Moving the HME Industry Forward

General Healthcare

Termination of CB Contracts for Failure to Provide Products

January 12, 2015

AMARILLO, TX – There are a number of valid complaints levied against competitive bidding. One complaint is that a DME supplier is awarded a CB contract in multiple CBAs, but refuses to provide products to beneficiaries who reside out of the supplier’s traditional service area.

The complaint is that when the contract supplier receives an order for a beneficiary residing out of the supplier’s traditional service area, then the supplier will either (i) refer the beneficiary to another contract supplier or (ii) simply refuse to serve the beneficiary.

A number of House Representatives recognize this problem. On July 25, 2014, Congressman Tom Price, M.D. (GA-06) and 137 other Representatives (from both parties) sent a letter to the OIG requesting that it conduct a study of competitive bidding (including the National Mail Order Program for diabetic testing supplies) to determine what impact competitive bidding is having on the accessibility and quality of care for beneficiaries.

The letter states: “At this point there is abundant and concerning evidence of arbitrary manipulation of the price-setting system that directly limits seniors’ access to care and technology, an inattention to growing contractor non-compliance that is significantly impacting the quality and choice of technologies and services, and inadequate efforts to measure health impacts on beneficiaries……It would be a grave error if the bidding structure developed by the Centers for Medicare & Medicaid Services (CMS) severely reduces access to home support services just as Congress seeks to enhance care quality through greater coordination of care, especially for patients with complex and multiple chronic conditions. CMS directs bidders be very clear that all suppliers must supply all products in every category in every CBA that supplier won. Moreover, failure to supply is a breach of contract…..[I]f suppliers don’t provide products and services as required by their contracts, then seniors’ access to the products prescribed by their physicians is compromised, especially for products that are among the more expensive in any given HCPCS code. Not making available to beneficiaries all products in a category is a breach of contract according to CMS’ own explanation of the program. In fact, CMS argues that binding bids are not needed in the program because of this requirement. We note, however, that CMS is not enforcing the requirement. For example, upon hearing that beneficiaries were having problems with access to TENS from winning suppliers for the new General Home Equipment category used in the Round 1 Recompete, a manufacturer of the devices contacted each of the winning suppliers in this category and found that only 44 percent of the suppliers were offering TENS to beneficiaries.”

AAHomecare is to be commended. It is working tirelessly to bring these access problems to the attention of Rep Price and other Representatives.

In a Dec 22, 2014 letter to Representative Price, a copy of which was obtained by AAHomecare, the OIG agreed to conduct a study. The letter states: “OIG will commence a study to determine the effects of the CB program on Medicare beneficiaries’ access to durable medical equipment subject to competitive bidding. We plan to review documents from providers and Medicare claims data for a nationally representative sample of beneficiaries to determine and compare the rates at which beneficiaries successfully obtained needed items subject to competitive bidding. For a purposive sample of cases when beneficiaries appear not to have received needed items, we plan to explore why they did not receive the items.” AAHomecare will monitor the progress of the OIG’s study.

The preceding two letters indicate that House Representatives and the OIG recognize the existence of an access problem. The CBIC also recognizes the problem. In a January 2, 2015 letter to a contract supplier, the CBIC stated: “This letter is to notify you that the Centers for Medicare & Medicaid Services (CMS) is terminating ________’s entire Durable Medical Equipment, Prosthetics, Orthotics, and Supplies (DMEPOS) competitive bidding program Round 2 contract for all competitively bid items in all competitive bidding areas (CBAs) for which _______ has been awarded a contract. Through our monitoring and enforcement of the DMEPOS competitive bidding program, we determined that _______ is in breach of…..the DMEPOS competitive bidding contract for refusing to furnish all items in your contract throughout the CBA…..” By conducting “secret shopper” telephone calls, the CBIC determined that the contract supplier was not furnishing certain products. The CBIC letter goes on to say that ______ has the right to submit a corrective action plan.

There are three messages to be derived from the three letters discussed above:
• A large number of House Representatives and the OIG recognize that a number of contract suppliers are not providing products as required by their CB contracts. AAHomecare will continue to work with House Representatives regarding this problem.
• The CBIC also recognizes the existence of the “access” problem. It is identifying noncompliant contract suppliers by conducting “secret shopper” telephone calls.
• AAHomecare has been tireless in educating Capitol Hill about the problems inherent with competitive bidding. Capitol Hill, the OIG and the CBIC recognize that “access” problems exist. It is AAHomecare’s goal that this recognition will lend weight to the DME industry’s goal for Congress to modify the competitive bid program so that it is fairer and more manageable.

Jeffrey S. Baird, JD, is chairman of the Health Care Group at Brown & Fortunato PC, a law firm based in Amarillo, Tex. He represents pharmacies, HME companies, and other health care providers throughout the United States. Baird is Board Certified in Health Law by the Texas Board of Legal Specialization, and can be reached at (806) 345-6320 or