Ms. Allison Eydt
HCFA Desk Officer
Office of Information & Regulatory Affairs
Office of Management & Budget
Executive Office Building
Washington, DC 20503
Dear Ms. Eydt:
HCFA has requested an emergency OMB review of the paperwork requirements/bidding forms to be used in the Polk County, Florida competitive bidding demonstration project. As you know, the Office of Advocacy has questioned similar "emergency" actions by HCFA in the past because of a seeming pattern of avoiding administrative due process. This pattern of failing to seek public comment has resulted in an unnecessarily severe impact on the small businesses that HCFA regulates. Having said that, we appreciate your inviting our office to participate in the ongoing discussions with your agency, HCFA and the industry regarding the demonstration project and for the opportunity to comment on the small business impact of the paperwork requirements contained in the demonstration project.
We are pleased that HCFA has been willing to participate in these discussions. We are also pleased that there are a number of accommodations for small business designed into the demonstration project.(1) Some of these accommodations probably will make it easier for some small businesses to compete for the exclusive home medical equipment (HME) contracts. However, there are a few problems remaining that go to the issue of small business impact.
Before addressing the issues dealing with impact, we would be remiss if we failed to mention again the "big picture" issue relating to administrative due process. Although the recent discussions have allowed a valuable exchange of information by all parties involved, the fact remains that the 60-day comment period generally afforded to the public (not just those invited to participate) will be lost forever. It is the opinion of the Office of Advocacy that no convincing argument has been made to explain the need for an emergency paperwork approval process. As stated in our earlier comments of November 2, 1998, there is no statutory deadline contained in the Balanced Budget Act of 1997 (BBA)—only a sunset provision. An expiration date is not the same as a deadline for implementation. Moreover, HCFA has known about the demonstration projects for quite some time. It does not seem fair to request that OMB rush things through at the last possible minute. Having said this, we realize that this issue now appears to be moot inasmuch as the review process is moving forward.
Consolidated Billing
The consolidated billing program requires skilled nursing facilities (SNFs) to bill Medicare directly for services and equipment provided by various suppliers (e.g., home medical equipment suppliers). Currently, suppliers bill Medicare separately for services that they provide. The new billing system will translate into delayed payments for suppliers who must now endure any number of record keeping problems and go through a "middle-man"—an SNF—to obtain their payments.
In addition, claims for Part B items and services furnished to SNFs are currently processed by the Part B Durable Medical Equipment Regional Carriers (DMERCs), while under consolidated billing, the claims will have to be billed by the SNFs to Part A fiscal intermediaries. There is no evidence that the Part A intermediaries will be able to distinguish that the claims under the demonstration project should be Part B.
Implementation of consolidated billing has been delayed due to computer software and Year 2000 difficulties at HCFA, but the regulations will go into effect sometime during the course of the competitive bidding demonstration project.
It is not clear in how many ways competitive bidding will affect consolidated billing, or vice versa. It is clear, however, that problems will arise that need to be addressed now. Aside from the various impracticalities of combining the demonstration project with consolidated billing, there are also some potential legal problems. What happens, for instance, when an SNF has a pre-existing contract with a supplier for oxygen. If that supplier is not the successful bidder in the demonstration project, what happens to the contractual obligation with the SNF? The most sensible solution is not to include SNF beneficiaries in the demonstration, or to use some sort of grandfather provision allowing suppliers to continue providing service to pre-existing SNF customers.
Thirty-Day Bid Period
The deadline for submitting bids will be thirty days after the release of the bid packages. The bidder’s conference will take place a week or more after the release of the packages. This accelerated schedule leaves little time for suppliers to assemble and develop information on projected costs and anticipated utilization. The Office of Advocacy proposes extending the deadline to 45 or 60 days.
Value-Based Bid Selections
It is difficult to prepare a comprehensive bid package when the criteria for judging and weighting the bids is ambiguous. HCFA indicated in the December 3, 1998 meeting that they planed to select the bids that offered the best overall "value." That is, the lowest and highest bids probably would lose, and the winning bidders would have a good combination of price and service. Of the winning bidders, a weighted average would be chosen and result in a final price. The final price may be higher or lower than the winning bid submitted by a particular supplier. It is not clear how this regime will foster competition.
What is value? Is it technical ability? Is it the nicest office space? Is it the most service for the least money? How much weight is given to the location of the facility (e.g., physical separation from other businesses and whether or not there is a sign in front), versus the satisfaction level of current beneficiaries, versus financial reserves? When submitting a bid as a network of suppliers and one supplier rates unsatisfactorily, how heavily does that count against the rest of the network? Anecdotal evidence suggests that some of the suppliers in Polk County operate from their homes. They offer quality services to many satisfied beneficiaries. How will their value be assessed?
The criteria for judging bids should be outlined as clearly as possible.
Information Requirements
HCFA is proposing to require a number of sensitive financial documents from all bidders. The fact is that a large number of bidders will not be winners. If their bids are not even in the ballpark, what is the point in requesting confidential financial information? The Office of Advocacy suggests tiering the information requests. If it appears that a bidder is going to advance in the bidding process, then a further request for financial information would be appropriate.
The Office of Advocacy defers to the industry on the substance of the questions and other informational requirements contained in the bidding package.
Small Business Accommodations
At first blush, it might appear that all of the small business accommodations outlined in the December 3 meeting will enable small businesses to compete with larger businesses in the bidding process. On closer review, that does not seem to be the case. Having multiple suppliers in each zip code, grandfathering some products and working outside Polk County could all result in different payments for the same item in different zip codes. It is unclear whether the regional fiscal intermediaries even have the software capacity to recognize bid prices based on zip code. The entire claims processing system would need to be upgraded.
Conclusion
It seems to be a foregone conclusion that the competitive bidding demonstration project will move forward. The suppliers in Polk County will be moving from a free market to a closed system whereby the government will essentially set rates. Losers will be kicked out of the Medicare system, and left to try and find business elsewhere. This is a serious and complicated structure that requires as much clarification as possible. The Office of Advocacy is disappointed that such an important and significant issue is moving on a fast track.
This office would like to urge HCFA to consider the recommendations outlined herein in order to minimize the impact of the proposed demonstration project. Please do not hesitate to contact our office if you have any questions.
Sincerely,
Jere W. Glover
Chief Counsel for Advocacy
Shawne Carter McGibbon
Asst. Chief Counsel for Advocacy
ENDNOTE
1. HCFA outlined the following small business relief provisions: 1) there will be multiple suppliers in each category; 2) grandfathering of some products will be permitted (i.e., if a supplier currently provides oxygen, a hospital bed, etc. to a beneficiary, that supplier may continue to provide those goods and services to current beneficiaries); 3) the demonstration is limited to Polk County, so suppliers can continue to do business in other counties; 4) there are only 5 categories of products included in the demonstration comprising only 48% of all products; 5) JACHO accreditation is not required; 6) bidding in a single zip code is permissible if a supplier does not have the capacity to bid for multiple zip codes; 7) bidding for separate product categories is permissible; 8) small business networks/consortia with a market share less than 25% can submit a bid; and 9) the project is time limited.