. Therefore, it is the recommendation of JAMES, AAHomecare and a large number of patient organizations that Congress must immediately stop the implementation of this bidding program and work with the HME community to ensure accurate pricing, while at the same time ensuring access to quality care for Medicare beneficiaries."

Access, Quality Concerns Ring a Bell

Although a few members of the subcommittee spoke in support of the bidding program, many were skeptical and picked up Lerner's theme, hammering away at issues including access to care and quality of products.

"It is really going to save Medicare money and is it going to preserve access for beneficiaries?" asked Rep. Ed Whitfield, R-Ky., adding he was particularly concerned about access to providers in rural areas. Three-year bid contracts "combined with the fact that relatively few providers are … winners, results in fewer competitors the next time bidding occurs because there will be a lot of people trying to get out of this business," he said.

"What if there is an accessibility problem?" asked subcommittee Chairman Frank Pallone, D-N.J.

CMS' Wilson said the agency received 6,215 bids from 1,011 suppliers and made 1,300 contract offers to 364 suppliers in the nine Round 1 CBAs.

"We believe we have offered enough — more than enough — contracts to suppliers in all these nine areas," Wilson said. "If a supplier has a problem, maybe we lose one, we certainly have enough providers. If we need one, we can certainly go out and offer another one a contract."

Rep. Joseph Pitts, R-Pa., addressed Wilson on the quality issue, commenting, "You claim $17 billion [in savings] over 10 years without compromising quality or access."

"We will have processes in place, underlying features that address quality," Wilson responded. "One thing that is different from 2008 is active claim surveillance. [We can] see who is providing the care, who is getting the care, whether there are any concerns, more hospitalizations, greater utilization. We will be looking very closely and we will have a plan in place to deal with problems as they arise."

But Rep. Kathy Castor, D-Fla., wondered about contracts offered to non-local companies with little experience. Rep. Bruce Braley, D-Iowa, described a University of Northern Iowa study that predicts a significant loss of HME providers in rural states under the bidding program.

And after Rep. Ralph Hall, R-Texas, ticked off the bid program's shortcomings during the initial Round 1, HME stakeholders squeezed into the packed hearing room burst into applause.

Not all were convinced, however. While Rep. Henry Waxman, D-Calif., chairman of the full Energy and Commerce Committee, said he took seriously the concerns that were raised about the bidding program, he also questioned "those who say that we need to repeal the program now because of speculative threats to beneficiary access in the future."

Fraud Incentive?

Fraud and abuse was also a hearing topic, as Wilson, King, Scanlon and Levinson each touted competitive bidding as an anti-fraud measure.

Responding to a question about his assertion of vast overpayments in the system, OIG's Levinson said, "We're talking about 11 million patients at a cost of about $10 billion a year. About half [the claims] are paid in error. It might not be fraud, it might be lack of documentation. Documentation is really the lifeblood of the program. When we are talking about an error rate that high, that speaks to a systemic problem.

"The nexus of fraud with overpayment," he continued, "is that if you have too much of a disparity between the acquisition cost and the prices, that does provide an incentive for those masquerading as legitimate DME providers."

That bothered AAHomecare's Walt Gorski, vice president, government relations, who attended the hearing. "For the first time, the OIG explicitly said that when there are items that are overpaid, that encourages fraud," Gorski said. "That statement baffles me. Scam artists are not providing the items, they are just billing the code. And they shouldn't have been able to bill the code if CMS did its job by monitoring the people allowed in the program."

Levinson apparently agreed with that latter. "Enrollment has been a fundamental flaw for many years," he said. "When our investigators went to Florida [some years ago] and banged on doors — or tried to bang on doors because in some cases there were no doors to bang on — they found that one-third of 1,600 DME providers that had numbers didn't meet the most basic standards like having a physical location, having regular hours. So it is quite clear that it is too easy to gain access. Solving that enrollment issue would greatly deter fraud."

There was no follow-up to Levinson's comments. Blackburn felt there should have been.

"I would have liked the testimony and the questioning to tear that issue apart, noting that CMS is in charge of the contract process with the National Supplier Clearinghouse, which admitted to not having enough staff to complete their due diligence when granting provider billing numbers," she said. "I would have liked to hear CMS' reasons for contracting again with the NSC after the admission."

Gorski also took issue with that segment of the hearing.

"I think the biggest issue with fraud and abuse is that the government witness panel took no responsibility for allowing these providers into the program to begin with," he said. "You don't give a broom closet a provider number if you adequately did a site inspection. How does that happen if CMS and its contractors are doing their job?"

Provider Rob Brant, owner of City Medical Services in Miami and president of the Accredited Medical Equipment Providers of America, pointed out Levinson's assertion did not reflect the new HME scenario that now requires accreditation and surety bonds.

"There was a panel of people from CMS, OIG and GAO who had a lot of old information prior to the implementation of the surety bond and mandatory accreditation, which cut in half the number of oxygen providers in Miami and Los Angeles," he said. "They keep talking about easy entry to this industry, but that no longer exists.

"I have CMS visiting my office every two to three weeks, which is normal for South Florida these days," Brant continued. "This whole story of things that happened years ago with fake storefronts is now irrelevant. It's been almost a year since mandatory accreditation and the surety bond were put in place."

Just Set Reasonable Fees

Subcommittee member Rep. Christopher Murphy, D-Conn., posed another question about the bidding program.

"What are the reasons to go to competitive bidding rather than coming up with a more reasonable fee schedule?" he asked Wilson.

Wilson gradually made his way to an answer. "The program is pretty unique for Medicare," he said, adding that there were competitive bidding demonstration projects before the final project. "There are not many other examples that would be even close to this type of program. This program has a unique set of challenges when it comes to fee schedules. There is a lack of information on true costs."

In the end, while stakeholders said they wished more industry representatives — particularly those from Round 1 MSAs — had been invited to testify, many said the hearing was a good foundation to build on: Rep. Pete Stark, D-Calif., chairman of the House Ways and Means Subcommittee on Health, is expected to hold another hearing on the bid program after Congress returns to Washington following the November elections. (See accompanying sidebar.)

"A lot of very good, very strong arguments were made," said PAMS' Shirvinsky. "We clearly have a steep hurdle to get over, but this is not over by a long shot. We have clearly made enough noise — strong points, strong arguments — that this program is going to cause untold and unjustified damage to this industry sector."