FACT SHEET
Problems Cited in Medicare’s Implementation of the
Competitive Bidding Program
July 8, 2008
Background



On July 1, Medicare launched the competitive bidding program for certain Durable Medical Equipment,
Prosthetics & Supplies (DMEPOS) in ten U.S. competitive bidding areas (CBAs).
The American Association for Homecare (AAHomecare), members of the medical community and
stakeholders representing the elderly and people with disabilities have all voiced support for efforts in
the U.S. Congress to delay by 18 months any further implementation of the program. The purpose of
the moratorium is to allow time for important reforms to be incorporated in the program to ensure
ongoing access to homecare products and services, while at the same time providing both quality and
savings for Medicare and its beneficiaries.
Medicare’s basic rules for participating in the competitive bidding program include:
1) Ability to service the entire competitive bidding area (CBA), not just a portion;
2) Required acceptance of all referred beneficiaries (i.e. orders) for all items in a product category;
3) Compliance with accreditation and licensure standards for all applicable services in a product
category.
Summary of Issues – The following problems and critical concerns have already been reported in the eight
days that Round One of competitive bidding has been underway:




Lack of verification by Centers for Medicare and Medicaid Services (CMS) of supplier capacity, and
CMS approval of long-distance suppliers with no location near the service area. As a result, Medicare
beneficiaries and their referral agents (such as hospital discharge planners and social workers) have
encountered access-to-care problems due to contract suppliers turning down referrals and being illprepared for the increased volume of beneficiaries.
Unlicensed suppliers (providers) are still being cited as eligible contract suppliers by Medicare officials.
Medicare is permitting suppliers, in violation of North Carolina Board of Respiratory Care regulations,
to serve beneficiaries in that state by drop-shipping from outside the state.
Medicare’s beneficiary and referral agent educational campaign has been inadequate by all measures
(late, inaccurate and misleading) thereby leading to unnecessary beneficiary disruption and increased
administrative burden for all parties.
Issue #1 -- Lack of Access to Care in All CBAs Due to Unprepared and/or Unqualified Contract
Winners
o In Miami, pulmonologists report being told that oxygen services could not be delivered for 2-3 days
by winning contractors. Prior to July 1, standard delivery timeframe to patients has been 2-4 hours.
o In Riverside, CA, 100% of out-of-state contract winners for CPAP/Bi-level sleep therapy equipment
have rejected referrals, stating that they “don’t service the area” or “that’s too far.”
o In Kansas City, 27% of referrals (i.e. orders) placed for walkers, enteral, oxygen or CPAP equipment
and services have resulted in contract providers refusing those referrals because they could not
service the area or did not have the equipment.
American Association for Homecare
2011 Crystal Drive, Suite 725, Arlington, VA 22202
703.836.6263 www.aahomecare.org
1




Five of the 11 contract suppliers contacted in the Kansas City CBA have no local office and this
was the reason offered in two of the turndowns. The remaining providers stated they could only
drop-ship the products and that it could take between several days and two weeks.
An out-of-state contract supplier from California told Kansas City and Pittsburgh referral sources
that they were not sure they could supply a walker to patients in those CBAs, but if so, it would
be shipped by UPS and could take 10-12 days to deliver.
One enteral nutrition contract provider said they only supply nursing homes – no homecare.
One supplier for the walkers product category said they only service one small town in Kansas
and cannot accept referrals across the Kansas City metro area.
Issue #2 -- Medicare’s Lack of Verification of Supplier Capabilities Has Resulted in Contract
Suppliers Not Adhering to Basic Program Requirements Causing Service Disruptions and Lack of
Response to Beneficiaries’ Referral Agents
o In Charlotte, based on 23 referrals that have been transmitted to contract suppliers for CPAP, enteral,
liquid oxygen and oxygen equipment and services, contract suppliers said “no” 30% of the time, and
another 30% of referral contacts resulted in no answer at the business’ phone number. Of the 30%
of oxygen referrals turned down by winning suppliers in Charlotte:
 57% of the refusals were due to an out-of-state, contract supplier not having a state license to
provide oxygen in North Carolina;
 14% were due to the patient being located “too far” away in the CBA;
 28% were due to the supplier not having the product in-house or having decided not to provide
liquid oxygen--despite the Medicare mandate that providers supply all HCPCS products.
o All out-of-state winners for CPAP are determined to drop-ship the devices to patients in North
Carolina which is a clear violation of the North Carolina State Respiratory Care Board.
Issue #3 -- Medicare’s Communications and Program Readiness Continues to be Inadequate Thereby
Causing Unnecessary Beneficiary Disruption and Administrative Burden
Medicare has severely underserved beneficiaries, suppliers and referral agents with an anemic education
campaign that occurred over a period of less than four weeks:
o Medicare beneficiaries received new program information at home as late as June 30 – one day
before the “go-live” date.
o Factual errors about contract/non-contract suppliers, product categories by CBA, and grandfathering
procedures (for pre-existing suppliers) are presented in Medicare’s beneficiary brochure and on the
Web site. 1-800-MEDICARE call center agents provide inconsistent and inaccurate information to
callers about contracted/non-contracted suppliers and the subject of grandfathering. 1-800MEDICARE has actually directed patients from one contract oxygen supplier to another for no
reason and no financial benefit to the patient.
o In one large supplier’s office, 98% of inbound inquiries from Medicare beneficiaries were caused by
confusing information mailed by CMS.
Issue #4 -- Medicare Concedes that it has No Process for Overseeing Contract Supplier’s Business
Practices
o On a nationwide conference call held on May 13, 2008, Medicare staff admitted they have no way of
monitoring the business practices of contract/non-contract suppliers.
American Association for Homecare
2011 Crystal Drive, Suite 725, Arlington, VA 22202
703.836.6263 www.aahomecare.org
2