September 19, 2016

New Moran Company Report Raises Significant Concerns about Application of Competitive Bid Rates to Home Respiratory Care Nationwide

Respiratory care leaders say report underscores need for legislation to extend phase-in of deep Medicare cuts to home oxygen services based on flawed competitive bidding payment methodology


WASHINGTON – The Council for Quality Respiratory Care (CQRC) – a coalition of the nation’s leading home oxygen therapy provider and manufacturing companies – today urged lawmakers in Congress to weigh the findings of a new White Paper from The Moran Company, “The State of Expert Judgment Regarding Medicare’s Competitive Bidding Program for Durable Medical Equipment,” which closely examines the competitive bidding program used to develop reimbursement amounts for durable medical equipment, prosthetics, orthotics and supplies (DMEPOS), including home oxygen. On July 1, the Centers for Medicare & Medicaid Services (CMS) began applying these competitive rates to all Medicare beneficiaries nationwide, including in rural markets that were originally excluded from the program, resulting in a 30 to 50 percent Medicare cut to home respiratory care.


The White Paper examines the history and intent behind the competitive bidding program, the design and implementation of the program, and how problems persist as competitive bid pricing is used to develop reimbursement amounts for home respiratory care supplies and services, and other DMEPOS, across the country. The White Paper specifically highlights several deficiencies with the program, including:

  • The use of non-binding bids allowed bidders to submit unrealistically low bids, knowing that if they are selected, and the ultimate bid price is too low to cover their expenses, they can simply refuse to enter into a bidding contract.

  • CMS also instituted a system in which payment amounts are calculated based on the median bid. This means that roughly half of the selected bidders will be paid higher than the price they bid, while half will be paid less.

  • The use of composite bids—bids that are weighted compilations of several products into one bid price—also provides incentives for bidders to try to game the system by bidding low for some products and high for others, leading to skewed pricing information for individual products.

In addition to these concerns, and others, a recent Office of the Inspector General (OIG) report found that high percentages of suppliers do not meet state licensure requirements, suggesting that CMS’s quality requirements for bidders may not be sufficient.


According to The Moran Company, “These issues, taken together, mean that the Competitive Bidding Program does not determine true market clearing prices, and thus the bid price information derived from the program is limited in value.”


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“This report underscores the immediate need for legislation to roll back deep cuts that took effect on July 1, which apply inaccurate rates to all Medicare home oxygen services. The recent cuts implemented by CMS are based on a methodology that is been proven both flawed and economically unsustainable for a healthcare community that cares for Medicare patients who depend on our consistent, quality services to literally breath,” said Dan Stack, Chairman of CQRC. “It’s time for Congress to pass this legislation before patient care coordination and care management services are jeopardized.”


The CQRC strongly supports bipartisan legislation that would extend the phase-in of reimbursement cuts so that analyses can be completed to understand the full impact of applying competitive bidding rates to non-competitively bid markets. The Patient Access to Durable Medical Equipment (PADME) Act - sponsored by Congressmen Tom Price (R-GA) and David Loeb sack (D-IA) in the House and Senators John Thune (R-SD) and Heidi Holtkamp (D-ND) in the Senate - retroactively delays the implementation of the cuts and requires HHS to perform a more thorough evaluation of their impact on health outcomes.


This legislation would extend the phase-in period of the cuts for an additional 12 months than originally provided, until June 30, 2017. Additionally, it would require publication of a quarterly report by CMS to monitor what impact the broader application of competitive bid rates has on Medicare beneficiary access.


The Moran Company concludes, “Given the problems with the Competitive Bidding Program outlined in this report, doubt has been cast on the validity of the pricing information the program has produced. Applying this information nationwide, to non-competitively bid areas, could lead to unsustainable reimbursement levels.”


Added Stack, “While CQRC remains committed to trying to make the competitive bidding program work, we are deeply disappointed that CMS is implementing another round of price cuts based on a bidding system that is in need of substantial improvement.”


To download The Moran Report White Paper, click here.


To learn more, visit cqrc.org and follow CQRC on Twitter at @TheCQRC.



Learn More About Home Respiratory Therapies:

Millions of Americans are living with COPD and Obstructive Sleep Apnea, experiencing acute respiratory failure, or living with neuromuscular diseases. These individuals rely upon home respiratory therapies to remain at home. Learn more about home respiratory therapies and how they can help.

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