Competitive Bidding - Does Anyone Win?

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By Mark DeHarde

Many in the current presidential administration and Congress view competitive bidding as an "All-American" answer to fixing our ailing Medicare program. They believe that competitive bidding saves money. They want to make it a key element of the current Medicare bill now making its way through Congress.

What exactly is competitive bidding?

Generally, it describes the process in which the Centers for Medicare and Medicaid Services (CMS) selects HCPCS codes for bidding by any supplier meeting the current Medicare supplier standards. The lowest bidders are awarded contracts to provide services exclusively in a certain geographic area.

Is this truly an "All-American" solution to saving money?

As with many terms in life, competitive bidding is a misnomer, because once contracts are awarded, it creates semi-exclusive geographic monopolies. Monopolies always seek to maximize profits by cutting quality because no competition is present to keep them honest. Informed consumers and professional O&P clinicians are they key to assuring that the highest quality care per dollar spent is received by patients and CMS.

If the lowest bidders win contracts, won't that save money?

No. Competitive bidding will actually reduce patient choice, lower practitioner quality, limit the choice of technology solutions, and erode patient outcomes. Patients will receive their care from the least qualified suppliers using the cheapest technology available. Why? First, because certain non-clinician suppliers with cost advantages will win contracts. Second, because prescribing physicians, referring therapists, and patients will have no choices for demanding better services.

Poor outcomes cost much more than the discounts CMS may receive for competitively bid contracts. For instance, if a post-stroke patient who can safely ambulate only with a properly designed and fitted custom AFO is provided with a poorly fitting "prefabricated" AFO instead, he or she may lose the ability to ambulate, which is a key predictor of heightened morbidity, mortality, and soaring healthcare costs. Both prefabricated and custom-fabricated AFOs, when properly fit and functioning, save money.

Does the current competitive bidding demonstration project in Texas measure the cost of patients who lose ambulatory status from ill-fitting, poorly designed orthoses?

No. The only measure of success is the amount of the discount, extrapolated to project future money savings. No patient satisfaction or clinical outcome measures are part of the definition for a successful demonstration project. However, they should be.

Does anyone in the O&P community think competitive bidding is a good thing?

I do not believe so. However, certain past precedents and arguments by some in O&P industry leadership make stopping the competitive-bidding train difficult, if not impossible.

What are these precedents and arguments?

Device-based arguments. For many years, O&P industry leadership has persisted in resisting competitive bidding based on "device" definitions and complexity arguments. The argument goes that you can't bid custom "devices" that require highly specialized fabrication skill and certain tools and equipment to make. These same arguments were the basis for establishing flawed qualified provider language as well.

Do technology advances really make certain "devices" so simple that anyone can supply them?

Hardly. Prefabricated technology and central fabrication advances have been driven by the need to deliver more function per dollar spent, as O&P fee schedules have not kept pace with general or healthcare inflation. However, clinical reasoning and judgment on the part of a qualified O&P clinician is needed more than ever to ensure that the prescribed patient outcome is achieved. For example, does a prefabricated AFO need to stabilize a joint to prevent falling or correct a gait deviation if that is its prescribed function? Of course!

In fact, prefabricated components and orthoses often require even closer attention to anatomic fit, alignment, and adjustment, since they were not made from a patient model. Also, central fabrication technicians working on custom items do not have the benefit of having seen, measured, or cast the patient. In the absence of appropriate clinical observation during fitting and follow-up, serious skin morbidity, falling, or other problems could occur.

Will larger O&P facilities benefit more from competitive bidding?

Often, smaller facilities actually have certain cost advantages because there are few true economies of scale in full-service professional O&P care. However, if larger and smaller facilities are forced to compete for contracts with larger DME suppliers, all will have to squeeze suppliers for discounts. Larger facilities may have more leverage to do so. Mostly, DME will increase patient care volume and profits by not providing the clinical services inherent in each HCPCS L-Code.

Will manufacturers benefit from competitive bidding?

Manufacturers of O&P technology that distribute through O&P facilities will certainly not benefit. Contract discounts will be passed along to manufacturers, which will have a chilling impact on new technology innovation and future patient outcomes.

Manufacturers who sell to every distribution channel and through sales representatives, and also bill Medicare, may be able to increase volume and market share through competitive bidding. However, the breadth of their product lines may limit this. The status quo may be preferable for them as well.

If competitive bidding in O&P is inevitable, can we offer anything our patients can live with?

Interestingly, in 1993 the General Accounting Office (GAO) actually identified (apparently with the help of O&P leadership), a small list of 11 HCPCS L-Codes that did not include any clinical services and recommended they be classified as DME or supply codes. Many of these codes are still in the L-Code fee schedules and could be competitively bid (and reclassified!). Any compromise must be based on the need (and payment by CMS currently) for clinical services to provide the intended patient outcome. Only the few codes without clinical services could be competitively bid without affecting outcomes.

What is the right thing to do?

Stop competitive bidding! It is a "loser" for everyone in the O&P community: patients, clinicians, prescribing physicians, referring therapists, manufacturers, and CMS.

What can the O&P community do to stop competitive bidding?

Stop using device-based definitions and arguments in O&P advocacy! Start contacting your congressional representatives and tell them about the wonderful clinical work and technology we have the privilege to provide. Warn them of the damage competitive bidding could inflict. Tell them proper O&P clinical care and technology are crucial to assure positive beneficiary outcomes-and happy constituents!

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