call the meeting of the health care committee to order today the house subcommittee will examine medicare's competitive bidding program for durable medical equipment and its impl quality costs and access and i myself five minutes initially for an opening statement as i think many of you know durable medical equipment prosthetics or thought existence applies d m me as we the acronym that coverage has been a longstanding issue of the subcommittee and i know it's an issue of great interest to many members of the house of representatives i want to thank our witnesses for being here today and i'm told by my staff that this is one of the most popular hearings she has staff with a witness list that was hotly sought after interesting lee so i will say to penny i the reason i was late was because i had a political science class from rutgers as you know in my district that was in the office and they wanted to know why you know with the how they put it with all the major issues of the day we were having a hearing on durable medical equipment and i explained to them that it had a lot of job and patients and that you know we were concerned about jobs and employment and so then i i quieted and when i told him that this was a very hotly contests that hearing would be a lot of witnesses and people that are a little surprised in any case i want to  specially recognize karen lerner and rich lerner of all care medical located in my district in new jersey karen will be testifying before us today about the concerns of medicare's program within the medical equipment community as you know the medicare program covers d m me under part b the supplementary medical insurance program and pay suppliers according to a fee schedule commonly furnished items under this benefit include standard and power wheelchairs oxygen concentrator and tanks hospital beds diabetic testing supplies and walkers these and other d m a e items are essential treatment to allow the approximately nine point eight five million medicare beneficiaries with disabilities and other conditions to improve or maintain their health and to live independently at home over the past several decades numerous reports of documented over payments in the d m v the schedule under medicare as such congress acted to limit these costs by creating a demonstration of the competitive bidding program in one thousand nine hundred seven its evaluation resulted in reduced costs in medicare by nineteen percent with no significant changes in access to supplies or changes in utilization  either supplies or changes in utilization were observed subsequently the medicare prescription drug improvement in modernization act of two thousand and three which many of my colleagues on the side voted against mandated that c m s adopt competitive bidding based pric ing for d m me on a phased in basis beginning in two thousand and seven the act mandated two rounds of bidding in m s a's followed by optional additional m s a after those rounds as i along with my colleagues witnessed there were many problems with the initial implementation coupled with broad industry concerns this resulted in a bill that i led through congress to both delay implementation and establish some of the reforms that are supposed to be part of the program today let me just briefly say that i've been skeptical of this program in the past i'm anxious to hear from c m s about how this program is being run and of course how the round one rebate is developing that being said i'm also aware the fact that c m s is carrying out the law as instructed by congress i know very well the concerns of the a suppliers and it's my hope that c m s has done their best to address some of them i think today will allow us to hear more about what c m s has done and continues to do to ensure that this program successfully reduces cost to medicare but maintains access  quality care for medicare beneficiaries it's obvious we can't ignore what will become clear here today and that is there remains a large constituency that is simply opposed to this program but meanwhile the fear of tremendous consequences persists from both industry and from congress so regardless of where this committee falls it's our job to keep a watchful eye of its development and beyond guard to make changes if necessary my record is class that caused me to be a little late today  had was very concerned about congress exercising its oversight authority that somehow over the last generation or so we've not done enough for oversight so i think we do need to do a lot of oversight and this is obviously part of that effort and with that yield to the gentleman from kentucky mr chairman thank you very much and we look forward to this hearing the opportunity to examine the impact of medicare's competitive bidding program for durable medical equipment and before i make a few comments about that i would like to in a very respectful way touch on some of the questions that you about the recently passed health care bill and almost all of them were unanimous in the fact that they did not understand the bill they did not know when regulations were to be expected when the bill would be completely into effect and asking all sorts of questions that we really cannot answer and i genuinely believe that with the benefit of the american people this committee did start having oversight hearings on that legislation because it impacts every single person in this country and i don't know of any legislation that's passed the congress since hearing about that legislation today where very much interested in learning how this new competitive bidding program this project is going to is it really going to save medicare money s not just for the fact of saving money but if we're going to continue to have a viable health care system for our seniors and we have to be concerned about the quality of care as well as the price they believe that this program is poorly designed they have concerns that the entire program could collapse under resulting in drastically reducing the number of home care cost and proving quality of care and i don't intend to be negative about this day but i'm delighted to have a hearing to have a better understanding of really is this going to work and is it going to be effective examine those winners are in fact capable of participating in the program and we only sent that letter a couple weeks ago so we have not had a response yet but i want to thank you again mr chairman for the hearing laxman thank you chairman polo for holding today's hearing on this important topic the health reform legislation contains many essential innovations to in progress improve the quality deficiency of care in medicare and in fact the whole entire health system today we're discussing an innovation that predates health reform competitive bidding for durable medical equipment the d m a benefit in medicare is an essential benefit for the nearly ten million seniors who use it every year it pays for wheelchairs to help seniors and persons with disabilities move around their homes and communities it covers diabetic testing equipment so that beneficiaries can manage their condition and avoid kidney failure or heart disease d m me as an indispensable part of an indispensable program and yet for many years payments for d m me and medicare have been the source of seemingly endless problems d m a has received truly remarkable overpayments take for example medicare paying ten times the purchase cost for oxygen equipment and d m the suppliers billing the program without even staffing their offices or document their claims gave us last year's famous sixty minutes program on medicare fraud these chronic problems are an embarrassment to a program that has been and must continue to be a model for efficient health care purchasing many suppliers are legitimate on a business people trying to deliver the best their best care they can to medicare beneficiaries their reputations are unfairly by the behavior of some of the other suppliers congress has acted many times to address these problems some of these reforms have been successful and some of them are just getting started competitive bidding for d n a is a market based bipartisan idea it's been tested successfully in medicare and demonstration programs under presidents clinton and bush and it was enacted for program wide adoption in the medicare prescription drug bill passed by a republican congress and signed by president bush this current round of competitive bidding is a rebid of round one which was delayed in two thousand and eight i supported that implementation problems identified at that time acting congress under congress direction the centers for medicare and medicaid services made many improvements to the rebid of round one those changes appear to have reduced confusion among suppliers though not opposition of the concerns raised by the supplier community regarding potential threats to beneficiary access to high quality competitive bidding has been tested successfully in medicare but not on a scale as large as what the real law requires c m s to implement over the next few years it is essential that we on this committee continue to monitor developments in this competitive bidding program as it unfolds that's why i appreciate chairman bill owens initiative calling this morning's hearing it is also essential that c m s aggressively pursue supplier and beneficia education efforts in the time before january one so as to minimize disruption to care with the start of the new year but i question those who say that we need to repeal the program now because of speculative threats to beneficiary access in the future where is the evidence of such a survey not found in previous experience with competitive bidding in medicare program tellingly those most concerned about beneficiary mr chairman thank you as far back as the balanced budget act of one thousand nine hundred seven congress has attempted to address the cost of durable medical equipment on american taxpayers in large part congressional action was prompted by conducting the program and some small businesses were disadvantaged those concerns i believe that companies should be competitive with market prices and not be protected by government at the expense of  patients at the same time reducing inappropriate transfers but certainly the idea holds promise and takes a fundamental free market principle and puts it into practice allowing businesses to compete to generate cost savings we all know something needed to be done prior to the medicare modernization act the work of this committee demonstrated that medicare beneficiaries were paying prices that were frankly too high however the execution of this attempt to address a very real problem has created problems of its own to say that the problem was poorly the program was poorly executed would be being unnecessarily kind fault lies with c m s the government accountability office has found widespread challenges to suppliers i'm quoting here including for timing the lack of clarity and good submission information a failure to inform all suppliers that losing business could be reviewed and an inadequate electronic submission system reports of winners who were unlicensed and unaccredited now close quote reports of winners who were unlicensed  unaccredited realistically unable to serve a geographical region and showed a wide spread reduction of the majority of providers in each of the competitive bidding areas a fee schedule based on these beds really cannot be considered to be a bal d schedule at all the first attempt at ran round one ran for two weeks it was stopped by congress famously on july fifteenth two thousand and eight because of some of these concerns the government accountability office called the results unclear and process that was deeply flawed i do not believe it is congress's job to guarantee a business income at the same time a winner unable to complete the job drives out competitors and leave the benefit what the program was supposed to accomplish  suppliers and information disseminated to beneficiaries is clear and consistent before we expand the bidding process and we also have to ensure that medicare beneficiaries quality of medical equipment that thank you mr chairman thank you for the hearing today you know medicare's competitive bidding program for durable medical equipment has been contentious to say the least and many issues in this competitive bidding programme are worthy of discussion it should be discussed we need to talk about access transparency accountability and the impact on small businesses and many of my constituents have very grave solid and valid concerns on the implementation of the program while the d m a e issues are worthy of discussion we continue to hear disturbing news about the implementation of obamacare news broke last week that i believe deserves urgent attention from this committee public opinion is heavily against the program the obama administration is dealing with regarding soaring health care costs and health and human services secretary sebelius is trying to bully insurance companies into we need to remedy that last week secretary sebelius what i think is a fairly threatening letter regarding rate increases resulting from new regulations and mandate in obamacare apparently insurers are supposed to explain the cause and effect of that program to their consumers including rate increases with one percent upwards to six percent in some areas the administration's attempt to muzzle private companies from detailed in countless hearings we tried this in tennessee i have tried to explain this to the president to the secretary and my colleagues on the other side of the tenn care was supposed to expand coverage and save money in t as tennessee learned comprehensive health care packages for all will not also be affordable government's resources to provide here are fixed as we learned intervention can exacerbate rather than controlled growing cost of have five legislative days at my state of the record without objection so ordered thank you and next is the gentleman from texas mr hall bankrupt other commision are in financial trouble of one bad as well in fact when asked about the questionable financial viability of counties who were awarded bad contracts lawrence wilson of c m s stated own the record that thirty percent of the bit income is a had single payment amount for portable oxygen oxygen tanks that allow patients to leave their homes and lead a normal life is a twenty one dollars a month while the actual cost to provide a liquid portable system is over one hundred dollars a month an additional  deliver in service cost brings actual monthly cost over one hundred fifty dollars a month providers would have no choice but to stop providing liquid oxygen which will result in the suffering of patients in a similar vein diabetic supply price reductions are averaging over the gentleman from iowa mr brayley competitive bidding sounds like would be un american to oppose something that sounds so important and yet competitive lit bidding will lead to the now disproven model of too big to fail in the durable medical equipment industry because companies that can lower margins and try to make it up on volume are going to drive providers out of the market in places like my state of iowa we know that's going to happen you don't need a ph d to figure that out the competitive bidding program has been plagued with problems from the beginning even proponents of the program readily admit that the implementation process was problematic c m s delayed the bid window deadline several times provided bidding instructions while the bidding window was open sometimes provided unclear guidance to bidders operated an electronic documents system that failed frequently and didn't notify suppliers that their bid information was incomplete put frankly this program has a poor track record now we have evidence of the devastating impact on beneficiaries like my constituents who depend on medical supplies especially in rural areas a recent study by dr kenneth brown a professor of economics at the university of northern iowa concluded that the competitive bidding program for d m a will have a significant negative impact on rural areas which are specifically excluded from the bidding process doctor brown reached this conclusion based on a study of the current state of the industry the financial results across the industry and the thirty two percent average reduction in reimbursements that is resulting from around one specifically dr brown believes that my home state of iowa will lose forty to fifty percent of its  suppliers in the aftermath of competitive bidding that is unacceptable to me and the people i represent now despite the data and track record c m s has moved forward again on its round one rebid and the problems are surfacing again and addition to questions about the impact in rural areas other questions have arisen about the level of transparency in the process so far and this is a bipartisan issue that almost one hundred fifty of my colleagues have raised concerns about i would hope that c m s would go above and beyond to provide full and open transparency into the bidding process which is a high priority of the president unfortunately though vital information is unavailable for both congress and the program advisory and oversight committee about how those rates have been determined access to care for beneficiaries and the impact on small providers for all of those reasons mr chairman i'm glad you decided to hold a hearing and i look forward to having many of these questions finally getting the answer they deserve and the last i would like to request unanimous consent to submit the following items to the record dr kenneth brown study on the impact of competitive bidding in rural areas testimony by jim toes a member of the board of directors of the center for manufacturers for our employees will suffer and our patients will stop or it doesn't have to be that way but it's critically important that we get it right i thank you for having the hearing and i yield back the balance of my time medicare medicare as competitive bidding program for durable medical equipment it's important for the committee to examine the status of this program which for years has seen the seniors something to the examination and that's what we're doing today we all know that durable medical equipment covers products that range from wheelchairs oxygen concentrator hospital beds walkers diabetic testing supplies these are all essential health care products and benefit these are responsible for paying the other twenty percent in addition to any unpaid deductible i'm familiar with every single one of these products with the exception of the diabetic testing supplies i had to get them for either my mother  father for both so i'm very familiar with who i went to who delivered what they cost what the rental costs were all of that because i was in charge of their care there is  inflated costs that hurt seniors directly and not just the medicare system as a whole we place a value on the importance of comprehensive quality care for the elderly in our country in the rates of fraud and  abuse that the g a o has uncovered in my view are sickening i just want to give some examples in two thousand and six the h h s office of the reported that medicare would allow seven thousand two hundred fifteen dollars and payments over thirty six months to oxygen suppliers for oxygen concentrator that cost five hundred eighty seven dollars on average to a to purchase in two thousand and nine  reported that in two thousand and seven medicare allowed four thousand and eighteen dollars for standard power wheelchairs the cost suppliers one thousand and forty eight dollars to acquire anyone that stays up late at night sees these ads the advertisements for wheelchairs and that guarantee that medicare picks up the entire tab for it so i'm not against medicare making payments for these things but you know what i think we all need to recognize that something is not right in this so this examination today is a very important one i think the early in the taters are positive that the new competitor the competitive bidding process is working i understand the suppliers don't like it but this is a new day we have the responsibility to extend the life of the trust is an area where like it or not we have to find ways to save money find new ways to do the same in a better way and save money and still take good care of  people we've had a system where people are used to it a lot of money on it i think that there has been documented abuse of that system so i hope what we learn is what's working what isn't and what we can approve upon as we move forward but i think central to this really must be a cost to medicare and the cost to seniors medicare doesn't pick up the whole tab for but as one member i'm convinced that we can to this in a much better way and save money i think that's already documented by the i g so thank you for having me chairman i look forward to the discussion in durable medical equipment competitive bidding program is great concern to both patients and suppliers in my home state of florida so i'm pleased today that we're going to take a closer look at what is what is happening  find themselves in trouble because they're losing bids to larger companies outside of the community according to the florida alliance of home care services out of area companies without experience  prices that are far below the cost of local services and then later walk away from their causing great turmoil other concerns around the programs actually targeting fraud in the right  taking away from our local suppliers that have a proven history today's hearing is critical to really getting to the bottom of these issues and let us get a better understanding that i'd like to ask unanim no problem with that any other member who wishes to do so thank you that ends our opening statements by members of the subcommittee so i'd ask our first child to come forward at this time if you  would let me welcome all of you and introduce each of you on the first panel beginning on my left we have mr lawrence wilson who is director of chronic care policy group for the center for medicare and medicaid services with u s department of health and human services next we have the honorable daniel levinson who is inspector general in the office of the inspector general again with the department of health and human services and lastly is miss kathleen king who's director of health care for the s government accounting accountability accountability office i think you know we we try to keep opening statements to five minutes and then those statements become part of the record and of course if you want to submit additional for print statements and writing for inclusion in the record you may do so and so i'll start with mr wilson good morning chairman sloan ranking member whitfield and distinguished members of the subcommittee i'm pleased to be here today to discuss the durable medical equipment that its orthotic supplies competitive bidding program this important initiative required under the medicare modernization act of two thousand and three and recently expanded under the affordable care act will reduce beneficiary out of pocket costs improve the accuracy of medicare payments help combat fraud and ensure benefits react to hype quality items and services c m s initially implemented the program on july one two thousand and eight in ten metropolitan areas after two weeks of operation the program was delayed by the medicare improvements for patients and providers that c m s has examined the program closely including lessons learned from the initial round of bidding in two thousand and eight we have made the changes required by law and many other significant improvements and are prepared to implement the rebid of the program on january one two thousand and eleven we will do so in a way that ensures a smooth transition for benefits trees and suppliers while providing affective oversight and monitoring c m s has worked closely with stakeholders including its external advisory committee to design and implement the competitive bidding program in a way that is fair for suppliers and sensitive to the care needs of beneficiaries for example the program includes provisions to promote small supplier participation and numerous protections for beneficiaries as designed the program results in a large number of winners so that beneficiaries have a choice and there will continue to be competition among contract suppliers on the basis of customer service and quality in addition qualit standards and accreditation combined with financial standards provide safeguards to support good quality and customer service while acting to weed out illegitimate suppliers and interim level playing field for suppliers competing under the program  made a number of important improvements to the program in preparation for the rebid in nine areas of the country these changes provide for a fair process and more effective scrutiny of suppliers qualifications and the integrity of their bid for example c m s initiated a comprehensive comprehensive bitter education campaign much earlier in the process c m s developed a more user friendly online bidding system which did not experience the glitches that troubled bidders in two thousand and seven  mithya mandated a process to alert bidding suppliers if they were missing certain financial bid documents this was very effective with three quarters of suppliers taking advantage of the process g m s verified bitters compliance with all state  requirements early in the bit evaluation process and c m s improved its process for evaluating bids to ensure they reflect a bonafide amount that a provider can provide an item g m s also carefully reviewed the capacity of the supplier to these process improvements also tend to favor local experienced suppliers for example seventy three percent of contract offer was made on july one went to suppliers with a history of providing a specific product in the local area a full ninety five percent of offers went to experience our experience with around one rebate has also shown the competitive bidding has the potential to bring value to medicare beneficiaries and tax payer compared to the current schedule in fact average savings across the nine metropolitan areas is thirty two percent this translates into seventeen billion dollars in savings to medicare over ten years and another eleven billion dollars in savings for beneficiaries through lower co insurance and premium reduction as a specific example in miami the price of a standard power wheelchair will drop twelve hundred seventy four dollars in the coming weeks we will complete the contracting process and publish the names of the new contract suppliers at the same time we will ramp up our outreach and education efforts focusing on beneficiaries referral agents suppliers and others as with any new program we recognize this is a change for suppliers and patients we will monitor implementation closely and are prepared to contractors and medicare call centers to address and track questions and concerns we will also survey beneficiaries and perform active claim surveillance and ensuring bent medicare beneficiaries are receiving quality care in summary will be diligent and thoughtful in our implementation of the program and continue to work closely with our stakeholders again i appreciate the invitation this morning to testify before you and would be happy take any question thank you thank you m pays on behalf of more than eleven million beneficiaries at a cost of more than ten billion dollars a year in two thousand and nine c m s estimated that more than half of the claims were paid in error the vast majority of medicare suppliers are honest and well intentioned however even a small minority of unscrupulous suppliers medicare funds and beneficiaries of red oh i work has demonstrated that this benefit is particularly market prices although the accounts for just two percent of medicare spending approximately fourteen percent of all ids health care fraud investigations involve these investigations have found the criminal set of store fronts and fraudulent medicare for millions of dollars then they close up shop and reopen a new location under a new name and repeat the fraud entry into the d n a has been an oversight enforcement of medicare and roman standards has been  resulting in wasted increase beneficiary co payments and making fraudulent building more lucrative for example twenty zero seven zero i found that medicare reimburses therapy based on a purchase price of more than seventy thousand dollars however suppliers paid approximately thirty six hundred dollars for new models likewise in two thousand and seven medicare paid about four thousand dollars for a standard power wheelchair cost of pliers about a thousand dollars to acquire our investigations  and millions of dollars in fraudulent claims for power wheelchair is an awful lot of devices the gang members involved had previously been convicted of charges ranging from assaulting our colleagues violations in response to our taking strong action to protect the integrity of the information earlier took several steps to make financial documentation instructions clear and notify suppliers when their financial documentation was incomplete in response to members five minutes generally for each of us and i'll start with myself my questions are very to you mr wilson you've probably heard before many suppliers have expressed the belief that winning suppliers will be unable to meet their contract performance requirements in effect you know happens a lot now with the economy that you know they offer up a suicide bid just to stay in the program without any actual ability to deliver on their promises or maybe they think they can deliver but they can't ultimately have you seen examples of what i close suicide bidding and do you have any protections in place to guard against inappropriate  chairman i don't know that i've seen an example of a suicide did we have a process in place to determine whether or not suppliers are qualified licensed accredited to meet all the standards required by medicare the second part of the process deals with whether or not their bids are bona fide and yes we have found that our bonafide we do have a process where we analyze request information such as invoices from suppliers to show to prove document that they can meet a certain price and we requested that information and verified whether or not there were what we would term a lowball bid unsustainable bid know i know you said you have a plan but as another fall will referral agents and i guess you know would there be any kind of follow up where people will be able to report problems and you know you find out about those problems as opposed to just looking at the plans well i think that's a very important part of the program i think the key here for us is ensuring that we have enough qualified suppliers in place to provide quality services to our beneficiaries that's the key to the entire program our ability to educate communicate with folks that are involved in that process like referral agents including physicians hospitals discharging workers workers state health insurance programs that is all part of our communications plan that we will ramp up we've already started but we will ramp up towards the end of this month when we release the list of contract suppliers it's a very key part of the program to the extent that either a supplier or a beneficiary has a concern we will be educating all of these entities on where they go through direct ma l through documents web sites again talking with partner organizations to deal with beneficiaries so that a beneficiary will know to call one eight hundred a complaint would get routed we would track that complaint  we believe we have offered contracts to more than enough suppliers to provide access to beneficiaries in these nine areas the core principle in the program with respect to offering contracts is to set a demand target that's very very high so that we can guarantee we have enough suppliers so if a supplier has a problem maybe we lose one maybe their number gets revoked we will still have enough suppliers if we need to add a supplier we can certainly go out and offer a contract my second question is more of a local you know referring to my state in the medicare improvement for patients and providers act two thousand  gave c m s use or just split metropolitan statistical areas more than eight million people into separate bidding areas new jersey is what is in one of these very large metropolitan areas it includes new york city northern new jersey long island pennsylvania you know like maybe twenty million people altogether i think because the geographic area and the number of people is so large it's essential that the m s s be divided into market areas m s a i should say be divided into market areas that better reflect the prevailing medical practice and it's my understanding that c m s has proposed to subdivide this market into five smaller competitive bidding areas is that correct and if is it true that the smaller areas well i want to know if it's true and secondly if the small areas are going to better reflect the differences between you know southern new jersey northern new jersey new york if you want to respond to th sure it is absolutely true mr chairman we did discuss that issue with our advisory committee we received advice we put our proposal in the in a proposal this spring and have received comments and are looking at the issue right now so you made a decision to subdivide the market we have we have proposed a methodology enroll in april to subdivide the market and we do believe that is the correct thing to do here there and how is that being done to reflect the differences you know as a new jersey versus new york or south jersey or whatever right well the issue that we're dealing with is really the new york metropolitan area so we're looking at new jersey counties that are west of the city as one area and jersey counties that are immediately south of the city as another area we also added in pike county pennsylvania to  to the western the western new jersey counties i don't think people like that but so we'll be looking at that aspect of our proposal very closely but we certainly did look at these market areas trying to deal with trying to develop more homogeneous market areas that would better serve suppliers ability to deal with patients across a smaller area and i don't want to take any more time but i may follow to go to watch and i thank you for your testimony we appreciate it very much mr wilson let me just ask you critics of this program have noted that the first effort second will be different well i can certainly talk to some of the issues and concerns from the two thousand and eight round of bidding that i think we have tried to address and i believe that we have addressed consistent with the  testimony today but there were a number of concerns particularly with regard to how the agency communicated information about betting the timing of communication that perhaps contributed to confusion about what the rules were that something that we've acted to fix in this round we didn't revise instructions midway through the bidding process this time as we did last time i think that was very important to provide a level playing field for all suppliers involved in the bidding the online bidding system last time as i mentioned in my testimony did not work it was frustrate frustrating suppliers would enter information think they did and when they went back it was gone there's a lot of information associated with the bits and we recognize that was a frustrating process we fixed that we did not have those problems this time those were legitimate concerns that needed to be addressed we did not validate licensing up front in the process in two thousand and eight so we looked to verify licenses afterwards after the bids were submitted what that may have led to is speculative being submitted by certain suppliers that maybe came in from out of state this time we said you need to have your licenses upfront they have to be in order and all of your other qualification qualifications in line such as accreditation so that that tended to favor local suppliers since they they really just need to be have local suppliers tended to be the ones that had local licenses and so those are the ones that that i think benefited from that policy i think the scrutiny that we placed on did this time it was more that we heard a lot of concerns about one whether there would be too many lowball bids coming into the process again we looked at that very closely revised our process this we requested more information in terms of an explanation of suppliers where we found them to be low we looked very closely at some of the invoices that were provided and when a supplier could not justify the level of their bid if it was we would discard that bit let  a bid for all areas in the wheelchair category and only about ten percent of his business was really related to wheelchairs and he evidently was offered  he won the bid in basically half of those ten areas and he deliberately submitted a low bid according to the article i read and when you all offered him the contract he refused the contract are you aware of that particular situation yes congressman i'm aware of that situation i've looked into it at the outset i'd say i can't talk about specific information in that supplier we consider bit information via terry i will say that everything in that article is not accurate the other thing that i'd say is looking at the article the supplier was very clear that he felt his bid was a fair price to quote unquote cost of goods in fact that leads to higher gross margin and a lot less labor than your average complex rehab so he thought he had a profit in there and that that was a  you mr wilson you claim that the overall savings to medicare beneficiaries will total twenty eight billion dollars over the ten years without compromising quality or involved in their care complaint process we hear of concern we'll have a process in place to act swiftly to address those concerns there are certain underlying features of the program which address quality requirements on suppliers in terms of accreditation and quality standards other parts of supplier standards which apply and what the competitive bidding program comes a more focused oversight effort on suppliers that are involved in the program and have contracts so we believe we have the mechanisms in place the infrastructure in place to deal with individual benefits and more systemic beneficiary issues one thing that is different in the program from two thousand and eight is we'll be doing active claims surveillance on the claims as they come in to be able to see who's providing the care who's getting the care and whether or not there are any issues or concerns we can look in see things like are there more emergency room visit are there longer hospitalizations are there some of the kinds of quality problems that we might be concerned about so we will be looking very closely and we will have a plan in place in the resource in place to deal with problems as they ar beneficiary protections are contained in the program there are a number of important benefits free protections i think one of the key ones is something that was provided in the law it's called grandfathering so for many many  suppliers and many beneficiaries of the existing supplier whether or not even if they don't want to contract they can stay in the program last time in two thousand and eight we saw that over ninety percent of oxygen suppliers and of course oxygen patients are the ones that we would be most concerned about in terms of any quality adverse outcomes so we expect that there will be a lot of grandfathering we have selected a number of suppliers to be contract suppliers of the beneficiaries eleven choice if they don't like care somewhere they can go somewhere else we have a safety net provision provided by congress called the physician authorization provision is the physician for the patient feels a specific brand or mode of treatment is required that has to be provided under the program by contract supplier antidiscrimination provision we require suppliers under the program to provide the same treatments the same items and services brands models to their medicare patients as they do for their private patients we have other provisions which require transparency so we will be publishing and updating quarterly all the brands and all the models that each supplier contract supplier provides so that beneficiaries caregivers for all agents can look and see what types of products and brands they won and sort of vote with their feet and go to suppliers that provide what they need and that also creates competition around the quality of the services provided there i mentioned and then as i mentioned oversight and monitoring efforts will have in place participate in the program we feel like we've done a lot more than that we worked with the small business administration to put in place a definition of a small supplier which is something less than definition or a lower threshold than a small business because many suppliers are very small mom and pop entities we've built some policies around that definition we actually have what we call the thirty percent target really set aside where we make sure that in every auction in every bid in an area for a product category we insure thirty percent of the suppliers meet that definition and if they don't we add small suppliers we found that in with respect to the current contract offers that we've made we've exceeded that target it's about almost forty eight or forty nine percent are small suppliers that meet that definition we allow small suppliers to band together as a network to meet all the requirements under the bidding program those are just a few of i think the most important provisions another key one i'll mention is that we have the way the policy works the way the bidding program is structured results in multiple suppliers so we try to select lots and lots of suppliers ninety two oxygen supply supplier contracts are offered in miami i think forty two wheelchair contracts offered in riverside we try to make sure there are lots of suppliers so that beneficiaries have choice more suppliers can participate that the frequency i'd have to get back to you with respect to some of the details of the survey we will be conducting a consumer satisfaction survey we've already done a pre implementation survey to provide a baseline so i think we'll be moving forward quickly i'll provide you specific information on when that follow up survey will occur but i think there are many other things that will be doing in terms of monitoring we will be collecting information from medicare one eight hundred from our program so that we can review complaints analyze complaints to see if there are systematic problems i already mentioned the active claim surveillance that we'll be doing so we're really trying to look on a broad basis using a number of different tools some of the issues and concerns let me let me just follow up on that line real quickly here also what will happen if  concern with respect to a particular supplier not meeting the quality standards or doing something in conflict with the quality standards that call for a certain type of targeted intervention if we found that there was a broader base committee the delay of the competitive bidding process and it just underscores how would we circumvent the normal process how harmful it is it's harmful to business to patients and even the federal agencies are left trying to trying to make sense out of what congressional intent was so this committee probably didn't play a role in allowing them to come to the floor without any discussion under suspension it was wrong it was a mistake and i think going forward this committee needs to assert it authority at the subcommittee and full committee level i'm very grateful to our witnesses for being here today mr wilson i know that the sec you've heard from several members that here we are now we have the six month anniversary of the health care act coming up upon us next week the secretary's going up with some reeducation that she talked about in the newspapers last week we haven't heard from her i know she can't just show up to this committee she has to be invited i have here a copy of a letter it's actually the second letter that mr barton i have submitted to mr waxman asking him to invite the secretary to come to the committee i would ask you today sir would you be kind enough to carry a copy of my letter to mr waxman asking him to invite the secretary so that she may be prepared for that some of these competitive bidding contracts i mean they're going to be the the amount of money coming in may be substantially reduced and that may be that may be entirely appropriate but have you at h h s done any studies as to the market feasibility of remov this amount amounts of dollars from the from the business models of these companies that are that are the suppliers we've certainly examined we've certainly examined the pricing structure in some of the business models closely so have you done studies as to the market feasibility i don't think i don't think we've done what i would call or describe as a markets disability study the way a corporation might conduct such a study wants to launch a product but the  the information that we have now from suppliers that many of the items under the current schedule are very overpriced i don't and i don't disagree with that at all and shame on us as a committee shame on the federal agencies for not having address this problem now mr levison since you're here and i'm so glad you're here i don't really understand why you're here but i'm glad you're here because we need to have we need to have this discussion and in fact german following that oversight and honestly it's been lacking over the last three and a half years and and i just hope going forward we can we can get that we can have that happen you know the television stories on  one of the most promising efforts just for the last couple of the strike force effort that has developed between our office in the department of justice with the help of c m s to close down fraudulent operators especially in south florida the program is effective in southern returning millions and potentially billions to the trust fund so that this is actually a very important turnaround for the program and i'd be happy to provide more detailed data when i would be grateful for that  testimony particularly the idea that over payments which we try to eliminate because they represent waste on their own terms actually contribute to and exacerbate fraud if we take paid too much for something we not only waste money on that purchase i think we're at the same time creating a magnet to attract bad actors and we can't forget as we're e small businesses and do a very good job that i don't think that's what this hearing is about that's certainly not my intent but i am struck by the amount of money that you said in your first few sentences that was it twenty twenty billion dollars or ten billion dollars a year that's i wanted you to restate that because i think everyone needs to hear that number again and here are my questions to you could you give us any examples of the nexus between overpayments and fraud and i think that you can probably do that off the top of your head and talking about a failure very often of documentation and the problem with not getting accurate documentation of course is that you really can't account for exactly what was provided and for what reason  genuine come into the marketplace and indeed we do have a lot of pricing reports that indicate that there is a significant disparity between what c m s allows and what the actual acquisition what do you know and then and what is your opinion on the fact that medicare plans to reimburse portable oxygen systems an average of twenty one bucks a month for as many failed at the patient  find this equipment for a lot less than we pay if you look at our overall payments and an auction in terms of the monthly amount we're paying excessively for oxygen and i think that demonstrate that and i'd be happy to provide more specific information about the prices that you're quoting i just don't have those prices in front of me and in what location that's fair and we can always ask you for my letter and you would respond wouldn't you but we'd be happy to submit them to you after the he have problems with contracts that area companies are going to have no experience i don't think we saw a lot of those companies bidding in this process i think of you financials you've said that haven't you i did not you did not say that that quotation i've seen several times over the last few days it's different in every direction and i'd like to submit a statement for the record i could tell you what i was referring to if you like sir like to is that about seventy two seventy three percent of all contract offers went to experienced local suppliers those with experience in the product categories another eleven percent went to  experienced local suppliers that may have provided a different product category another twelve percent went to suppliers that were experienced in the product category but came in from the outside area that leaves about five percent that i don't have information on i expect a lot of those are mail order diabetic supply outfits that are set up out of state somewhere and because they operate through the mail the gentleman from florida ms castor thank you mr chairman and thank you to the witnesses very much for your helpful testimony the benefit of having durable medical equipment suppliers and local communities is that the companies and their staff are familiar with patients in their neighborhood and are accessible for patients and their families in the distance or service for their equipment so a lot of the frustrated frustration you hear comes from all across the country in the small businesses aren't the fraudulent companies have been working very hard in providing good service companies bankruptcy to win thirty to forty percent less than current reimbursement please explain this to me what kind of financial vetting process do you have that allowed bankrupt companies to win thirty to for them to try to win these contracts because the competitive bidding process is so unpredictable at the outset i would just say congresswoman that i'm not aware of any bankrupt companies winning contracts i know there was some discussion in the trade press about a particular company that had a high debt talking about potential for reorganization several years ago they may have been considering reorganization they may have been trying to pressure the creditors to give them a better deal i don't know we do know that we looked carefully at their financials we same type of financial ratios that banks and other financial institutions use to judge the viability of an entity this falls under our financial standards is the reason why we collect the documents such as tax records credit history and things like that so we did look at all those things for every  here dealing with some of the issues that the inspector general mentioned already in terms of documentation for claims there is a new requirement for face to face visit with physicians to document physician orders for d m me i think that's competitive market based conservative the policy people you have to implement in the private practice of payments happens for the most part before the checks get sent because the private sector doesn't want to lose the money and we spend money and sometimes our constituents have terrible times because they're fighting with the auditors of the insurance companies are  for the check to be set our system we send the check we're a fee for service we send the check and we can send the check for multiple years to one single mailbox billions of dollars in every candidate who runs for federal office when they talk about the funding problems of medicare what do we say we're going to clean up waste fraud and abuse and what  point to point to this and that's the frustration and i think it's a bigger problem than just getting our our crossed and our eyes dotted it is a fundamentally different system of a one payer system a fee for service that only worries about the expenses after the fact versus someone who's watching this and making sure the checks going the right place before it's a government model versus a private sector competitive market model that's the macro debate and that's kind of why we're here but that's our discussion you guys implement and so we appreciate the and it would be good for the secretary to come talk to us and now i'm on record at every hearing asking for that so i will do that now and then i'll do that this afternoon and i will continue that record of saying you know it's about time we had someone who wanted to talk about this law because no one wants to and i would pretty much argue that during the whole six weeks of break no one was talking about it but we were talking about it but no one else to go to mr wilson and mr wilson do you believe that a code that does not represent a distinct homogeneous group of products should be included in competitive bidding as a general matter yes it should be included in the final rule for competitive bidding stress product categories would include items intended for similar medical condition do you believe that the intended uses of mobility and prevention and treatment  groups from the disabled veterans to the christopher reeve foundation have raised concerns over cushion and mobility equipment being lumped in the same category and then you exacerbate skin type injuries and embrace and really huge problems because they are in a universe of separate  m give it if that's the case shouldn't we reconsider the inclusion of these type of products in the  future i don't i don't personally see a reason for reconsidering their inclusion that said we have not posted made a decision on what items will be included in round two but for this round i think it's important that they be included we think that the prices are excessive well let me let me end up the letter from mr langham and one of our colleagues one of the really well respected members who who has led us in a new era of understanding the disabled community i think has a very strong position and i would hope that the administration would listen to him and other people who feel that this policy is harmful and i and thank you mr chairman mr wilson i'm going to start with you i wasn't here when competitive bidding was made law but isn't it true that there's a lot of ways that you can address the issues of waste fraud and abuse that wouldn't involve competitive bidding there are certainly many ways for addressing this problem and in fact in mr levinson's written testimony that he's provided to the committee he documents a lot of the work has done to try to address the enormous problem we have in health care delivery with waste fraud and abuse and at the solution of his recommendations he notes it is critical that these and other program vulnerabilities be addressed through competitive bidding or otherwise and that otherwise is a huge sector of healthcare delivery that involves diligent oversight and management you would agree with that that is certainly one of the areas that we would need to pursue in order to solve this problem has c m s to your knowledge done an analysis of the impact of the competitive bidding process not just the initial phase but as it is intended to be implement throughout its entirety on rural health care delivery we have not done that type of analysis to this point because rural areas are excluded from the program we have not yet done will making on how to expand the use of those prices by two thousand and sixteen where we would do such an impact analysis do you understand why patients enroll america have serious concerns about a shrinking market to meet their healthcare demands if the impact of the long term competitive bidding process resulted in the shrinking of available suppliers and unwilling ness on the part of some of the remaining people who are eligible to participate to go into areas where bol you will not allow them to achieve the type of margins they could have factored in when they presented their initial bit application i think that what beneficiaries need is choice and quality and i think that can be sustained under this program are you aware that in a host of other purchasing opportunities that people in rural america have substantially fewer choices in the marketplace then people in more populated areas i think it's certainly true that there are challenges and real healthcare have you ever lived in rural america mr wilson i have not well i have i grew up in a town of fifteen hundred and most of my district is considered rural america and we see lots of policymakers who come to committee hearings like this and try to tell us how they're going to fix the problems in rural america but i can tell you that for those of us who deal with these problems on a daily basis this is more than just paranoia this is what we have seen happen on the storefronts and shops in our cities and towns it's a problem where every time a drug store goes out of business in a rural community denies access to people who need durable medical equipment every time a provider who is furnishing services to those small town hospitals and health care providers once they go out of business we are confident maybe as c m s is that the big players are going to be willing to come to our part of the country and continue to compete for our health care dollars do you believe that a decrease in the number of suppliers in rural areas could impact accessibility and timeliness of receiving durable medical equipment i'm not sure that we're going to see a decrease in suppliers in rural areas i think we have not moved forward with the authority that we have to really was interested in a number of the comments that you made in your report i want to focus on a few of those you appropriately and noted the challenges that we're facing in health care we talked about this a lot on this subcommittee in dealing with what some people have identified as a five hundred seven hundred billion dollars problem in this country not just in medicare and medicaid but across the health care reimbursement system and waste fraud and abuse and you've identified enrollment payment compliance oversight and response issues that need to be addressed one of the things you talked about was that d m is one of those areas where we see problems with people getting in at the entry level and then it becomes hard to monitor them once they're set up and doing business but i guess i'm a little confused because if the purpose of having a certification requirement that a good or service is medically necessary before it can be prescribed and paid for by public or private reimbursement system why is it a challenge for anybody receiving medicare payments whether they're d providers pharmaceutical providers or other health care providers to be identified at the point of entry and be held to a level of accountability that protects consumers of health care and well over time is certainly become a parent that it has been too easy to get a provider number in rome and has been a fundamental flaw for many years in terms of gaining entry to the program when our auditor is about to it is for example went to south florida couple of years ago and just banged on doors or tried to bang on doors because actually there were no doors to bang on we found out about one third of the fifteen or sixteen hundred d n a providers in south florida those who had registered and got a number didn't make even the most basic standards for being able to gain entry to the program like having a physical location like having regular hours staffed by somebody could identified you really solve a lot of the consequential issues that we have to deal with when it comes to compliance oversight and response doesn't necessarily deal with pricing methodologies with being able align prices so that they better reflect market reality and some of our pricing reports indicate that medicare indeed too much and you know we have done some comparative work not just with which one might argue is a different kind of structure but with the federal employee health benefits program as well and with internet pricing so the pricing issues are perhaps somewhat related to enrollment but i think that the enrollment issue  to the extent that we can get on top as a as a department of the enrollment issues that will solve a lot of the of the blatant fraud issues and again fraud is is a segment of a of a larger of a larger issue but one of the most promising aspects actually of the affordable care act is the mandating of compliance programs for health care providers and i think by having compliance built in to medicare going forward across a wide range of industries will be able to do a much better job of protecting taxpayer dollars and actually giving value to beneficiaries all right thank you your time i yield back next is the gentleman from maryland mr  schedule that was put in place back in the late eighty's that has continued to inflate over time and therefore bears much less connection any kind of rational connection or reasonable connection to the actual pricing structures out there at least with respect to some of these durable medical equipment items that's correct and the on reasonable relationship is it paying a lot more in many instances than one could justify just looking at the market so the competitive bidding process is a response to that we talked about what some of the issues are with that process not a couple  questions one was where else has c m s done this kind of competitive bidding as a response to similar kinds of issues and what's  experience been with that and what are the reasons you go the competitive bidding route as opposed to just working harder to come up with a  schedule that bears a more reasonable relationship year in and year out to the underlying market and price structures that are out there i think this program's pretty unique for medicare there has been a lab demonstration on competitive bidding there i think really not many other examples would be even close to this type of program and i think going to your second question this program has a unique set of challenges in terms of setting prices and calculating or competing and the schedule there's a lack of data on what items actually cost so i think one of the reasons for competitive bidding was going to the only place to get to a true market price which was the supplier and drug pricing is another place where the  data sets are pretty opaque in terms of understanding what they do i'm less familiar with that program it doesn't fall within my purview but you know i construct schedule at that time then it is now or that was the method to be used at that point with all the flaws or historically the only historically there was a very reasonable quote unquote reasonable charge based payment system sensually some discount off charges provided by supplier that was the only information available those charges were in many cases inflated or distorted but they were locked into the schedule for twenty years in terms of the details of the competitive bidding process i don't know enough about how it's set up but are there are there and reasonable to provide the service there is a ceiling which is the current schedule ok thank you mr doyle thank you mr chairman i want to thank the sub obviously i've been hearing from many of my constituents in the pittsburgh area that i think very valid concerns and mr chairman i'd like to have more questions and i have time for so i'd like to submit questions for the record to maybe get them answered one able to be viable three years down the road at some of these prices that they're competing with but before i get into that i have a specific question on glucose testing strips i want to ask you i have a lot of diabetes is a big problem in  strips are unique to the machines that they use just like razor blades or a certain razor razor handles and i understand that providers are permitted to provide a monetary incentive to patients to switch monitors suppliers are going to be able to furnish the volume of specific products that will be demanded through the competitive bidding program for example c m s know for instance suppliers who contract for pittsburgh will be stocking and selling strip me what happens that let's just say for instance if i have seniors in my district that have a monitor that needs a specific test strip and it's not available what are their options their options are several if it's not available and we certainly hope and that's really the concern that we have about this quality and access and i know c m s is serving customers regarding the level of service and quality of care changes my question is what happens if there is an identification of a change work well first of all we're concerned about any concern whether it's a systemic concern or an individual beneficiary concern and we'll be collecting information and have infrastructure in place to deal to evaluate those and deal with them the other thing i'd say is that we are evaluating the program as we move forward i mention that we're going to be collecting claims data active claims surveillance as the program moves forward so beginning very soon after january when the claims start coming in we'll be able to see what's going on with the benefit or whether they're going to the doctor's office the emergency room other types of problems and if you're seeing if you're seeing these problems in quality of service and access how we respond to that how do you change what you're doing well we will have to examine the particular situation and see what the problem is we'll have to identify whether it's a particular problem with the suppliers not meeting quality standards whether it's suppliers having other types of difficulty  mention to you we have an unusual lot of an unusual number of members actually who said they're going to submit written questions which is fine we try to get them to you within ten days the clerk you know try to get them to within ten days and then of course we'd like you to get back to us as quickly as possible i don't think i've ever had a hearing where there were more members who said they were going to submit written questions so thank you very much and i appreciate your input on such an important subject thank you and i left the second panel looking forward let me welcome the second panel and introduce each of you again from my left is them is karen lerner who is a registered nurse with wound care support services and she's also a rehab specialist at all care medical  where is all care medical ok terrible new jersey my witness i mentioned it earlier and i was hoping that i was going to mention that again thank you and then mr alfred ship in detroit and dr william scanlon who's a health policy consultant where you from dr scanlon from washington all right as i think i mentioned before try to keep everything the promised savings and advantages of a competitive bidding program that would sound that what sounds too good to be true is too good to be true this ill conceived program will single handedly destroy the whole medical nurse and with direct experience in the home care medical field i believe this program will increase costs rather than save money patients will suffer through limited access to clinically appropriate equipment and services they will reduce the quality of equipment the center for medicare advocacy takes a wait and see approach to the competitive bidding process we acknowledge that it is a program that is and stream the complex and confusing our beneficiary  clients have been the victim of many efforts and misinformation they've been frightened and confused about what this program means  continue to worry about the complexity of the program overall and the impact of that complexity on the provider wired which is the patient and us access to specific services and items of d m me that people might assure beneficiaries that where there might be fewer suppliers in this competitive bidding area that that will not jeopardize access to to access some major concerns that we have is that we do see that there is put forth a strong beneficiary education and access program and that the timing of that education efforts be very clear and specific as different phases of the competitive bidding process are rolled out this is such a critical thing because over time this approach will read if i'm how all of the is going to be meted out and i think that raises a very significant enough to consider the point we also need to have better information on the c m s the web site for the medicare beneficiaries medicare it's difficult to find information about the competitive bidding process we also need better information points to access written material and additionally we need more clarity about the specific items that fall within the initial rollout of the program in two thousand and eleven so the beneficiaries have more clarity about that we also need additional information about the importance and significance of beneficiaries of training within the competitive bidding area in which they live there are real consequences for beneficiaries they're traveling on vacation and something happens and you need to beneficiaries are informed are deeply concerned about the impact of competitive bidding on our patients and costs unless the program can be revised to protect our health care delivery model value of our organizations the ability to integrate and coordinate post acute care with h ere over the past three years we have worked as an informal coalition of hospitals and health systems in twenty two states that have their own d m a and other post acute services as a tool for improving quality and safety and service for our patients while controlling costs durable medical equipment is one of many services housed within our health system that allow us to better manage and deliver patient care all business units including d m a are aligned to coordinate and integrate care at the best price in a very competitive marketplace with growing burdens of uncompensated care one of our primary goals is to provide a smooth transition between hospital and home so that patients can leave as soon as they are clinically ready and make beds available for new patients in addition to reducing the length of stay we also work to prevent unnecessary readmissions and to lower the use of the emergency department the ability to own and control virtually every aspect of patients here including is essential to our success members of our coalition are large and small and most are organized similar to hannah and henry ford health system our coalition includes the michigan health and hospital association and many of the nation's premier health systems such as the university of michigan university of iowa the university of meridian health in new jersey two of our members here in the university of michigan have done studies showing that patient care and cost would be adversely affected by the competitive bidding as it is now structured the michigan study show that the aggregate median length of stay the flexibility we need to manage patients here in a structure where pricing is the same for all d m a providers in the area in today's hospitals patient discharges take place throughout the day in many cases the ability to send a patient home or into nursing care depends on the availability of numerous items of hospital beds surgical or diabetic supplies wheelchair or a composer oxygen coordinating the supply and delivery of me is critical to avoiding extra days in the hospital extra days that medicare medicaid and private insurers will not pay for immediately but these costs do get folded into the overall cost of health care when d m me and other post acute care is aligned with a hospital we can respond to the demands of medicare and private insur better care to lower costs and less complexity for the patient family having to use an outside supplier or several suppliers in the case of complex patients destroys this crucial alignment and perpetuates an inefficient and costly delivery system even though extra days in the hospital may not immediately and directly cost medicare part a more the cost for unnecessary days remains in the health system and eventually everyone pays for savings estimates for competitive bidding focused primarily on price reductions for durable medical equipment under part b what is left out of the picture are the increased costs at the hospital and within our health system a number of health systems in our coalition are affected by phase one which begins january of two thousand and eleven and very few have been awarded contracts for medicare patients cleveland clinic in ohio and you p m c in pennsylvania receive no contracts are now shut out of medicare services some other systems receive contracts for only one or two items these results go in the wrong direction but these health systems and hospitals cost will be higher than necessary and support for families caring for elderly patients in the home will be lost instead of support there will be one eight hundred telephone numbers and multiple suppliers often tell families calling to report malfunction qualified health systems that all of the ability to continue to serve patients at a reimbursement rate determined by the competitive bidding process we believe this is a limited reasonable and commonsense remedy and we thank support as well as his remarks this morning the bill will preserve savings associated with lower prices for services allow us to preserve a critical patient management tool that allows us to save money and better serve the patients that come to us every day for quality medical care on behalf of our coalition i ask for your support and will be pleased to answer any question thank you very much economist and been involved in health policy research for thirty five years until two thousand and four i was the managing director of health care issues at the u s general accounting office i've also been a member of the medicare payment advisory commission completing my second term this past  my own and do not reflect those of any organization with which i've been a competitive bidding for durable medical equipment is one step in attempting to make the medicare program a more efficient service there's been a longstanding concerns about the level of growth of medicare spending is it is essential to ask whether the program is being as a patient as possible in maintaining access to medically necessary services for its beneficiaries efforts to make medicare a more efficient purchaser of been underway for many years beginning in the early one nine hundred eighty s medicare collecting sufficient retail price or acquisition cost data to change prices for middle and only a limited number of prices have been changed over the years even when those data are available that being an efficient price for the medicare program is problematic medicare as a major purchaser should not have to pay retail prices to obtain beneficiary access the advantages to suppliers of being able to sell to medicare are likely sufficient to make them willing to offer medicare competitive bidding offers an alternative to setting prices administratively which is less burdensome and more likely to result in better prices for the program suppliers have the incentive to offer better prices to be able to win a contract with potential competitive bidding has been demonstrated by the price reductions in the texas and florida demonstrations authorized by the balanced budget act and in the two rounds of voting under the minute the medicare modernization act authorized program suppliers willingness to offer prices predicated on their expectation that winning a contract will result in a bigger market share for this to be true medicare has to move away from its traditional and the willing provider approach and limit the of winning contracts this is a significant change and there are legitimate concerns about potential disruptions and negative impact on beneficiaries and providers taking steps to minimize such impacts and ameliorate them promptly is essential because the importance of making medicare a more efficient purchaser cannot be ignored too important steps to reduce some of these disruptions that have been taken  award multiple contracts in each area and to award small businesses a very significant share of this preserve preserves a range of supplier choices for beneficiaries these provisions strike a balance between reducing potential disruptions and getting a better price for the program having more winners a lower incentive to offer lower prices while having more winning result and somewhat higher prices in the short term it also is likely to keep the program competitive over the longer term and guarantees sort of savings in the future how the program is implemented on the ground as well as design are incredibly important in minimizing disruption as you've heard from there were legitimate concerns about the aspects of implementation in the first round of bidding in two thousand and seven some of the shortcomings identified that's unfortunate but very common outcome of introducing such fundamental change substantial change requires a learning process on the part of providers and beneficiaries as well as c m s is learning should not however be allowed to be a gradual process it is important c m s invest heavily in provider and beneficial education and in monitoring the process of bidding and contract award requesting bids in securing better prices is only the first phase of making medicare a more efficient prudent purchaser of continued oversight to assure that access to a quality of products meet expectations is also essential that congress is required to report on the experience with  program including beneficiary access and satisfaction quality issues impact on suppliers especially small businesses and opportunities for greater c m s needs to be able to answer those same questions on an ongoing basis simply identifying problems however is preserving access for beneficiaries and keeping the program more affordable for both taxpayers and beneficiaries competitive bidding for d m a provides an opportunity to improve program efficiency competitive bidding itself is only about setting the price how wanted ministers the purchasing of the product after contracts have been awarded is critical to ensuring that the goals of access and quality are these things cannot be sort of understated thank you very much mr chairman i'd be happy to answer any questions you remember did paint a picture and i'm looking at the written testimony where she says we're going to drive thousands of qualified himi providers out of the medicare marketplace and you know the result is a loss of decrease under that it is betting that over time this will actually lead to an increase in prices because they'll be fewer betters i mean do you find that is that part of what you're saying this learner i'll start with you and then doctors the same thing if you think that that's a convincing argument and and even if prices were to rise somewhat above the thirty two percent savings projected by c m s for their round one rebid it would seem that to me the prices would have a long way to go up as you get back to current levels my question is is it just a question of the competition and i know you mentioned all the problems with layoffs and do you also arguing ms lerner that you know competition is going to disappear and that ultimately we're going to end up effect ultimately going to cost us more in the future or is it or is it just the fact that we're going to have fewer suppliers and you're worried about the layoffs  it's a competitive marketplace we offer a better product there are other clinicians that are you know the problem is i know i'm interrupting you you know we've heard all the testimony earlier about how there are so many of these providers out there it's very easy to get in the business charging too much medicare is losing money there's fraud i mean obviously the competitive bidding was a response to that i mean you got to kind of tell me where you think we are on the spectrum in th arguments i think it's important to go back to one of the things that i mentioned which is that there has been a balance struck in the way this program is being designed rather than being more aggressive in terms of trying to get the best price and  is that good enough or you want to comment on a little bit well i applaud them for what they are doing that no they have a very complex program to implement and to explain to beneficiaries our concern is that the beneficiary education and effort to this point has been rather invisible it's hard to find things as i said before on their web site i think there needs to be more attention to those kinds of details about where you put your beneficiary information and how it's made available to people i think those are some of the fundamental things that could happen it will allow advocates such as our organization to have better access that trying to find the bits and pieces of information that can be translated into the pamphlets and other things that would be of help to beneficiaries in understanding the program going forward so i think one of the fundamental things with respect to beneficiary education that it shouldn't be viewed as just an add on to the to the process but it should be an intricate part of the roll out all the way across the board thank you my time   in the process and i think many of us would argue that they should be separate let them compete but let them be separate based on patient needs i've been following the ranking member i mean the chairman and there's some compelling arguments in support of that legislation because in the bidding process i don't know i'm not the person doing the bidding process but you would think again this is the difference between government and the competitive marketplace if i was doing a big contract and i needed twenty four seven i think that would write that into my bid process but obviously c m s does not do that and the concern is you want to control that so you can move you know i think for any of us who have had to navigate through health care in this country ways that we can make it simpler for patients and family and improve the efficiency by having that control of  high burden in detroit as our flagship hospital is one of the safety net providers in the so you wouldn't dispute the fifteen percent from the actuary talking about hospitals throughout the country will probably have to close because of the provision but i do think there will probably be more  can we put in quality measures for the bidding process to meet the need for twenty seven delivery of equipment certainly we can make that a requirement i think one of the things that we need to think about  is what did it what did it take to be a qualified for a provider that turns out to be one of the essential attributes then we should make that a requirement one of the instructive things about looking at the veterans administration is that they have used competitive  long time and they've actually in the past have had stronger specifications in terms of the products they receive and services than does the medicare program and let me go because of your expertise in government healthcare and also you know when i deal with the army war college and we prepare them for to congressional testimony one thing i do when i talk to these soon to be senior leaders is that you better be prepared to answer any question you are an accountant so i would expect  billion dollars cut in medicare reported by the chief actuary is that harmful to senior citizens on medicare well that's a very big number you just  process we have been very clear that we're not taking a position on competitive bidding week step competitive bidding is part of the process and we're trying to make sure that we have clarity around those organizations that are hospitals and health systems again you may get additional questions from within ten days from the clerk in writing and get back to the soon as possible but i think that this hearing today was extremely helpful in terms of knowing some of the problems but also going to have to dig a little deeper as well  thank you very much and if anyone else has any questions that objection that the hearing of the subcommittee is adjourn