Legislative Update

New Ideas

Rethinking the fight against competitive bidding

• By David Kopf
• Aug 01, 2014

For years — a decade, essentially — the industry has approached competitive bidding with one central strategy: it must be stopped. The program is bad for providers; it’s bad for patients; and it needs to be gone — period. Basically, the industry’s efforts to stop competitive bidding have rotated around the notion that we must stop the program and make it go away. With competitive bidding’s flaws, who wouldn’t agree?

There’s just one key problem with that strategy: it’s not working. This effort has included 2010’s H.R. 3790, the bill introduced by former Rep. Kendrick Meek (D.-Fla.) that called for the repeal of competitive bidding; and the more recent H.R. 6490, the lapsed 2012 bill launched into the House by Rep. Tom Price (R-Ga.), that would have replaced CMS’s competitive bidding program with the industry’s Market Pricing Program (MPP).

Despite legions of co-sponsors, the Meek bill lapsed at the end of Meek’s term, and H.R. 6490 had hopes of being added to the “fiscal cliff” legislation (there were high hopes that might see passage given the crisis mindset of Capitol Hill at the time), but that eventually fell off the agenda. Both bills lapsed at the end of the 112th Congress.

And currently, we have H.R. 1717, which also would replace competitive bidding with the MPP. Rep. Price launched H.R. 1717 into the House in April last year with fellow House Ways and Means Committee member Rep. John Larson (D-Conn.). Dubbed the DMEPOS Market Pricing Program Act of 2013, the legislation quickly picked up solid backing. In less than two months, the bill was at 131 lawmakers signed on as co-sponsors.

But at a certain point — right about when Round Two reached implementation in July of 2013 — momentum on gaining co-sponsorships began to slow. It was steady, but not the flurry the bill enjoyed at the beginning. Today, more than a year later, the bill has been hovering at 180 co-sponsors, as some raise questions regarding how the bill would fare after the Congressional Budget Office scored it.

The upshot is that stopping competitive bidding outright might get signatures, but not enough political “push” for a vote. A strong argument that competitive bidding was seriously flawed was made by the industry, patients, and the more-than-200 economists (including five Nobel Laureates) organized by University of Maryland Professor of Economics Peter Cramton, the architect of the MPP, but at the end of the day, that has not been enough. Two lapsed bills and one bill that is creeping along are an indication that the strategy isn’t working.

The reason trying to stop competitive bidding outright hasn’t worked is thanks in large part to a highly partisan atmosphere. Congress has become dysfunctional, explains John Gallagher, vice president-government relations for HME member organization the VGM Group Inc. The House and Senate haven’t passed budgets like they should over the past eight years, and when Congress doesn’t pass bills and budgets, it looses its oversight over federal agencies. This has let the Centers for Medicare and Medicaid services essentially “run amok,” he notes.

“CMS knows they’ll get a get a budget at the end of the year, and they do whatever they want to do,” Gallagher says. “… without Congress intervening.”

Interestingly, despite the fact that the country’s legislature has been paralyzed by political division, and the fact that the lower chamber is essentially controlled by the Republican party and the upper chamber under similar influence of the Democratic party, the industry can pull nearly 200 members of the House in bi-partisan support of the bill (47 percent Democrat; 53 percent Republican). Similarly, there was a bi-partisan letter circulated in the Senate and signed by 39 members (nearly split down the middle) that questioned CMS’s activity in competitive bidding. That proves the industry has political traction in Congress, which is the good news, it just needs to try a different way to use it.

Bearing all that in mind, the industry’s legislative leaders have a new plan; one that has resulted from a key strategy shift.

Fighting Smarter

That new idea is H.R. 4920, legislation that would make all bids binding as well as require providers to obtain bonds before bidding. Aiming to negate some of the most damaging elements of CMS’s competitive bidding program, Reps. Pat Tiberi (R-Ohio) and John Larson (D-Conn.) introduced the bill into the House in late June, dubbing it the Medicare DMEPOS Competitive Bidding Improvement Act of 2014.

The legislation would require that providers put up surety bonds — “biding bonds” — before submitting their bids to ensure those providers would truly bid an amount they could support. So, for example, if CMS offers a winning provider a contract and the provider declines to sign it, CMS can collect the bond. And when a provider wins a contract, the bid bond transfers to the performance bond that is already required.

“In essence, if you want to participate in a competitive bidding area, you will have to obtain a $50,000 bid bond from a bond company,” says Jay Witter, vice president of government affairs for the American Association for Homecare. “And if you are offered a contract either at or above your bid price, you will have to accept that contract, otherwise that bid bond is violated.

“Then, if you accept that contract,” he continues, “the bid bond turns into a performance bond, and you have you fulfill the elements of that contract. Otherwise, they [the bond issuers] can collect that $50,000 bond.”

Is $50,000 enough to a large company? Witter points out that if a company violates the bidding bond, the company then violates the surety bond already required by CMS for any and all companies to provide DME to Medicare beneficiaries.

“So there is an incentive, even for large companies, to comply with the bond and accept the contract they are offered,” Witter explains.

“It would absolutely do away with the speculative bidders, which we have in the market today,” adds Tom Ryan, president and CEO of the American Association for Homecare. “These people who have no experience with the product, no experience with the demographic, put their toe in the water, and take up market capacity in an area for which they have no intent of serving.”

Does H.R. 4920 change problems in past rounds of competitive bidding? No. But it does set the stage to fix the program in re-competes going forward.

“It won’t change what’s happened now,” Gallagher says. “It won’t change the rollout competitive bidding nationwide in 2016, but with the re-compete Round Two, and the next re-compete of Round One, it would have an impact on those, with an intent of hopefully eliminating the suicide bids that were thrown out there with the only intent to sell, or to pick and chose which contract they’d walk away from.”

Private Sector Oversight

There’s another benefit to requiring the surety bonds: it brings in a third party into the process. While CMS has claimed transparency, it’s been pretty clear that the vetting of contract awardees was less than stellar. As became obvious in 2013, whole swaths of providers were fond to not have the state licensure required for them to operate in the CBAs for which they won bids, for example. But when a surety bond company has skin in the game, the scenario changes.

“The legislation sets up a bid and performance bond so that there is a financial repercussion if you don’t sign the contract, and that third party is actually reviewing your financials and your existing financial performance,” explains Cara Bachenheimer, senior vice president for Government Relations at Invacare Corp. “So there’s that extra level of financial scrutiny.

And those bond issuers will set their prices according to the company’s financial capabilities.

“This system brings in private sector oversight,” Witter says. “The private sector will be a second level of financial scrutiny. … They have a financial incentive ensure [bidders] are good companies and are going to fulfill the contract, otherwise they loose $50,000.”

“If you have stronger financials; if you’re an established provider, it’s going to be a lot more cost-effective for you to secure that bond, than a brand new company,” Bachenheimer says, adding that this doesn’t create a close market, either. “It doesn’t mean new companies can’t get into the market; it just means that they have to prove they have the financial wherewithal to provide the products in the area that they’re bidding on.”

So, one small requirement could bring big change.

“It makes a whole lot of sense, and put some rationality into the program that doesn’t currently exist,” Bachenheimer says. “It’s small, but it could have much more meaningful impact.”

“And that financial due diligence is only going to be good for the patient,” Ryan says. “From a patient’s standpoint, you want a company that has the financial viability to perform.”

Passing the ‘Passability’ Test

So can the industry get the binding bids bill passed? Clearly, H.R. 4920 takes a different tack: instead of trying to get rid of the whole bidding system, and essentially send Congress and CMS back to the drawing board, or try to advance an entirely new system, this bill addresses the very key problem with competitive bidding: it creates suicide bidding and ejects responsible players out of the DME marketplace. This legislation simply holds all players to their bids — and that’s something that no one could argue against, because the government wants reliable contractors, right? Politically and bureaucratically, the ostensible answer is a resounding “yes.”

“We all want to get rid of this [competitive bidding] system, because it’s a horrible, flawed system,” Bachenheimer says. “Obviously, we’ve been supporting H.R. 1717 … but we’ve just not have been successful; Congress is not going to pass such a gargantuan measure. So, this binding bids bill represents a very passable piece of legislation.”

“What’s good about it is that it doesn’t have a score to it,” Ryan notes. “H.R. 1717 didn’t get a score, yet, but what would the score be? This is going to be a budget-neutral, simple fix.”

And budget neutrality is critical in this Congress, VGM’s Gallagher notes, because it doesn’t force the industry into the position of trying to fix a problem that CMS and Congress created in the first place.

“No longer is it that a majority of Congress members and their staff are saying, ‘You’re wrong, this is a great program,’” he explains. “Now, they’re saying, ‘You were right,’ but at the same time they say, ‘$7 billion — what are you going to do?’ … That’s why I think the industry is taking a better approach with a shotgun approach than a single piece of legislation.”

The development of H.R. 4920 came from months of work with various industry champions who would love to see H.R. 1717 implement, but have determined that the bill is too complex, too large, and too hard to understand to be a viable legislative vehicle to move this year, given the political climate, says Seth Johnson, vice president of government affairs for Pride Mobility Products Corp.

“So, what we were asked to do by our industry champions, who believe that we need relief from ill-conceived competitive bidding program, if you could only have one or two provisions, what would they be?” Johnson explains. “We were advised that it has to be clear-cut, very straightforward, easy-to-understand, so that it is more viable and easier to get through the Congressional process prior to the start of the Round Two re-compete.

“We looked at the MPP, and what would be the biggest ‘nut’ that we could pull out of MPP to get some significant relief from the bidding program moving forward, if that’s all we could get,” he continues. “And it was pretty clear that the binding bid provision would be the provision that could do that.”

“We had to take it step-by-step,” Ryan said. “If there was one step we could take, this is it.”

Bachenheimer says working with Reps. Tiberi and Larson, what was driving them was the speculative bidding made by bidders that “came out of nowhere” and won contracts at the expense of established providers, Bachenheimer explains.

Moreover, it was clear those legislators did not want a piece of legislation that was just for show. They wanted a no-brainer, bi-partisan, budget-neutral bill, so that it would go through a House dominated by Republicans and a Senate dominated by Democrats. This could be the bill — at least that’s the industry’s hope.

“That was the rationale for having such a targeted piece of legislation,” Bachenheimer says. “…The only thing that can get through both chambers and get signed by the president is legislation that is truly nonpolitical; non-partisan.

Moreover, even CMS has said its hands were tied and that the ball is in Congress’ court.

“CMS has told folks on Capitol Hill repeatedly that they don’t have the statutory authority to make bids binding, and that Congress would have to authorize it,” Bachenheimer explains. “So this really responds to that.”

What About H.R. 1717?

Of course throughout this discussion, there’s still one lingering question: What about the MPP bill? H.R. 1717 is still active and slowly adding co-sponsors. Do providers continue to advocate and lobby on behalf of that bill, or do they pretend it doesn’t exist? How does the industry treat the legislation it has been backing?

“We continue to advocate for H.R. 1717, but again, some of the stumbling blocks there are we need to get a score, and the concern is that what’s it going to score, and is that going to be an issue?” Ryan explains. “We think, again, optically, to have a 180 sponsors on a fixed bid program is important. We still believe the Market Pricing Program structure makes the most sense, and we continue to advocate for it.”

H.R. 1717 is a good bill, all the experts agree. It addresses all the problems of the current competitive bidding program, and has garnered significant support. But for now, the best help that the MPP bill can give the industry before the end of the 113th Congress is a foothold to advance the binding bids bill.

“When it comes to something that can get done a little more succinctly, without controversy, and without having a score attached to it, H.R. 4920 right now is the magic answer for a lot of what ails the program,” Ryan says.

“The goal is to go back right now to the 180 co-sponsors of H.R. 1717, let them know about H.R. 4920 and get them to co-sponsor that legislation so that we get some relief this year,” Johnson says.

“They should be able to be cross-walked pretty simply to this legislation,” Ryan notes.

Getting H.R. 4920 Passed

So what will it take to get the binding bids bill passed? The push is to get as many co-sponsors passed as possible right before (as this article is goes to press) and during the August recess for both the House and the Senate. This is important, because the 113th Congress has until the next election. Time is tight, but the bill’s limited scope and overall political neutrality give it a good chance, Johnson says.

Congress can put non-controversial bills on what is called the suspension calendar, according to Witter, and those can be voted very quickly through the process. Watchers of C-SPAN are probably familiar with the House voting through a large number of bills suspension of rules bills, usually on a Monday or Tuesday.

“So H.R. 4920 could move as a standalone piece of legislation,” Witter says. “With that said, you have to get the committees of jurisdiction to sign off. Well, that’s kind of already happened. Congressman Tiberi has gone to the Energy and Commerce Ways and Means committee chairs about this bill and got their sign-off. He’s also talked with Speaker Boehner from Ohio about this as well, and he was supportive of the process. So there is a distinct possibility this is going to be able to move on its own.”

“We’re being told that since the bill is bi-partisan and non controversial that the likelihood of it being moved as a stand-alone piece of legislation and being voice voted is quite high,” he notes. “That’s a good position to be in given the challenges the calendar presents at this point in the process.”

This means getting co-sponsors for H.R. 4920, and again, moving H.R. 1717’s backers to move over should help that, which is handy, given the timing. How many co-sponsors? Experts agree that the binding bids bill needs to have around 200 co-sponsors signed on by the end of the August recess.

“This is going to be a piece of legislation that’s going to get lobbied hard during the August recess, period, in order to put us in the best possible position for advancement this year,” Johnson says.

And a stand-alone vote isn’t the only option, either. H.R. 4920 could get attached to larger legislation, as well.

“It could be attached to a larger vehicle later in the year,” Johnson says. “There’s a possibility that it could be attached to a Medicare vehicle after the elections; there’s appropriation bills that have to move through the process.”

“And again, there’s going to have be another SGR fix again, possibly in the lame duck session, I’m not sure,” Ryan says. “But the last one was only a short-term fix, so they have to go back at it again, and that would be another opportunity.”

But since the bill is so non-controversial that it could be voice voted as a standalone bill, that is the industry’s main strategy at the moment.

“That would certainly be the easiest to get this significant reform to the competitive biding program put in place before the start of the Round Two re-compete begins next year,” Johnson explains.

Meanwhile work is being done to advance companion legislation in the Senate. At press time, the industry is still making headway in that regard, but there is hope that a sister bill will launch in the upper chamber by the time your read this article, before the August recess. The Senate has a process similar to the House’s suspension of rules called “unanimous consent,” and a similarly non-controversial Senate bill could just as easily move through such a process, according to Witter.

“We’re in the midst of working on a bi-partisan bill on the Senate side,” he says. “And hopefully it will be Senate Finance committee members.”

Time to Go to Work

Now, as Congress approaches recess, the industry has a new bill in hand, H.R. 4920, one that industry experts think could be a winner. There are a large number of lawmakers co-sponsoring H.R. 1717 that could easily be converted to the new bill. And, with the August break, the industry has a golden opportunity to concentrate on gaining new co-sponsors for the binding bids bill. It’s time to go to work.

“Now’s the time to make appointments and get support back in the district,” Ryan says. “We’ll be working with our State Leadership Council to make the month of August the month to see your legislator.”

For HME business owners and operators wondering how to back the effort, Ryan says start by picking the low-hanging fruit, because gaining numbers fast counts more than ever with the binding bids bill.

“Look at your legislators, see who’s signed on to H.R. 1717, thank them for their support of that, and say that by singing on to H.R. 4920 they’re essentially singing on to what they’ve already supported, it’s just a more succinct fit,” Ryan says. “When you start to see that number of co-sponsors break 100 … that’s a good way to build momentum.”

At the end of the day, the binding bids bill is simultaneously not the best legislation the industry could ask for and is exactly the best legislation the industry could ask for. The bindings bids bill does not address all of the competitive bidding program’s many ills (and there are a lot of them), but it does address perhaps the most pivotal problem with the program. It doesn’t fix past inequities or restore business to providers who were unfairly nixed out of the market, but it helps return more fairness and more protection to the marketplace for the future.

Most of all, what the binding bids bill offers is a realistic chance for change, because it would work in today’s political and legislative climate. It is inherently neutral legislation that can pass as a standalone bill through a deeply divided legislature, and get signed into law. It might even be legislation that adds a requirement that CMS surreptitiously wishes had originally been part of the program. If anything, what H.R. 4920 offers the industry is the right bill for right now.

This article originally appeared in the August 2014 issue of HME Business.