Medical Device Daily Washington Editor

WASHINGTON — The competitive bidding program for durable medical equipment (DME) was sure to generate opposition, and yesterday's hearing in the House Small Business Committee gave Congress an earful from industry. More conspicuous however, was opposition to the program by Democrats and Republicans, especially given the fact that the program was put into play by an act of Congress (the Medicare Prescription Drug, Improvement and Modernization Act of 2003).

Heath Shuler, (D-North Carolina), chair of the committee's Subcommittee on Urban and Rural Entrepreneurship, said in his opening remarks that the fact that healthcare cost the U.S. $2.3 billion in 2007 highlights the need to "consider how we will care for these older adults" in the coming Medicare crunch.

"Access to healthcare is becoming increasingly critical to our nation's seniors," so the question for the committee is "whether this will hurt small healthcare providers who serve our seniors," Shuler said. Of the first round of demonstration projects, he said "the results were mixed at best," adding that CMS "incorrectly disqualified some companies due to clerical problems" with their bids.

"Since Ashville, North Carolina, is in the second round of competitive bidding, I have been hearing first-hand about these problems," the former NFL quarterback said, making the case that "healthcare practices [in rural communities] could be forced to close their doors and working families would lose their jobs."

Nydia Velazquez, (D-New York), the chairwoman of the full committee, offered several comments, including that she is of the opinion that "CMS has little regard for how its decisions are impacting small businesses."

Democrats were not alone in displays of their distaste for competitive bidding. Rep. David Davis (R-Tennessee) said his deceased mother had chronic obstructive pulmonary disorder and relied on DME suppliers to keep her supplied with oxygen. He said his mother would have had many more problems had she relied on non-local suppliers.

"Would it have been in the best interest of the taxpayers of America if my mother had ended up in an emergency room ... or in a nursing home?" Davis asked. He also said "I think we need to pass policy" that "doesn't go after the 97% of suppliers" who are in compliance. Given the much higher cost of hospitalization compared to home oxygen therapy, Davis said, "I hope that when we make these decisions that we use some common sense."

He said of oxygen therapy, "it's not just a piece of equipment that you drop off and pick up when the beneficiary dies."

Laurence Wilson, the director of the Chronic Care Policy Group at CMS, said the bidding program is in force only in standard metropolitan statistical areas (MSAs) and that CMS has already excluded rural areas that fall within some of those designated MSAs. He said that the quality standards element of the bidding program "ensures an even playing field" and that "beneficiaries get good customer service." He said that financial standards ensure that only financially sound firms get in, and that the standards "weed out fly-by-night operators" that prey on beneficiaries.

As for concerns over the effect on small companies, Wilson noted that "CMS adopted numerous approaches to ensure that small suppliers" could participate, including set-asides and allowing them to "band together in networks." He said that CMS's formula for small-firm participation called for a "30% target for small-supplier participation," but that "[u]ltimately about half the contracts signed were with small suppliers, clearly exceeding the program's goals."

However, for the bidding program to work, "there must be winning and losing bidders," Wilson said.

As for ensuring that beneficiaries do not experience interruptions of service, he said that "CMS is conducting an aggressive outreach to ensure" that patients and suppliers are aware of exactly how the program works, and CMS is also allowing some companies to be grandfathered into the program in order to ensure uninterrupted access.

Shuler asked "how does CMS evaluate the bidder statement of capacity when the bidder has no offices, no employees in Charlotte [North Carolina]?" Wilson said "some suppliers are setting up subcontracting arrangements" with existing operations in the service areas while others are getting operations up and running. One in Pittsburgh "already had existing contracts with the University of Pittsburgh," he said, but CMS is checking on these arrangements to ensure they will work the way they should.

Shuler asked "how is the quality measured? Wilson said the law mandated quality standards be set up by an independent accrediting organization and that "[w]e expect and require for this program — and will require by Sept. 30, 2009 — that all suppliers will" be in conformance.

Shuler asked about how CMS qualifies subcontractors, and Wilson said "we hold the supplier responsible for meeting the requirements," but that there is no specific requirement for subcontractors. He described this as "an important issue," adding that CMS is examining a set of standards for subcontractors.

Linwood Staub, President of Global VAC Therapy (San Antonio), appeared on behalf of the Advanced Medical Technology Association (AdvaMed; Washington), stating that AdvaMed members "are concerned about the design and implementation" of the program.

One of the chief concerns, Staub said, was the purported interchangeability of products, giving walkers and vacuum-assisted closure (VAC) therapy for wounds as comparative case studies. "Competitive bidding treats these categories the same way," he said, despite the fact that the latter is "a complex therapeutic system" used in patients who often have co-morbidities. Staub asserted that VAC "is unique and not comparable to other products."

VAC therapy "has the largest body of clinical evidence" for such treatments, Staub said, adding that two professional societies told CMS "the category should not be competitively bid but CMS would not listen.

"VAC demonstrates why this policy is penny wise and pound foolish," Staub said, adding that AdvaMed members "think superior outcomes, not lower prices, will save money."

"CMS is fooling itself if it thinks low bid prices will lead to low costs," Staub said.