Reaction Spreads to Bid Amounts
Reactions ran the gamut in the days following the announcement of the single payment amounts in the DMEPOS Competitive Bidding Program. While some providers were taking a wait-and-see approach, most were devastated and upset about the impact the slashed rates will have on Medicare patients and small businesses around the nation. Meanwhile, the clock is ticking down on accepting the contract offers; providers are to respond by Friday, July 16.
As information continues to spread, Respiratory & Sleep Management gathered news related to its niche.
RATES REFLECT DEEP CUTS
Click on the charts below for the oxygen and sleep rates. See also the lists of what CMS calls the "weighted average savings" in each of the nine areas. The average cut in oxygen is 31 percent and the average cut in sleep is 34 percent.
Oxygen Supplies & Equipment
- Charlotte, N.C.: 29 percent
- Cincinnati: 34 percent
- Cleveland: 37 percent
- Dallas: 29 percent
- Kansas City, Mo.: 27 percent
- Miami: 27 percent
- Orlando, Fla.: 33 percent
- Pittsburgh: 37 percent
- Riverside, Calif.: 28 percent
CPAP Devices, Respiratory Assist Devices & Related Supplies & Accessories Single Payment Amounts
LINCARE DROPS ON NEWS, CONTRACT STATUS UNCLEAR
Respiratory powerhouse Lincare Holdings felt the impact of the bid rates immediately in its stock price, which tumbled more than 8 percent after the announcement to close at $29 on July 2. It closed even lower on Monday, July 12, at $27.37. Lincare officials did not return a call for comments.
On July 2, the day following the bid release, Susquehanna analyst A. J. Rice said that Lincare officials stated that the company was not likely to be offered a Medicare contract for oxygen in any of the nine bid areas. However, Lincare has not confirmed that position since then. Rice said he was told on July 12 that the company is evaluating further disclosure of its bid status and may release more information with a quarterly earnings release that is due on July 19. That may signal that the company perhaps received contract offers in a few areas. "Even so, Lincare's posture is that the rates are so low that they will have to scale back on service levels to stay in the markets," Rice said.
If Lincare is shut out of the nine areas, Rice said, the total revenue affected is about $50 million, with 2011 earnings potentially lowered by 10 cents to 20 cents a share. The company's 2009 revenue was $1.55 billion.
Lincare, which provides respiratory services to more than 700,000 patients across the country, gets two thirds of its revenue from government sources.
PENNYSLVANIA SUPPLIERS REACT
The Pennsylvania Association of Medical Suppliers is looking into why oxygen bid rates for the Pittsburgh region came in so much lower than the other eight areas. The amount for oxygen concentrators (E1390) in the Pittsburgh area is the lowest nationally, at $102.84. That's $22.16 less than the highest amount of $125 in Kansas City, Mo., and Miami, according to John Shirvinsky, PAMS executive director.
"The amounts do not make a lot of sense," Shirvinsky said. "We are suspicions that CMS has made some errors. Something does not pass the sniff test that it costs 20 percent less to provide a concentrator in Pittsburgh than it does elsewhere. We are exploring our options, and that includes litigation to seek more transparency about the bidding process and these rates. Outside of the nuclear codes, the bidding process has been one of the most closely guarded secrets in the whole country." This past week, PAMS was conducting an independent survey of affected providers and considering the next step in a course of action to stop or delay the competitive bidding program, he said.
Pittsburgh area supplier QualiCare Home Medical received a contract offer for oxygen, according to Dan Shields, RRT, vice president of clinical services. Shields was baffled by the low ball rate, stating that QualiCare had bid quite a bit higher than the amount the company was now being offered. "We are going to meet with the shareholders of our company to determine whether we can operate at this level or even want to," Shields said.
"This was panic bidding," Shields said. "People bid as if the life of their company depended on Medicare. Luckily for us, Medicare is a small percentage of our business, at 15 percent to 17 percent, so losing the Medicare business would not kill us. But what is going to kill us is when all the other insurance companies follow and drop their rates. It took a month for insurance companies to drop their rates 9.5 percent after MIPPA."
Interestingly, QualiCare was also a winning bidder back in 2008, when Medicare offered an oxygen rate of $136 to Pittsburgh area suppliers in the initial launch of the competitive bidding program.
Beyond worrying about the dollar amount, Shields has practical concerns about the logistical nightmares about to occur with hospital discharge planning. "One of biggest problems I see is how CMS has fractionalized the discharge process," he says. "When a hospital patient needs to go home with oxygen, a bed and a walker, it's possible that three different providers will be involved. How are they going to coordinate the delivery? It's not going to happen on the day the patient is supposed to go home, so the patient will have to stay in the hospital for an additional day. So with that reality, CMS has wiped out any savings it tried to gain with competitive bidding. Hospitals will not have access to quick discharges now."
Overall, Shirvinsky expressed deep concern about the future of HME providers. "This industry is on the precipice of imploding with this program in place," he said. "CMS does not realize how unrealistic the 32 percent average reduction number is. To sustain that even one year would be difficult, but for three years as the contracts require would be impossible."
H.R. 3790 PUSH CONTINUES
Providers used the Independence Day holiday to press legislators for more support of the bill to quash the program entirely. As of Friday, July 9, H.R. 3790 had 252 co-sponsors. With the bid amounts now public, sources said it may be easier to convince members of Congress what a disaster the program will be, despite the large savings touted by CMS.
A statement from the Texas Alliance of Home Care Services said: "CMS' disconnect is now even more obvious. They do not know what we do or the services we provide and now they reveled they do not know the wholesale price of equipment. CMS has revealed they do not know what they are doing. This is helpful to us and our cause. The results are so clear. We can prove the entire program is more than flawed. It is a dangerous mistake. The bid methodology and implementation are obviously full of errors, and we will capitalize on those errors."
Around the country, providers and advocates alike are pinning hopes on moving H.R. 3790 forward. The American Association for Homecare released a statement: "AAHomecare is working with key members of Congress regarding our concerns about Round One bid rates and continues to push for passage of H.R. 3790, which would replace the bidding program in a fiscally responsible manner."