By Catherine Burzik
The Centers for Medicare & Medicaid Services recently implemented the 2nd round of its so-called "competitive bidding" process, a system devised by Medicare to award supply contracts to providers of medical devices and products to patients in their homes.
This new round significantly expands the scope of the program to cover 50% of all Medicare beneficiaries. With this expansion, CMS will be embarking on an experiment of massive scale that could have serious adverse health consequences for about 25 million people.
CMS is claiming success on the 2nd round, having achieved, on average, a 45% reduction in the cost of life-saving medical products such as oxygen, sleep apnea products, power wheel chairs, beds, wound therapy, feeding tubes and a 72% reduction for diabetes testing supplies.
This is a Pyrrhic victory, unless CMS is trying to win a race to the bottom. And, don’t be mistaken, we will reach bottom: The potential exists for less access across the country to critical medical devices and equipment, a lower quality of patient care, and ultimately and ironically, a higher cost burden on the overall healthcare system.
At first glance, competitive bidding looks like a good idea: Several bidders battling to provide a product for the most "competitive" rate. How can this not work? Because, in fact, it is not the most competitive rate, it’s a very low rate chased to the bottom by low-ball bids with no binding commitments to participate in the program at the bids offered – or to deliver products or services promised in these bids.
In some cases, low-ball bidders who win and sign a contract to supply in a certain metropolitan area may not have the operational infrastructure and experience to provide quality service or support, and sometimes may not even have access to the actual product they promise to provide. In fact, we have already begun to see irregularities with unlicensed or non-compliant suppliers winning bids, affecting legitimate bidders and payment amounts. Granted, these irregularities aren’t occurring on large scale just yet, but it’s early. Why risk potential for greater indiscretions – fraud, mistakes or whatever it may be – through a model that allows them to happen?
The problem here is a lack of transparency in the standards CMS uses for making decisions about whether a submitted bid is viable and can be binding. Compounding the matter, no penalties exist if winning suppliers can’t supply the products they promised; there are no penalties if they supply poor-quality products that don’t work well, because CMS does not actively monitor winning bidders after they have started providing care to Medicare patients; and there are no penalties if patients or their caregivers have a critical need to talk to a supplier and no one answers the phone at any given hour. These are significant considerations; after all, we are talking about many advanced, doctor-prescribed technologies used for patient care in the home.
What does this all mean, practically, for the health of a large number of vulnerable elderly and disabled Medicare beneficiaries?
In the worst case, it means there will be Medicare patients who will not have access in their homes to prescribed medical devices and equipment. In other cases, it may mean access only to inferior products and services. Without proper access and care, patients will suffer continued chronic and acute pain, and potentially as a result, more costs could be imposed on the healthcare system over the long-term.
While the risks to patients are priority-one, the economic tightrope is equally perilous. At rates artificially driven to the bottom, manufacturers could be forced to reduce their workforce, move jobs off shore and limit innovative research and development. We don’t need programs that increase joblessness or move jobs out of America. After all, the vast majority of life-changing and life-saving medical products used throughout the world are developed in America.
Selling out to low-ball bidders, regardless of their track record or experience with medical technologies, (especially those that require patient education and careful monitoring) absolutely ignores the importance of patient outcomes. And good medical outcomes represent the lowest total cost to our healthcare system.
What is the solution? An auction-based, binding-bid system with accountability, including more rigorous standards for product and service quality at the time of submitting bids and after bids have been "won," a closer look at comparative outcomes and meaningful penalties if a supplier cannot meet the terms of an awarded contract. CMS needs to look beyond what claims data may say about very general measures of patient health outcomes and focus more on detailed medical reviews of the care that patients are actually receiving – or not.
These types of solutions should not go ignored. After all, access, quality and patient outcomes should be the cornerstones of our healthcare system. The current competitive bidding process, at CMS’s direction, does not do enough to account for these ideals. It’s a potential threat to patients and can lead to increased costs in our healthcare system. With some adjustments, CMS can and should make this right.
Catherine Burzik, the former president & CEO of Kinetic Concepts Inc., is a general partner at Targeted Technologies, a board member of Becton Dickinson & Co. (NYSE:BDX), a member of the San Antonio branch of the Dallas Federal Reserve Board, and a board member and advisor of several venture-backed biotech firms.