Moving the HME Industry Forward


Competitive Bidding – Looming Challenge

May 25, 2015

WASHINGTON, DC – AAHomecare just concluded its Washington Legislative Conference and providers, manufacturers, and other stakeholders from throughout the country attended. AAHomecare did an excellent job in preparing the attendees with position papers and talking points as we visited with the staffs of Senators and Representatives.

Competitive bidding is deeply flawed. However, it is the law, and it is not going to go away anytime soon. CMS has totally “bought into” competitive bidding. Because of that, it is unlikely that CMS will voluntarily make any changes to competitive bidding that will lighten the burden on the industry.

This places on the industry’s shoulders the responsibility to work with their elected officials (Senators and Representatives). When I say “work with elected officials” I really mean “work with the legislative staff of the elected officials.” The Senators and Representatives rely on their staff to do their homework and advise the elected officials regarding important issues.

What is interesting, and uplifting, is that we were greeted positively on Capitol Hill. Our Senators and Representatives are looking at the DME industry as “problem solvers.” Said another way, they are looking at us as a way to deliver health care in a cost-effective manner. Having said this, it is critical that our elected officials hear from us as frequently as they hear from CMS.

The message that the elected officials hear from CMS is that competitive bidding is a resounding success with few, if any, problems. The industry needs to counter that message by pointing out the most serious flaws and then offering solutions.

Competitive bidding is not going away anytime soon and it does us no good to be angry and righteously indignant. Our approach needs to be that we are problem solvers and we will work with Congress to solve some of the most serious flaws in the competitive bidding program.

Against this backdrop, I would like to focus on a serious problem that all of us have to address. We cannot rely solely on AAHomecare, or VGM, or MED Group, or the manufacturers, or the state associations, or the largest DME suppliers to address this issue. My experience is that a “Mom and Pop” business is just as persuasive on Capitol Hill as a national player. In short, we are all in this together. So let’s discuss this looming issue.

This concerns the application of the competitive bid rates to small town America. On October 31, 2014, CMS released the final rule entitled “Medicare Program: End-Stage Renal Disease Prospective Payment System, Quality Incentive Program, and Durable Medical Equipment, Prosthetics, Orthotics, and Supplies” (“Rule”). In all areas outside the existing CBAs, the Rule phases in, over six months, a new reimbursement rate.

On January 1, 2016, the reimbursement rate for claims outside the CBAs, with dates of services from January 1, 2016 through June 30, 2016, will be based on 50% of the non-competitive bidding fee schedule and 50% of the competitive bidding fee schedule in geographically close CBAs. Starting on July 1, 2016, reimbursement rates outside the CBAs will be the competitive bidding fee schedule (based on the competitive bid rates in geographically close CBAs). Here are some examples:

HCPCS Code                          Region                Current             1/16/16            7/1/16
E1390 (O2 concentrator)          Mideast               $178.23              $134.21           $90.18

EO470 (BiPAP)                        Rocky MT           $241.85             $178.50          $115.14  

K0003 (standard w/c)              Great Lakes          $97.98             $68.78             $39.58

K0823 (standard PMD)           New England       $568.89           $424.22           $279.55

We are talking “apples and oranges” here. One of CMS’s “selling points” for competitive bidding is that while the reimbursement rates in the CBAs will decrease, the DME suppliers will be able to make up the smaller margins by higher volume. According to CMS, this higher volume results from the fact that only a relatively small number of suppliers will be awarded contracts in a particular CBA and, therefore, the contract winner will have fewer competitors……and, therefore, the contract winner’s volume will increase.

This “selling point” is obviously not true in non-CBAs. A DME supplier in small town America will not have an increase in volume but will get hit with approximately 43% in cuts. The end result will be: (i) a number of suppliers in smaller towns will close their doors; (ii) suppliers in adjacent CBAs will not be able to afford to serve the smaller towns; (iii) the DME patient in the smaller town will not be able to receive care at home; and (iv) that same patient will end up receiving care at the hospital ER. This is not “cost savings,” but is “cost shifting” from the inexpensive Part B to the very expensive Part A.

It is critical that all DME suppliers take this message to their Senators and Representatives. I am not sure what the solution is. If I could “wave my magic wand,” I would see to it that there would be no cuts in the non-CBAs. However, if my magic wand does not work, then perhaps the reimbursement cuts can be 21% and not 43%. Perhaps the reimbursement cuts can be phased in over a period of years so as to give small town DME suppliers the opportunity to adjust. Thus far, the industry’s entreaties to CMS have fallen on deaf ears. There is a possibility that a bill will be introduced in Congress to address this problem. If this happens, then our Senators and Representatives need to sign onto the bill.

The bottom line is that we cannot wait for “somebody else to do something.” That places our success or failure in someone else’s hands; it is not wise to do that. Every one of us must take the initiative to educate our elected officials…..perhaps educate our local newspaper…..about this looming crisis so that we can head it off before it becomes a reality.

One more thing. Brown & Fortunato has been working with AAHomecare for many years. I acknowledge that in the past I questioned the relevance and effectiveness of AAHomecare. This has changed. Under the leadership of Tom Ryan, Kim Brummett, Jay Witter, Peter Rankin and their team, AAHomecare is a powerful force. Of all of its accomplishments since Ryan took over, the most important one is that Capitol Hill and CMS take AAHomecare’s phone calls, return AAHomecare’s e-mails, and they personally meet with AAHomecare.

While CMS and Congress may not agree with AAHomecare on certain issues, CMS trusts Ryan, Brummett, Witter, Rankin and their team. In short, AAHomecare has credibility in the eyes of Congress and CMS. When people talk, good things happen. Past experience has taught us that it is rare to have a large victory. However, it is common to have small, incremental victories. These small victories add up. It is just as important for a “Mom and Pop” supplier to be an active member of AAHomecare as a large national or regional player. All of us, big or small, are in this together.

Jeff Baird will be presenting the following webinar on May 28, 2015:
AAHomecare’s Educational Webinar
How the Losing Bidder Can Enter the Competitive Bid Arena

Presented by: Jeffrey S. Baird, Esq., Brown & Fortunato, P.C.
Thursday, May 28, 2015
2:30-4:00 p.m. EASTERN TIME
Sadly, there are way too many quality DME suppliers that have not been awarded contracts. There are ways, however, for the non-contract supplier to enter the competitive bidding arena “after the fact.” This program will discuss those ways. Examples include purchasing 100% of a contract supplier’s assets; engaging in a partial asset purchase in which the non-contract supplier purchases only those assets associated with the contract supplier’s competitive bid contract; 100% stock acquisition; and establishing a 5% or more common ownership that will entitle the non-contract supplier to be added to the contract supplier’s competitive bid contract. In addition, the webinar will discuss the recently-published CMS rule that, under certain circumstances, allows a selling contract supplier to “carve up” its competitive bid contract. Lastly, the webinar will discuss whether, as a result of one of these transactions, any liability of one company will be imposed on the other company.

REGISTER for “How the Losing Bidder Can Enter the Competitive Bid Arena” on Thursday, May 28, 2015, 2:30-4:00 pm ET, with Jeffrey S. Baird, of Brown & Fortunato, PC.
Contact Ika Sukh at if you experience any difficulties registering.
FEES: Member: $99.00; Non-Member: $129.00

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, infusion companies, 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