CMS, DME, competitive bidding: A radioactive combination


Despite receiving multiple invitations to a Medicare fraud event at UCLA last week, the CMS honchoes ducked me as if I sported a plutonium necktie.

I was radioactive in a fashion: I didn't have a camera crew with me, meaning there was danger I'd ask questions toddling far from sippy cup-safe sound bites. And true to form, I kept on asking about that darned competitive bidding program for durable medical equipment (DME).

The pilot program for DME competitive bidding chopped costs by 35 percent in the nine metropolitan areas in which it was deployed this year. That prompted the Centers for Medicare & Medicaid Services (CMS) to expand it to more than 90 cities by 2013. This could prove a venue for CFOs looking to grow revenues and brand awareness for their hospitals--assuming it gets that far.

While competitive bidding appears good for cutting costs--CMS claims it can save $28 billion on DME over the next decade--it is also one of the few segments of healthcare still populated by mom-and-pop shops. Although CMS claims slightly more than half of the contracts are going to small businesses, many are loudly shrieking the process will Wal-Mart them to the sidewalks.

"Money may be saved, but small companies like mine and patients will suffer," said Jim Luksh, who operates a DME business and showroom in Scranton, Pa. His annual revenues are about $2.5 million a year, and he has 20 employees.

While Luksh has no problems with cutting government spending, he raised issues of concern for the competitive bidding process in nearby Pittsburgh. For example, he claimed larger companies submitted bids without even having set up shop in the city and opened branches only after winning contracts, a tactic that gave them greater control on fixed costs. In some instances, that helped drop payments for tasks such as portable oxygen delivery by 50 percent or more--a price point where he can't compete. Such business models are also focused on making as few patient visits as possible--a reduction in customer service Luksh would prefer not to impose.

Luksh's concerns seem perfectly relevant to ask of Don Kennedy, the Southern California-based director of CMS's western integrity division. The feds did a sweeping survey of DME fraud in Los Angeles in 2006. It found hundreds of phony vendors, and all but proclaimed Southern California ground zero for Medicare fraud.

But Kennedy waved me off. So, I too-politely asked him if he'd speak to me if I said I worked for the New York Times. For some reason that changed his mind.

Kennedy told me competitive bidding was inevitable. "This is how the business world works," he said. But as far as the smaller DME ventures were concerned, he conceded "we don't have an answer for leveling the playing field." And in the scheme of things, the vendors line up behind the Medicare enrollees and taxpayers, he added.

Eileen Turner was a lot warmer than Kennedy. A senior technical adviser for CMS's provider enrollment arm, she "understood the angst" of the DME vendors. She did note that many areas of DME won't be covered by competitive bidding, and suggested those businesses look to expanding into those segments.

Yet the centerpiece of the summit--Dr. Peter Budetti, deputy chief of CMS's integrity division--showed more will than Kennedy and less grace than Turner. He glided right into another softball TV interview after giving me a second brush-off.

I was told by the CMS press officer who invited me that Budetti mistook me for a reporter from Politico. It was an odd answer. We were about as far from Washington as you can get without gulping the Pacific. And Politico has been even-handed covering both Budetti and CMS. It suggests the tap-dancer-meets-minefield issue DME could become.

How so? Even the appearance of putting mom and pops out of business at a time when the country is scrambling to create jobs is disheartening. CMS may be taking the time-honored Republican path of a free market solution, but it could wind up being used by the GOP as the election season warms up.

If you don't think that's the case, keep in mind current CMS Director Don Berwick was a recess appointment because Senate Republicans say he's a Trotskyite with a stethoscope. His stellar qualifications are utterly beside the point.

Budetti passed by as I interviewed Turner. "I'm glad you got to speak to the right person," he exclaimed with all the cheer of a top manager passing an unpleasant task to an underling.

I'll get back to you on that, integrity chief--if you're ever willing to talk. - Ron

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