Commentary by Robert Brant

Yesterday, Competitive Bidding Design expert, Professor Peter Cramton, released a new study supporting his claims that Medicare's DMEPOS bidding program is fatally flawed. Using the past 5 years of utilization records in the 9 Round One areas, he detailed how the Home Medical Equipment providers with the most experience and largest market share were undercut and excluded from the program.

The report reviews the 50 largest providers, based on Medicare charges from 2006 through 2010, by volume and market share in each of the bidding categories in the Round One Competitive Bidding Areas (CBAs). This not only shows how local communities have lost established, experienced providers, it confirms his argument that inexperienced companies, with likely little idea of the cost of providing services, gamed the system with "low ball bids".

The exclusion of companies with the largest market share goes against any common sense. These established companies already have the highest volume discounts from manufacturers, have working facilities near local hospitals and already have vehicles and trained staff to handle the largest amount of business in the area. Yet Medicare gave contracts to companies who simply bid lower, regardless of their facility, vehicles, staff or if they have ever provided the equipment before.

For example, in the Cleveland CBA, 87% of companies with the highest market share did not bid low enough to win contracts. The six largest companies, which hold 57% of the market share were excluded.

Top 6 Cleveland CBA

CPAP Providers (Bid Too High)

Percentage of Market Share:

• Medical Service Companies 12.4%
• Lincare 12.4%
• Praxair 9.9%
• Health Care Solutions at Home 8.9%
• Apria Healthcare 8.2%
• Cleveland Clinic Homecare 5.4%

TOTAL Market Share of Excluded Top 6 Providers 57.2%

Of the top 12 CPAP providers, only 2 were awarded contracts. Only 9 of the top 40 area providers were awarded contracts, but the majority of those had a market share below of 0.5%

Below is a sampling of the report's findings:

Bidding Area

Category

Market Share excluded from Bidding Program:

• Charlotte
  Hospital Beds 83%
• Cincinnati
  Enteral Supplies 83%
• Cleveland
  CPAP Devices 87%
• Dallas
  Diabetic Supplies 97%
• Kansas City
  Walkers 96%
• Miami
  Support Surfaces 94%
• Orlando
  Std Power Wheelchairs 49%
• Pittsburgh
  Oxygen 77%
• Riverside
  Complex Rehab 77%

Another point to consider is that Supply items such as Diabetic Supplies, Enteral Feeding Supplies and CPAP Mask supplies cannot be grandfathered to existing patients. That means the percentage of excluded market share is likely the same percentage of patients who must change their suppliers. 87% of the established CPAP patients in Cleveland, 83% of Enteral patients in Cincinnati and an average of 96% of the Diabetic patients in the Round One CBAs will likely need to change their suppliers.

Do the combined 3% of market share in the Diabetic Supply category in Dallas carry Brand name products?

Are the contracted Support Surface suppliers in Miami, with 6% of market share, aware that patients with Alternating Pressure Mattresses need to be evaluated each month for multiple Stage 2 or Stage 3, Decubitis Ulcers of the Buttock?

Can the 4% of established, contracted Walker suppliers in Kansas City deliver and set-up $44 walkers to patients in all of the area's 11 counties.

Do the lowest bidding Cleveland CPAP suppliers, know something the established 87% of suppliers don't; about CPAP regulations, the need for premium downloadable devices, proof of patient compliance and evidence of 90 day patient/physician face to face examinations?

Doubtful, but Medicare seems to think so.