DME Competitive Bidding Process is Flawed

I keep reading in the industry press that the bid process is "flawed." I don't know about you, but it never crossed my mind that any DME provider would praise the fairness and correctness of the bid process (RoTech came closest to doing so in its statement, but even they fall short of congratulating CMS on a job well done).

Let's stop pretending to be surprised by the current returns and take a look at the "flaws" that the providers themselves contributed to the selection process, because some of the responsibility for the bid reimbursement rates lies on the industry's shoulders.

Garbage In, Garbage Out
In the original round one, the "leaders" of the industry preached, over and over again, how important it was to turn in bids that weren't too low. Everyone knew that CMS was going to average the bids received from a CBA and set the reimbursements based on them, so responsible bidding was imperative.

Little changed in how CMS was going to handle the round one rebid; there were a few tweaks here and there, but fundamentally speaking, the process didn't change. That was pretty well-known by all going into the the rebid.

It seems pretty clear that no one in the industry learned anything from the original round one process. Despite the "no suicide bidding" campaign, low-ball bids were, quite obviously, submitted. Let's take a look at some examples, then and now, for a couple products in a few bid areas.

E0470
Miami
First bid rate: $159.90
Rebid rate: $147.57

Dallas
First bid rate: $169.36
Rebid rate: $150.00

Kansas City
First bid rate: $170.90
Rebid rate: $144.26

Orlando
First Bid rate: $156.00
Rebid rate: $130.00

I'm wondering, based on what I see above, if in some of the CBAs, there wasn't some kind of weird "how low can you go" contest.

K0835 (RR)
Miami
First bid rate: $324.59
Rebid rate: $285.00

Dallas
First bid rate: $328.65
Rebid rate: $275.39

Kansas City
First bid rate: $385.60
Rebid rate: $330.47

Orlando
First Bid rate: $324.59
Rebid rate: $293.55

Did this item suddenly become that much cheaper cheaper to supply?

The Buck Stops Here
No matter how unpleasant and no matter how unwanted competitive bidding is, it was (is) the responsibility of the bidders to submit responsible, feasible bids. It was (is) the responsibility of the bidders to determine what their actual costs of doing business are and prepare appropriate bids.

Each bidder turned in financials to CMS to be considered for contracts. If a bidder says that he can provide a product or service at a specified dollar amount, it is not the responsibility of CMS to question that (not unless the bid is so ridiculously low that even the agency laughs at it). No one knows a business like its owner (or manager), and so CMS has to assume that a bid rate submitted is a reasonable one for the company.

CMS is not to blame for a bidder's stupidity, or greed, or fear, or combination of the three. For the new reimbursement rates to be so much lower than they were in the original round one process is, in a word, crazy.

If there were providers out there who submitted low bids because they were afraid of not being selected in the rebid (this might be doubly true for those rejected in the original bid), or if there were providers out there who submitted low bids because they reasoned that they'd make up a financial shortfall in increased referrals, I can only wonder how long it will be before they're experiencing the joys of bankruptcy (a much-deserved bankruptcy, all things considered).

The articles in the industry press seem to make it clear that the industry is blaming CMS for the low reimbursement rates; even Lincare is saying that "pricing mechanism used by CMS to determine the payment rates ... is fundamentally flawed." This may be somewhat true, but the baseline CMS used came from bids submitted by providers.

The industry howled about the reimbursement rates from the original bid. Yet in the rebid process, the same industry submitted lower bids (on average) that generated lower reimbursement rates. What's wrong with this picture?

Along Come the Anomalies
So CSI:HME wants bidders to give them information that will enable them to "approach Congress with some real data" and with "anomalies" such as:

1. A bidder could bid to supply up to 20 percent of the market with no verification that it could actually meet the demand, and could choose never to honor the bid, yet the prices it offered will set the prices other bidders will receive.

2. A bidding supplier could be offered a contract where payments it receives would be 20 percent or more lower than its bid.

This isn't new; why was this "real data" and the "anomalies" not taken to Congress right after the original round one was scrapped?

Confusion to Your Enemies!
No, not at the moment; all the confusion seems to be within the industry, not CMS.

The industry doesn't have a sound, cohesive strategy. The industry doesn't have sound, cohesive leadership (that's most definitely true for the johnny come lately organizations that excel at shameless self-promotion but that offer nothing new and nothing effective).

The classic definition of insanity is doing the same thing over and over again and expecting different results. The DME industry has, for the last decade, done the same things over and over again, and can't seem to understand why it doesn't get different results. In a word (or a grunt as the case may be): DUH! It's time to do something else!

In the meantime, maybe the dismal showing of the round one rebid will teach those slated to participate in round two to not submit bids from the basement.

Maybe.