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First-Round Bombshell: Number of Bidders Likely 90% Lower than CMS' Expectations
BALTIMORE--CMS is likely grappling with far fewer bids for the first round of competitive bidding than it anticipated--about 90 percent fewer, according to attendees at Thursday's meeting of the Program Advisory and Oversight Committee.

CMS had projected it would receive about 16,000 bids in its initial round of DMEPOS bidding; in reality, it has probably received fewer than 1,500, according to PAOC member Cara Bachenheimer, vice president of government relations for Elyria, Ohio-based Invacare Corp.

And of those bids, she continued, there is no way of knowing how many are valid.

CMS convened the PAOC, formed to advise the agency on competitive bidding, for the Oct. 11 meeting, its first since May of 2006.

While the agency has remained mum about the number of bids it received by the Sept. 25 deadline, only 2,200 provider locations are accredited across the first 10 competitive bidding areas, officials said during the meeting.

Those bidders remaining in the accreditation pipeline won't push the number much higher. Some 100 are still pending accreditation by the Oct. 31 deadline, Sandra Bastinelli, division director for medical review and education in CMS' Program Integrity Group, told committee members.

That means the maximum possible universe of sites in the first round is approximately 2,300.

Whether competitive bidding can work with that number of providers is up for debate.

Bachenheimer said maybe a greater percentage of bidders would win contracts, but that would depend on the capacity that bidders state and that CMS and Palmetto GBA, its Competitive Bidding Implementation Contractor, believe is possible. She surmised that CMS was surprised by the low figure. "I think the number of 'real' suppliers is much smaller than CMS expects--or there are a lot of numbers that shouldn't be out there."

If that's the case, Bachenheimer said, it might demonstrate that CMS' system of giving out numbers needs to be scrutinized.

However, Herb Kuhn, recently named CMS deputy administrator, said he was "very pleased by the number of suppliers who responded" to the bidding process. Kuhn added that he was confident "we'll have a pretty robust offering" of suppliers for beneficiaries in the first 10 CBAs.

Others at the meeting, attended by an estimated 150 to 200 HME stakeholders, weren't so sure.

Based on calculations from Waterloo, Iowa-based VGM, Vice President of Development Mark Higley told CMS during public comments that the buying group has about 3,000 member locations owned by approximately 2,000 companies. Using that ratio, he said, the 2,200 locations that are accredited so far probably represent 1,500 to 1,600 companies.

Higley also confirmed the highest sequential bidder number the buying group could find among its members was about 1350.

"They have eight percent of eligible providers and they're happy with that?" asked VGM's John Gallagher, vice president of government relations. "It doesn't make sense." If there aren't enough winning suppliers, he added, beneficiaries' access to care will be limited where there are shortfalls. "I don't understand how that would be a positive," he said.

"It's very troublesome that their estimates in the final rule exceed [the number of bidders] by about 10 times," said meeting attendee Dave McCausland, senior vice president of planning and government affairs for The Roho Group, Belleville, Ill.

"If they so dramatically overestimated the number of bidders, what does that do to quality, access and choice? If you have 10 times fewer providers offering these products in any [CBA], some of which are quite expansive geographically, how close is the nearest product for the patient and caregiver?" McCausland wondered.

"If there are 10 times fewer suppliers," he continued, "... the winners will have fewer competitors, and both referral sources and beneficiaries will have fewer choices."

Under its bid evaluation structure, CMS will determine how many suppliers bidding below its "pivotal" bid are needed to meet beneficiary demand for each product category in each CBA. If it doesn't get enough suppliers from below the pivotal bid, CMS will move up to higher bids until it has enough suppliers to meet the capacity it needs.

But the final rule doesn't address the scenario of "running out" of bidders eligible to win contracts, Bachenheimer pointed out.

"What's not addressed at all is what happens if you don't have enough bidders, period, or if you get into those that don't meet financial or other criteria," Bachenheimer said.

Limited meeting agenda
While those questions and others--such as why CMS' estimates were so high and why so few providers bid--were the issues committee members wanted to discuss, Bachenheimer said, the PAOC session lasted just one day and focused mainly on technical bidding problems in Round One and updates on Round Two, when bidding will expand to 70 more metro areas across the U.S.

"Maybe that's why a number of members didn't show," Bachenheimer said, noting that the committee was given the agenda only a week ahead of time. Five of the PAOC's 21 members were absent from the meeting.

Bachenheimer also voiced strong concerns with CMS' lack of transparency regarding competitive bidding. "We've made repeated requests for substantive answers" to problems but can't get them, Bachenheimer said. Even though competitive bidding will determine the fate of thousands of providers, she added, "the whole process has so many unknowns ... There should be an open dialogue on something that's so crucial" to so many.

"The meeting was pretty much what I expected: CMS saying, 'We had software problems, they were fixed or will be fixed before the next round,'" said attendee Mike Hamilton of Association Services, Hoover, Ala., director of the Alabama Durable Medical Equipment Association.

But Kuhn told HomeCare Monday the meeting was set for one day because that's what many PAOC members wanted, noting "they're all busy, too." As for the agenda, he said, policy issues surrounding competitive bidding had largely been dealt with, and CMS' main task now is focusing on its implementation in Round Two.

Regarding any "unintended consequences" of competitive bidding, such as possible hits on beneficiary access, Kuhn said, "that's what the PAOC is about. If there are problems, we'll address them. The key is to make sure beneficiaries are served appropriately."

In other information given at the meeting, officials said CMS plans to pick the first-round winners in December but will not announce them until March or April of 2008. The gap is intended to give the winners time to decide whether they want to sign contracts; if not, additional suppliers will have to be chosen.

The agency said it would also unveil "very soon" the next 70 CBAs in which the bidding project will be rolled out. Bidding for Round Two will begin next year, and reimbursement based on that round is expected to start in 2009.

In addition, officials announced steps intended to smooth the bidding process in the second round, including:

--Simplification of the registration process while keeping the bidding system secure.
--An "intensive" campaign to educate suppliers on National Supplier Clearinghouse requirements to make sure they're correct and don't snag bidders during registration.
--Implementing controls to keep multiple users from accessing the system with the same user ID.
--Preparing "a comprehensive and user-friendly guide" to the bidding process.
--Home page status indicators with hotlinks to incomplete information and pointers to incomplete bid data.
--Letting bidders copy and paste identical bid data from one bid sheet to another, rather than having to re-enter it.
--Changing the verbiage in error messages to provide "clear and user-friendly language, free of technical jargon."

Some PAOC members, as well as some public commenters, urged CMS to take these additional steps:

--Reveal the actual financial ratios used to determine the financial viability of bidders. So far, the agency has refused to do so, citing fear that some would use the data to gain an unfair advantage.
--Announce the date by which all Medicare suppliers must be accredited. This is a key step that some PAOC members said would prompt suppliers outside current bidding areas to get accredited as soon as possible.
--Drop complex rehab as a bidding category. "Of all power mobility device users, at least 60 percent, and perhaps 80 percent, have requested customizing from manufacturers or others to configure systems that meet individual needs," said PAOC member Jean Minkel, rehab services consultant for Independence Care System, New York. "I don't see the bid process meeting these needs for people who are already functionally limited."
--Create some kind of bid appeals mechanism, which Congress didn't authorize when it wrote the bidding law. The rejection of a bid "is a death sentence without any ability to appeal," said committee member Michael Tootell of MGFT Decisions.

Just 'a bad idea'
"It's a train wreck," Roho's McCausland summed up after the meeting, adding that competitive bidding will "absolutely" harm both beneficiaries and providers. "Unfortunately, this is so obvious to anyone in the industry. If you know a cataclysmic event is about to occur, you need to do everything possible to stop it, but we [have been] helpless to do so," he said.

The purpose of competitive bidding "has shifted from purely saving costs to eliminating suppliers," ADMEA's Hamilton said. He pointed out that many of the nation's small suppliers are providing service where no one else will.

Large national suppliers, he said, which are likely to dominate competitive bidding, "will be the same as HMOs, where you have to wait three or four days for a hospital bed." He noted that Part A (hospital) costs could be raised by poorer DME service.

A comment from John Shirvinsky, executive director of the Pennsylvania Association of Medical Equipment Suppliers, seemed to represent the industry's most widely held view of competitive bidding. Perhaps fittingly the last speaker of the day, Shrivinsky told CMS officials that "competitive bidding is a bad idea and ridiculous process."

To comment on CMS' bidding system, e-mail dbids@cms.hhs.gov by Nov. 9.

To comment on competitive bidding overall, e-mail Ralph.Goldberg@cms.hhs.gov.

Bird is soliciting comments on Medtrade via e-mail at kevin.bird@nielsen.com.

Providers Eager for New Technology, on the Hunt for Retail Products
ORLANDO, Fla.--While the minds of Medtrade 2007 attendees were focused on issues like competitive bidding and accreditation, a number of new products unveiled at the show also attracted attention.

One that created a buzz was Inspired Technologies' ViaSpire Liquefier, a device that makes liquid oxygen in a patient's home.

"That probably stole the show for me," said Kevin May, managing partner of Jackson, Mich.-based Lean Homecare Consulting Group. May, who also serves on the clinical staff for the University of Michigan Health System's home care services division, said his department is currently moving patients to non-delivery oxygen systems.

"The thought that we would be able to replace our weekly or every-other-week deliveries with liquid is a great opportunity," May said. However, he added, pointing to the unit's size, heavy power consumption and pricing, "I think it's a technology that needs to be refined more, but I found it very exciting. Just the ability to be able to do this is phenomenal."

May, who attended Medtrade to search out new products, said the U of M's home care division had fielded a team of buyers to take advantage of show specials.

Cindy Ciardo, CEO of West Allis, Wis.-based Knueppel HealthCare Services, said that, along with attending educational sessions and networking, her company also attends Medtrade to buy at special prices, to find new products and identify niche markets. After recently opening a retail store, Ciardo said she was looking for products that are "different," that aren't readily accessible in the local Wal-Mart and that she can sell for cash as opposed to medical items that require insurance billing.

Ciardo said she found several products that fit the bill, including fashion medical ID bracelets from Lauren's Hope, a retail-packaged diabetic skin care line from Masada and the Big John, a wide toilet seat for bariatric clients.

"Medtrade wasn't as good for us as years past," Ciardo said, "but we still were able to bring back some new information, new product ideas and shared time with old friends. So it was worth it."

Dr. Philip Paul Weiner, the owner of Weiner's Home Health Care Center in Pikesville, Md., said his main purpose at the show this year was to attend sessions.

"We've attended seven sessions--three Tuesday, three Wednesday and one this morning," he said on the last day of the show. "If I pick up one idea, something I can change to make my business better, I do it."

But Weiner said he was buying as well. "I usually bring down orders with me and just pretty much hand them to the reps that I already know, because there are specials," he said. "I'm always looking for new markets, especially new niche markets."

One product Weiner liked was the Mediflash, a UBS computer stick that can hold a patient's medical information and be worn as a necklace or bracelet. "I always find something that interests me," he said.

At the show's New Product Pavilion, attendees had a chance to cast their votes for best new products in three categories.

The Innovation Award went to Healthcraft Products for its Dependa-Bar weight-bearing bath safety device. PDG Group garnered the Provider's Choice Award for its Fuze Power Tilt feature, and Life Gear won the Merit Award for its Comfort Zone portable blanket warming system.

No Mandatory Accreditation Deadline Yet, CMS Says
BALTIMORE--CMS' Sandra Bastinelli confirmed Wednesday that no deadline has been set for mandatory accreditation of all Medicare DME suppliers--at least not yet.

"Evidently, someone thought we had a drop-dead deadline for everyone to become accredited, and someone made up a nice date of April 2009," Bastinelli, division director for medical review and education in CMS' Program Integrity Group, said of a rumor circulating in the industry.

"Guess what," she told 360 phone listeners who dialed in to the agency's Open Door Forum. "That deadline did not come from CMS ... it did not come from a leak. It wasn't even a proposed date, that's the funny part. I can guarantee you that ... if someone was betting on it, it wasn't even close."

However, Bastinelli said, when such an accreditation date is set, CMS will get the message out. "I promise you that it will be on the Web site. We will also say it on the Open Door Forum, and we will also do a mass mailing if we can by list-serv," she said.

Bastinelli reminded callers there is one deadline that is fast approaching: all first-round DMEPOS bidders must be accredited by Oct. 31 in order to be considered for contracts. "We have gotten word from some of our accrediting organizations that some of the suppliers have refused onsite unannounced surveys," she said, adding that "accreditation is not just submitting an application and paying a fee.

"I'll give you a hint," she continued. "Three weeks before the deadline is not a good time to be refusing your onsite survey. When you are refusing an onsite survey, for all intents and purposes, you are refusing to become accredited."

With the deadline so close, Bastinelli said, "Obviously if you don't already have an application, and that would be a completed application, we have to assume that you are not ... and do not want to be a bidder."

In an update on Thursday at a meeting of the Program Advisory and Oversight Committee, Bastinelli said suppliers participating in the first round are taking an average of three months to become accredited--although she said "a few" had accomplished this in as little as three weeks--and the average accreditation fee is $2,500.

Some PAOC members urged CMS to go ahead and set an accreditation deadline for all providers, saying that is the only thing that would spark a major move toward accreditation among those outside current bidding areas. (See top story in this issue for more on the PAOC meeting.)

Jerry Lewis, MDA Urge Passage of H.R. 2231
WASHINGTON--In a recent letter to Congress, Muscular Dystrophy Association National Chairman Jerry Lewis urged federal lawmakers to pass H.R. 2231, the Medicare Access to Complex Rehabilitation and Assistive Technology Act of 2007.

The proposed legislation would exempt complex rehab products and assistive technologies from Medicare's competitive bidding program.

Current Medicare competitive bidding policy limits those who need equipment such as technologically advanced power wheelchairs to one or two pre-selected equipment vendors, "promoting a one-size-fits-all concept of care," Lewis said in his letter.

He urged Congress to include H.R. 2231 in a package of Medicare provisions that will be coming before the Senate shortly.

"How can you restrict people's choices when selecting wheelchairs and other vital equipment," Lewis wrote. "This is not only medically wrong, but fiscally irresponsible."

Rita Hostak of Sunrise Medical, president of the National Coalition for Assistive and Rehab Technology, said the group was grateful for the support of its complex rehab carve-out bill. "This is important to demonstrate to Congress that consumers will be harmed should complex rehab equipment be competitively bid," she said.

MDA is the second consumer group to officially endorse H.R. 2231. The ALS Association lent its support to the measure at an NCART press event on Sept. 25.

OIG Work Plan Zeroes in on HME Claims
WASHINGTON--Medicare claims from home medical equipment providers--including those related to power wheelchairs and those from providers in South Florida--will come under increased scrutiny from the Office of Inspector General next year, according to a work plan released last week.

Each year, the OIG, which was created by Congress to help maintain the integrity of services provided by the Department of Health and Human Services, compiles a list of issues related to health care on which to focus in the coming year. The portion of the 2008 list addressing Medicare includes 12 sections, among them HME and supplies. The list also includes sections directed at Medicaid and other CMS-related issues and investigations.

"Through our previous work, we have identified management and performance challenges facing the Medicare and Medicaid programs, most significantly oversight of Medicare Part D, integrity of Medicare payments, appropriateness of Medicaid payments, Medicaid and SCHIP administration, and quality of care in institutional and community-based settings," the OIG said.

The work plan lays out several areas related to HME that the OIG intends to focus on through audits, evaluations and inspections. The following areas are slated for review:

--Medicare claims for DME, prosthetics, orthotics and supplies furnished to beneficiaries receiving home health agency services. "Based on OIG interviews with home health patients, there were indications of unnecessary DME being ordered for beneficiaries receiving home health services," the OIG noted.

--Appropriateness of Medicare payments to DME suppliers that submitted claims with modifiers. On review, several regional carriers that processed the DME claims "found that suppliers had little or no documentation to support their claims," the OIG reported. "This suggests that many of the claims submitted may have been invalid and should not have been paid by Medicare."

--Appropriateness of Medicare Part B payments for home blood glucose test strips and lancet supplies.

--Comparison of prices for negative pressure wound therapy pumps. "We will assess the range of supplier purchase prices for the pump to determine how Medicare reimbursement compares to the median supplier purchase price," the OIG said, noting that between 2001 and 2006, Medicare payments for the pump rose 624 percent. A recent OIG study found that 24 percent of pump claims did not meet Medicare coverage criteria.

--Payment suspensions for medical equipment suppliers. The OIG will seek to determine if CMS has inappropriately made payments to suspended or excluded DME suppliers; it will also assess the agency's safeguards to prevent such payments.

--Adequacy of medical records and other supporting documentation used by the Comprehensive Error Rate Testing program. The OIG will consider appropriateness of payments for such items as power wheelchairs, orthotics and other supplies; whether documentation supports the claims; whether the items were medically necessary and/or whether beneficiaries actually received them.

--Appropriateness of Medicare reimbursement for pressure-reducing support surfaces.

--Medicare payments for power wheelchairs. The OIG will review documentation supporting claims for power wheelchairs to determine if Medicare beneficiaries received the required face-to-face examinations prior to receipt of the wheelchairs.

--Supplier purchase prices for power wheelchairs. The OIG said it will "determine the difference between the Medicare fee schedule for power wheelchairs and suppliers' invoice prices."

In addition, the OIG said it will continue to review claims submitted by South Florida DME providers. In a report released earlier this year, a review of DME suppliers in three South Florida counties found that 31 percent did not meet selected Medicare supplier standards.

The 2008 work plan also includes reviews of nursing home DME and enteral nutrition.

Results of the reviews will appear in its annual report to Congress next year, although some could appear in its 2009 report, the OIG said.

To read the work plan in full, click here.

Doctor Gets Prison Term for Role in Houston PWC Scheme
HOUSTON--Jayshree Patel, M.D., 63, of Houston was sentenced to 78 months in prison for her role in a far-reaching scheme to defraud Medicare of more than $21 million, United States Attorney Don DeGabrielle announced last week.

At a Friday morning hearing, Judge Vanessa Gilmore sentenced Patel to a 78-month prison term for each of her 10 convictions for health care fraud, with the terms to run concurrently. Patel was also sentenced to three years of supervision after the jail time and is liable for restitution to Medicare in the amount of $9,477,349.

A federal jury in Houston returned the guilty verdict in October 2006, convicting Patel; Charles Frank Skripka Jr., M.D., 66; Pius James Ekiko, 44; and David Dennis Brown, 48, of health care fraud for their roles in the scam, which involved several tiers of illegal conduct., according to a statement from the U.S. Attorney's office. Dennis Brown was previously sentenced to 80 months imprisonment, and Harold Horatio Iyalla, aka "Prince Yellowe," who cooperated with the government and testified against the remaining co-defendants, was previously sentenced to 50 months imprisonment. Sentencing for Ekiko is set for Oct. 22 and for Skripka on Oct. 29.

Similar to other scams in the Houston area--where massive PWC fraud sparked the government's Operation Wheeler Dealer initiative in 2003--the scheme involved the payment of kickbacks by DME companies to recruiters, who solicited Medicare beneficiaries to get power wheelchairs. The recruiters then referred and transported beneficiaries to physicians to secure false or fraudulent CMNs that the DME companies would use to bill Medicare for the equipment, prosecutors said.

The evidence at trial established Patel and Skripka had been hired solely to authorize motorized wheelchairs for beneficiaries who clearly did not meet the Medicare guidelines to receive such a device, the statement said. Patel and Skripka routinely approved wheelchairs for as many as 30 to 80 patients a day without performing a physical exam or ordering any medical tests. Recruiters such as Brown promised beneficiaries free scooters and the payment of $50 to see doctors Patel and Skripka. Brown recruited patients from Louisiana and transported them 350 miles to Houston to see the physicians.

DME companies, such as Pius Ekiko's Horizon Medical Supply and Yellowe's First Choice Medical, then paid the doctor's office $200 for each fraudulent prescription and CMN, and also paid Brown and other recruiters as much as $1,000 per patient in order to be able to supply the equipment. Suppliers such as Ekiko would then use the fraudulent CMN to bill Medicare for a PWC but would instead deliver "the significantly less expensive scooter to the beneficiary, according to the statement. Medicare paid suppliers approximately $4,200 per wheelchair, while the scooters that were actually provided were only paid at a rate of $1,600.

The trial revealed that Patel falsely certified in excess of 1,900 Medicare beneficiaries for a motorized wheelchair.

The case was investigated jointly by the U.S. Department of Health and Human Services Office of Inspector General, the FBI and the Texas Attorney General's Medicaid Fraud Control Unit.

Medicaid Enrollment Declines, but Only Slightly
WASHINGTON--Medicaid enrollment declined for the first time in nearly a decade, but only by a half-percent, according to a survey released last week by the Kaiser Family Foundation's Commission on Medicaid and the Uninsured.

However, state Medicare directors in 42 states said they expected to expand the coverage to the uninsured next year.

"In hard economic times, states are under incredible pressure to restrain Medicaid spending growth, but when fiscal conditions improve, states look to restore some cuts and really focus on improvements. States are turning to Medicaid to address the rising number of uninsured to help fill in the gaps for low-income families," explained Diane Rowland, executive vice president of the Kaiser Family Foundation and executive director of KCMU.

This fiscal year's decline in enrollment was driven by two factors, according to KCMU. First, states reported significant delays in processing applications because of new documentation requirements. This affected individuals already eligible for the program, they said. Second, states credited a good economy and lower unemployment for reducing enrollment.

Conversely, according to the survey, Medicaid spending grew by 2.9 percent, propelled by the decline in enrollment and the continued transition of the prescription drug costs for dual eligibles from Medicaid to Medicare. The survey said states expect enrollment and spending to increase in fiscal year 2008 as they move forward with program enhancements.

To revisit this news any time during the week, go to www.homecaremonday.com.

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