to our witnesses and guests but health and human services has been calling procedural votes on the floor of the house in an effort to prevent this hearing from going forward and please that we're here any to review the development and the execution of the durable medical equipment come pelleted building program mandated in m m a of two thousand and three and the program was to be phased in over time it started in ten of the largest metropolitan areas already and scheduled to move rapidly to another seventy areas in two thousand and nine and may then be taken nationwide  medical expenditures are a very small part of the overall medicare spending we think about two percent all of us are well aware that changes to this benefit will have a significant impact on suppliers and beneficiaries in each of our districts and all over the country spending is been growing rapidly in this area and that provides a good cause for a view review of how we pay for a durable medical equipment this hearing was called because of the concern from colleagues who are hearing from the suppliers in their communities and this is something that affects every district and as this change would it's vital that we perform oversight we've learned so far not much from this program c m s will update us on their thoughts in a few minutes but there are a few points that i would make first the good news from this demonstration is the parent companies are willing to take medicare if this is a far lower price than the current fee schedule rates the estimate is that medicare would save twenty six percent over their currency schedule that's a big savings the accreditation process is also important that the emmy industry has always been this as been a service industry and it's had excessive fraud and abuse mostly because it's not very expensive to start up a line of business and there's been little oversight to assure that the businesses are legitimate and the credit ation process is a positive step but i applaud it there are many questions about the process used by c m s to implement this first round demonstration preliminary numbers presented to the congressional staff at a recent bitting briefing indicate that out of a thousand and five applications six hundred thirty were rejected for lack of proper document taishan that's more than sixty percent of the applicants a refusal rate or that percentage does not show the market working they were excluded because they failed to meet the standards they were excluded because they didn't understand the rules or couldn't follow the directions and fill out the paperwork properly i'll wait for c m s to provide their testimony and we can discuss their thoughts on this first round process at a minimum it seems there should be strong lessons learned about how we can do it better if this process is going to be repeated hundreds of times around the country my question is whether there is value added to repeating this process again and again and each and every community might medicare be better served and significant administrative costs say by requiring all suppliers the new accreditation standards and then take what we learned in this first round of change the fee schedule by which we now pay for d m me those improvements can be done once and will immediately be in effect nationwide that for one idea seems simpler and much fairer and less disruptive to suppliers and beneficiaries we can continue this discussion after we've heard the testimony and i'd like to yield on if i may to the distinguished ranking all to be taken with great caution because i believe that this program as outlined in the legislation that we passed a few years ago does hold out some hope for helping to control costs and this portion of the medicare program i think the chairman just outlined very well the considerations that the subcommittee and i have thought about this solution that the chairman just suggested which would be to require some sort of certification for devices at a more appropriate level but i think mr chairman what we have found through the years with medicare is that it's very difficult for us to keep pace with the reality of the market in terms of setting prices and that ability we are behind the curve and i'm just hesitate as a single member of  the house and member of this committee that has jurisdiction over this matter i hesitate to take action which would possibly threaten the existence of this new competitive bidding approach i hope that we can arrive at some solution that gets at the particular problems that the chairman junking the whole thing and then trying to reset the prices at the appropriate level i just think particularly in this segment of medicare it's going to be very difficult for us to do and it seems that the pilot project that is in place now and s to be expanded to only ten regions only ten in the whole country we have a chance to learn from the mistakes of this round and employ some better procedures in the next round and that's why if the chairman will recall we did phase in this program slowly over time so that we could learn as we go along so i just wanted to come in and urge the subcommittee mr chairman to  this and be very careful about actions that the subcommittee suggests for fear in my view of jettisoning this approach before we even get a chance to see how well it works and i appreciate the i'd like to associate myself with your remarks we have no other reason we're faced with a budget bill and if in fact we cancel the program there are projected savings of millions of dollars and how do you get that bidding of durable medical equipment and medicare i think we need to examine medicare payments for these types of supplies to ensure that beneficiaries get the best quality care and the best equipment the best price we've heard a number of complaints about how this program is being implemented and i think it's important to remember how however how we got here because medicare does use its negotiating power to administrative leave set prices for durable medical equipment along with a man number of other goods and services that it covers and i think if there's one lesson we should all take from this situation is that the government often does a lousy job when it comes to setting prices  we've had a number of government audits and reports that highlighted how medicare was overpaying for certain types of quitman in these reports by g a o and the h h s inspector general compared medicare payments rates to other purchasers that medicare paid more than all other payers for certain durable medical equipment and these reports triggered the mandate by congress for the demonstration projects to develop an alternative to the government setting prices for d m c m s conducted competitive bidding demonstrations in florida and texas and i know we'll hear testimony about how that resulted in savings of nearly twenty percent overall in each site and obviously the access and quality remained  unchanged there but even though c m s has made a tremendous effort in getting this program successfully underway there are problems and we've all heard about those problems particularly relating to the submission of bids and questions about wh the bid winners will have the ability or the capacity to serve existing medicare populations and while suppliers argue these issues will limit access for beneficiaries living in certain areas and will decrease the quality of services they receive in the short term i'm concerned how these issues could absolutely reduce the number of providers that supply these items and actually increase costs in the long run so i believe we need a way to resolve these implementation issues as quickly as possible if the government continues to set inaccurate prices or fails to truly create a competitive environment and i frankly think competitive bidding as it's currently structured is not an accurate description of what's going on but i don't think we'll see any winners if we don't if we don't fix that so we need to refocus i think on the overall goal of this program use the market to drive down costs to make medicare more financially stable and secure and celeste and i think we would be wise to use in the entire health system i think we're going to hear some comments about accreditation and i think that would be a good way to move ahead in terms of making sure that those providers are doing a good job so i look forward to the testimony today i thank the chairman for his hearing and i yield back my time committee and we have your parrot testimony and your colorful exhibits and why don't you proceed to enlighten us or expand on your testimony where you prefer thank you good afternoon mr chairman it's a pleasure to see you again mr camp i'm very pleased to be here today to discuss the durable medical equipment prosthetics worth audix and supplies competitive bidding program i think this will be an excellent opportunity to  dispel some of the rumors and talk about some of the facts this is a major initiative reduce beneficiary out of pocket costs and improve the accuracy of medicare's payments help combat fraud and ensure beneficiary access to high quality items and services the initial round of competitive bidding is now complete the bidding window officially closing on september twenty fifth two thousand and seven we received a total of six thousand two hundred nine bids and of the bids received one thousand three hundred thirty five were winning bids we exceeded our targets on small supplier participation and offered sixty four percent of the contracts to small suppliers as of april eighteenth two thousand and eight one thousand two hundred fifty four contracts have been signed out of those offered translating to a ninety six percent acceptance rate we expect to be able to announce the contract next week when the new payment rates take effect on july first around one billion areas the beneficiaries will begin saving money on ten of the most commonly used durable medical equipment supplies such as power wheelchairs oxygen and diabetic testing strips and we give an example of the savings this is a box of blood glucose techs test strips with one hundred in the box in cleveland under the current fee schedule the price of this exact box is seventy three dollars and eighty six cents of which medicare pays fifty nine dollars and nine cents and the beneficiary pa fourteen dollars and seventy seven cents due to access a successful competitive bidding program on july first this same box in cleveland will drop to forty two dollars that's a forty three percent savings and it's worth six dollars and thirty seven dollars per box to the beneficiary or seventy dollars a year second other example power wheelchairs as you can see to the chart to my right beneficiaries in miami currently pay eight hundred five dollars for this particular wheelchair medicare pays eighty percent of the cost or three thousand two hundred and one thousand dollars now after competitive bidding the beneficiary in miami will pay five hundred  sixty three dollars and medicare as payment will drop to twenty two fifty three the sickler example of how the program is going to say both the beneficiary and the government money c m s is conducting an aggressive education and outreach campaign to be sure that every beneficiary partner provider and supplier knows how to use the program and to ensure a smooth transition on july first as you can see from the second chart in front of you see a mess has begun the significant outreach campaign we started with several education activities ranging in activities with various media outlets to listserv announcements and training later this month will be announcing round one suppliers and will be posting them to medicare dot gov our website will feature a supply supplier finder tool with contract supplier location information as well as a list of the products a particular supplier will offer this will not only assist the beneficiaries but also the providers in june we will conduct a direct to all medicare beneficiaries in the round one area this med mailing will contain a letter a brochure that outlines a new program and a list of all contract suppliers in their area medicare has developed a beneficiary factsheet and those will be not only available on our website but through partner groups and through physicians our partner groups are crucial to a smooth transition and will be relying heavily on them to assist us my staff and i have been in contact and will continue to be in contact with our partner groups to educate them on this program the c m s will monitor the performance of contract providers through beneficiary satisfaction surveys tracking the volume of questions and complaints that ships and one eight hundred medicare receive will track the shift from non contract to contract suppliers for competitively bid programs products comparing before and after july first will track the number of advance beneficiary notices issued by non contract suppliers and competitively bid areas for competitively bid items to gain insight into where the beneficiaries are obtaining their products all of these activities will help us keep current on what's taking place on the front lines once our program begins our regional offices will respond to general inquiries from beneficiaries they may also refer questions and complaints to one eight hundred medicare which will be the primary point of contact for beneficiaries questions or complaints can also be referred to the claims processing contractor or the local ombudsman all questions and complaints will be tracked for internal reporting purposes c m s is committed to the success of this program we set out to provide the beneficiaries with quality items  services and at a lower price from reliable suppliers in their communities we have a lower price we have reliable support suppliers and we are in the process of educating beneficiaries on this new program o extensive modern monitoring network will signal any issues that arise and allow us to move to correct them quickly and efficiently appreciate your time and the invitation to testify before you today i'd be happy to answer any questions you have at this time or address any concerns you have about the process to date well thank you i think our concerns are legion and and  and i guess i'll just pick on one area i think the process will have no quarrel or bidding just is one that causes a great deal of unnecessary concern i would just point out to you that the federal government goes to a lot of extreme i mean we we do have no bid contracts with other companies like that where we just awarded to our friends then the g s a on the other hand buys tens if not hundreds of thousands of vehicle they do not give the chevy dealer in washington d c an exclusive if that chevy dealer bids lower they happen to have the manufacturers bid and then the manufacturer go to terminal where the car is delivered to what dealer and in the case of automobiles if there's some preparation required by the dealer or it added equipment the manufacturer pays the dealer but they're there principally dealing with three or four major suppliers to bid major manufacturers to bid and the suppliers are all still allowed the dealers to continue you have a picture here of the wheelchair miami where i guess we've saved a thousand bucks federal government but this is not correct that in miami there will be only one dealer that will provide these wheelchairs and that's not correct now how does that happen to be the way that the bid process worked was we asked for bid yeah and we also estimated we knew historically the number of wheelchairs that were provided in that area ok we asked suppliers for an estimate of their capacity but we'd let no supplier go above twenty percent of the market so even if don't know i can provide for the record if you like ok well let's suggest that there were fifty so you've just put forty five i'm out of business what good does that do you well nineteen were successful in that area but you told me only go take five no no no if they said they could take twenty percent of the market then we would count in one minute nine hundred the same bit now that's not that's not the way the bidding process works are we took their estimates of capacity up to market clearing up to the point where all the capacity in the market would be taken they had each bit a price at that point we took the median bid from that successful group it suits your convenience and you have managed to get a lot off a lot of suppliers all steamed up one would think that you could find the savings and still allow many of these businesses to continue in your testimony you didn't suggest any changes that you might make in the program are there none that you can think of that would improve the program i think the change that we would make for round two is to understand your instructions are out of the game if there are unable to provide adequate documentation yes what if you're unable to provide instructions that are intelligible if you ever think of that what you're saying to this committee is there's nothing that you think is wrong with this system i can't think of anything that i would change at all i think that shows your us all this as a what is this a camp well i would just have to say that mr weems this is a process where some people were not to bid and so what's happened is there's been a there's an exclusive group of providers that are now going to be providing this equipment and i think we both agree that we've had a decade of testimony from g a o that medicare is paying higher than market rates for d m me but what i'd like to hear from you is a way to reform what you've been doing because i would agree with mr stark that i don't think this process has been one that stands scrutiny so  if you could help us with a way to move forward and this is not competitive bidding in any i mean that may be the term it has but it is a structured price setting and i think there's another way to design this to get the result where there there's you know more competition brought into the system and yet there's still choice of providers i i know that they'll be at least five providers from your testimony no one can have more than twenty percent of the market but i don't see any problem with having more than five providers or more than ten or fifteen providers in an area and particularly what i'm concerned about is information i've been hearing that some providers are going to parachute into areas of the country that they've not had any history no infrastructure and i do think not all of this equipment is just dropped off there is a service aspect to durable medical equipment sometimes you get it and it doesn't work and you need to get another one and and so i think the goals that you're trying to achieve are laudable i understand those and i appreciate those what i would like to hear from you is not that everything's ok and we're just going to move forward with the system that we've designed but is there some way that we can improve upon this because i think the contractor who who was hired to implement this has not done us a good service so if we could find a way to move forward and accomplish the goals that have been we've been hearing about for more than a decade before this committee but so if i'd like i guess i'd like to hear from you some ideas on how to move forward with that and i think the comment on accreditations and then why not  that statute clearly contemplated that there would be unsuccessful bettors that the statute contemplated people would bid a price that would be competitive where they could go and achieve a market share now like you when i heard reports that a large number of bitters had been disqualified  for reasons of documentation i was very concerned about that and so i sent a team of federal officials down to where the documents were actually received and for  ders who said that they were wrongly excluded we looked through one hundred of the bids and we found that the contractor was correct that items were and in fact in several of them the there was a cover note oldest there were items missing that will let me i know my time's about to expire but let me suggest something if you were to provide had a sixty day window to re examine the bid that were disqualified due to lack of information do you believe a six month delay would be necessary and do you think a rebid would still be necessary if you could reexamine those folks that were disqualified or rebid would be costly if we we have looked at those that were disqualified two thirds of them would not have made it on price anyway so only one third of them were based on a sample or is that it based on based on looking at all of the  that based on looking at all of them so you know two thirds of them what we're not even in the in the competitive range you know there are improvements we could make in the the online bidding system that did not work particularly well in the in the fall of this year actually in the summer so we extended the bidding window for sixty days to be able to allow suppliers  to come in we obviously will need to work a little bit more on supply or education but actually i think the results of this round will provide substantial education and i realize my time's expired just want to say quickly  first the bitters were told if they didn't have sufficient information they'd be contacted and i realize that change twelve days before the bids closed but if you could reexamine those bids in a sixty day window that didn't have adequate information to give them a chance to submit that  answer you said something along the lines of this round will tell us a lot about how we go in the next round is there any discussion or consideration being given to delaying the second round till we find out what we one we haven't announced a full schedule yet for the second round the statute requires that are you considering delaying it to learn from we are considering the schedule that that that we would lay out given what we've learned here that will give us time to take away some lessons learned from around one of course of course the the session requires that we do the competition in two thousand and nine  like to ask you about this proposal and how it affects an area that's near and dear to me that's rural america yes about thirty percent of the suppliers are in rural areas and it takes you longer to get from one spot to another there's a greater distances to travel gasoline at four dollars plus a gallon the costs all start to tack up what are your plans for dealing with the disparity that the folks in rural areas are going to find themselves slapped with well in the the first and second rounds that we have announced so far those were required to be an contemplating competitive bidding in rural areas at this point though i think that the beneficiaries in rural areas who look at the price savings that those in urban areas have might want those prices might have what might get your equipment or to have a service or repaired or or have warranty work done on it these are all problems that folks in rural areas experience that folks in the city who oftentimes make these policies have no idea  what life in the rural areas like and i'd like some assurances that the rural issues concerns and access for these folks are in fact taken into consideration but they are and we have exempted   suppliers experience or lack of experience with a given type of equipment before you made these awards we took into account a suppliers ability to supply the market we took into account whether or not they were an accredited entity we would how about their their actual experience with providing certain type of equipment providing service for that certain type of equipment how do you determine if one  is is qualified to do that at the same level that beneficiaries were experience and before unlike the big current program we actually required our bidders to be accredited  we do expect that all of them will be accredited by september of two thousand and nine but under the current regimen they are not accredited i'd like to know what that accreditation takes and  you in writing the various standards that we that we have i think we have i don't we have more beneficiary protections now under competitive bidding than there are in the previous program and we added additional protections for quality standards for oxygen and for complex rehab shares mr chairman i would hope that through the committee you would require that that they submit this so we have an understanding of how in fact they are they are crediting these people to make sure that miles away gets to be an oxygen provider that stretches the imagination of accreditation but maybe it's because they have those horns on the scooters and that squeeze the bulb and you get how can you run an organization like this without medical experience a number of my predecessors have not been clinicians i know i've griped about that have you ever done any work other than for the government my entire professional career has been as a civil servant i mark twenty seven years with the government this month twenty five with h h s this month ok thank you the you know you set the price for the medical equipment we've already determined that on hearing from the suppliers in the third district dialysis in chile and how the implementation is affecting them i've become concerned you know congress can have all the good intentions in the world but if the agency in charge of putting congress ideas into practice misses of market puts us in a difficult position the number one issue i've heard about sustain all these other questioners have heard about how many suppliers submitted bids to c m s for around one out of dallas area about five hundred and eight six hundred the number i've got but that's close those suppliers how many filed a thirty day review of their bid package with the contractor to look at insufficient financial disclosure i don't have out of the dallas area about about three hundred forty six filed total about three hundred now it seems to me that these numbers suggest more of a systemic problem rather than a supplier here they're forgetting to include a piece of paper with their back would you not agree with that i would say that there is a problem with the fact that certain financial documentation was not supplied but you had no cross between the guys submitting beds to tell them that they didn't have all the information there and according to what i'm hearing from you the contractor was not telling you where they got all of the paperwork or not is it true or false i was informed of that after and then you set a higher number there are some concerns that massive consolidation may negatively impact the competition in bids to bid years to come how do you see this process unfolding in the next year or within the next three  say i see substantially more competition especially as we move to to around to the other seventy m s phase i think that will have more companies come in to the market to try and capture market share we will have lower prices and drive down the cost for the government and for beneficiaries well as my friend here pointed out i think duction in suppliers ultimately could lead to less competition and prices you don't agree with that statement i'm not sure that i accept the premise phobia reduction and suppliers well if you keep setting limits on them and put people out of business i don't know how you can help but understand th did you do anything to ensure that contracted suppliers have a sufficient capacity to supply the products we looked at their beds looked at their business plan their  two supply and as i said we only letting any individual supplier say that they could supply up to twenty percent of the market even if they made claims being able to supply more than  if indeed the the company was expanding beyond their current capacity and had a business plan to do that we required stronger financial assurances from the company before we would allow that bid to come in at that capacity well how did you determine whether the financial capability was stronger well the the financial documentation required in the bid allowed us to do that because we were able to compute certain financial contractor who wins a contract from c m s able to subcontract some of those services based on that awarded contract absolutely and that's ind what i expect to happen when we announced the the wedding suppliers next week that many will want to subcontract with them so far the qualifications of a sub contractor taken into account by c m s in the process awarding a bit to a prime contractor not in the process of award because those contracts don't exist yet so the liability responsibility remains with the prime contractor to make sure that the services are rendered as provided for in the that's correct we will hold to that contractor responsible for the services they contracted for so is a contractor a prime contractor able to subcontract with someone who may not have any experience in that particular field they could yes i'm not sure that be in their business interest to do so but yes they could is there any requirement that a subcontractor be accredited to provide the types of equipment or services that are required in the contract the contractor themselves are required when in supplier requires required to be accredited the the same quality standards from which that accreditation arose what would also be required of the sub contractor they would not be required to be accredited at this point but also pliers are going to be required to be accredited as of september two thousand and nine and as i understand it though your relationship legally is with the contractor what the contractor does to satisfy the terms of the contract you don't have that much oversight over them on that in that regard he in these ten areas they're going to be under the microscope we're going to have a high degree of scrutiny over contractors performance and their ability to deliver quality products to beneficiaries but you're going to have to rely on the prime contractor doing this the right way because you relationship c m s is legal relationship is it with a subcontractor that's correct and you've already said just a minute ago that you don't interfere with the process of the sub contracting so the subcontractor could be someone or some entity totally unfamiliar with the field that the contract with the prime contractor it for you again perhaps not in the best interest of the contractor but what you say is possible yes or so why why not run the thread of legal responsibility that c m s when it gives out money and gets a contract runs not just to the contractor but to the subcontractor for the the contract right now and as you point out the legal responsibility is with the contractor you know they're they're the ones who have have won the bid they're the ones with the skin in the gang and if they don't perform we're going to take action against them and that includes the nonperformance of a sub contractor the difficulty mr weems with that is that you're not trying to remedy a situation you're now trying to rectify a problem that may have occurred as a result of the contract because of whatever activity by the contractor in this case in our example with a subcontractor so trying to remedy something doesn't necessarily assure us that we're going to get our money back if we overpay or if we were and i think there's a real concern that they said some of us i think that this so called competitive bidding process may not be necessarily giving us everything we think we're going to get in return for me before my time expires ask d something else with regard to this competitive bidding process doesn't it seem to around run somewhat counter to intuition that we have competitive bidding in the marketplace if you limit the number of suppliers who can compete and actually it's it's quite intuitive to me because when we did a contract and government typically there's just one winner and everybody who didn't win is when i know you're not going to be done let's  pentagon i mean even even h h s when we acquire things are going to when we have a contract we competitively bet it and if you don't when you don't win you don't participate but rather than say that we only want as many competitors as we think we'll need to satisfy the need want to say everyone come forward anyone who can match the price is eligible to compete and participate so this way you always have a lot of contractors out there who are able to participate and you ultimately hopefully then get the most competitive price because you have a very open competitive process but when you simply say we need three we're go need someone to satisfy this need of widgets medical widgets we need a thousand of these medical widgets and we see that we have three suppliers that can provide the thousand medical widgets so therefore we only need three suppliers that doesn't necessarily guarantee that those three suppliers are going to give you the best price most competitive price but if you say we need a thousand widgets everyone compete and everyone at every point can compete then there would be true competition to try to keep the price of those widgets low as possible so they get the business from the government i  understand your point the first of all of the law doesn't allow for any loans provider but second of all if if we bid and said everybody come in it's likely that we wouldn't get twenty six percent terms of d m me but in terms of medicare advantage and see if you'll say the same things with regard to the the process of competition that you that you provide for and or that the city for medicare advantage participation  medicare contract many patients and hospitals are affected what are plans at c m s for transition in states where the hospital based e m e a companies currently serving many hospitals and medicare patients have not been offered medicare contracts specifically my interest after july first two thousand and eight several large health organizations will no longer be able to accept medicare patients including in my region u p m c which serves thirteen hospitals and vantage which serves twelve hospitals what are the transition plans for these patients in the hospital they for the question  with beneficiaries so that you know they're going to become contract suppliers they're just not going to you know in their service and close down in a hospital ok a very different kind of transition occurs for many medicare patients who will be leaving hospitals what are the medicare strategies for acquiring the do d m a contractors to be responsive and timely in fulfilling their obligation to deliver equipment and services at the time of discharge from the hospital particularly after normal business hours people are going to be in this business to succeed they're going to be in this business to win market share and with the lower prices there's going to be even more motive to capture market share the way to do that is going to be through quality that is they're going to offer higher quality services they're also going to be accredited they will have met quality standards that's not true today mr williams one of the issues that has become apparent in conversations i've had with interested constituents is that there have been beds awarded to companies that have never previously provided the bid service i'm curious what is c m s is approach to this particular issue and the and has there been any thought to protecting the medicare benefit by making certain that awards are given to bidders who are clearly able to provide that service and maybe with a focus on providers that are already doing this and how does that and if in fact the other is happening how does that equate to enhanced quality care for our medicare patients well first of all it's good to step back and look at the circumstances today today anybody can move into a particular line of durable medical equipment without that expertise for the competitive bidding program they had to show that they were a viable ongoing business that's not a requirement today they had to meet our quality and accreditation standards that's not a requirement today and they also had to demonstrate a business plan that would show capacity to meet the market that's not a requirement today those are the kinds of beneficiary protections that are built into the so your argument is there's really no protection today  from folks answering stepping up providing the service absolutely i wonder mr williams can you offer their rationale behind the requirement for national diabetes suppliers to bid based on a full formulary while small suppliers could bid and win by bidding on a limited number of products and i wonder what impact will this have on patient choice did c m s find that this created a disproportionate number of particularly low beds which were based on fewer products i'm going to have to provide you that that answer in  would you like to thank you for your testimony mr williams and while i certainly share a number the concerns my colleagues have voiced i think it's important to understand how we got to this point and there was a conclusion reached not only by you and your office but by a number of other groups that looked at this issue that we've been paying and are today paying significantly more for durable medical equipment than is necessary to provide quality durable medical equipment to medicare benefits serious isn't that correct it is sir and that's why you conceive this competitive bidding program where it's why it was conceived where we are following the law and i  do want to get your reaction to the question my colleague mr basara right because we have competition is a good way to address this problem why wouldn't it also be a good way to deal with medicare advantage where we're still paying eleven hundred dollars more per beneficiary than for traditional medicare in medicare advantage the payment rates are based on a county benchmark system with in that benchmark system plans do compete when they don't complete enough to not result in a situation that's been estimated at a cost over ten years of one hundred fifty billion dollars more than if we just covered them with traditional medicare so it might be some competition but it hasn't it is yet to lower prices and as you know your actual worry has been unable to give us any future date by which we won't be paying out billions of dollars more of these plans why can't they compete in the same way that you proposed to occur here the payment for medicare advantage plans are based on a county benchmark that's in statute the payment rate is  is fixed by statute on a county benchmark level well i'll accept your answer but respectfully disagree with you that the system is not working and it's causing us a much greater cost to sustain the quality of care than than any of what we're talking about today but focusing on today you were called that back in two thousand and one the h h s inspector general testified to congress that durable medical equipment providers were that we were paying them for products were sometimes never delivered and we were paying for more expensive items than what was actually received and that was one of the initial voices of concern and then in two thousand and four the g a o indicated that medicare lacks the capability to identify specific items provided to beneficiaries because suppliers claims use broad codes and don't identify the specific item i gather that that's still a problem in my question to you apart from competitive bidding since i've heard that there are concerns that there are incentives to substitute lower price or lower quality items for higher priced items is has c m s or h h s ever considered establishing some kind of serial number identification program so that you can track individual pieces of durable medical equipment and  can look at i mean one of the frustrations are as as you well know with with durable medical equipment is supplied in the home and supplied outside of the public view and it is one of those it's not quite a government acquisition but you know you don't you don't get a corresponding control number a corresponding receipt for government doesn't for actually having acquired the equipment you're going to respond to question m accreditations but if you did a great occasion for the suppliers were you looking only at financial capability or did they have to demonstrate some expertise in being able to deliver a service of someone was an oxygen and they are now going to provide diabetes supplies or if they were in motorized wheelchairs like the scooter store and they will provide oxygen what do you look at to assure that they have the capability to provide quality products we looked  at first of all an overall ability to do delivery and set up can can they do that for many of the kinds of products we're talking about that's not very complex but we took an additional step for for two items which are more complex and that is more oxygen and for complex power motor devices complex wheelchairs we actually established higher standards for the delivery and set up in the capability of doing that for those two items because they are more complex standards which don't exist to the stay so if the scooter store will be providing oxygen supplies they had to meet those stand they do yes and just one other area we all remember the problem some would say fiasco associated with the initial implementation of the party program and the claim that all you had to do was just call one eight hundred medicare we're now about i guess less than two months out from this program going into effect what have you done to ensure we don't have a repeat of what additional training has there been and is there any i guess in the one that you have in front of you shows the various outreach activities that we have but let me just let me stress two things services you you ask a very very good question that the most important moment in all of this is when a medicare beneficiary sits with their provider and they're written a prescription they need to know what to do with it at that point that's what we're concentrating on going to give suppliers excuse me we're going to give physicians a list of qualified beneficiaries remember most of this is not storefront type material what happens is  beneficiary takes that and then calls a number and it's delivered to their home that's the moment that we're concentrating on every medicare beneficiary in these m s a as will get a letter from us every provider every supplier will get a letter from us laying out in detail so what what happens then one of the things that i think is vitally important when you institute a new program is situational awareness how do you know what's happening we've put together a surveillance network so that we will know what happens and yes that includes calls to one eight hundred medicare it includes calls to our ships includes the regional offices involvement in each one of those areas we're going to check in with the suppliers we're going to work to get this right and i hope you're feeling better thoughts on from things that i've been hearing and thanks for your long term service to the federal government our taxpayers some would say that the entire process in which the implementation of this program has not met transparency levels that we would all be proud of in the federal government and that there has been a lack of information provided to both beneficiaries and and suppliers and policymakers throughout the implementation of this process what would you say to that criticism i would strongly disagree i think that we have  done a very good job of educating our suppliers we have an advisory committee with them that has met six times over the course of this we've taken considerable import from them we have been very transparent  about the requirements the only thing that i would say that we have not disclosed as a matter of the bid process is exactly how we use the financial ratios in judging the financial viability of of each bidder we have told them what financial documentation we need we have told them the ratios that we would use but we have not told them how that would be scored that i would say is the the one piece sort of our audit plan we have not disclosed so if members of this committee can give you information that contradicts that you'd be willing to look at that absolutely just a follow up on mr english is point or one of his points the criticism that there are suppliers that could be awarded regions that they have no business model presently and may not be a concern but after this process is put in place and you have people providing a service in a depends on the problem if if we find somebody who simply incapable in that region then we're going to take steps to to in their contract and award it to another so if you know it depends on on what problems but again these suppliers bid to have a viable business model to move into if they're moving in into a community to actually sell product they they didn't win not to sell product but there's no it there's no advantage given to someone who has a business model within that community that they might have a particular competitive advantage by knowing the computer but by knowing the community knowing i just had a couple of questions  the definition of a supplier i gather is that person with whom the beneficiary patient has contracts is that correct yes and for the most part suppliers are not manufacturers certainly not necessarily maybe they're not necessarily manufacturers or are some cases and and the supplier does not have to supply new equipment is that correct they may supply refurbished equipment but that's true now yes and they can purchase their equipment from anyplace china taiwan france there's no real prohibition no where they buy the equipment is th has to be an f d a approved but that you know after after that it has to meet manufacturing standards but yes they can require it does the f d a approved crutches bandages and well those aren't ones that we competitively bid you know none of the supply what about hospital beds they do i'm told yes if he approves this little bit  and is there no how does one judge the quality of refurbished or used equipment the equipment has to be in good working order it has to meet the standard working working for the be beneficiary and you know being of good quality it's confusing we're pleased to welcome ms kathleen king the director of health care studies at the u s government accountability office affectionately known as g a o mr tom ryan from the american association for home care mr peter thomas the health taskforce coat chair at the consortium for citizens with disabilities and mr thomas her her senior fellow at the research triangle institute international we have your prepared testimony and without objection for each of you it will appear in the record did its entirety and if you would like to expand on it change your mind or inform us anyway  please continue we'll ring a bell here in about five minutes and we can elicit more details from you in the question period that follows this king would you like to lead off mr chairman members of the subcommittee thank you for inviting us here today to testify benjy alles work on medicare payment for medical equipment and supplies a number of you have made references to our earlier work and we have in fact done series of reports over the last ten years or so where we talked about cases where medicare was overpaying for medical equipment and supplies and in one case in two thousand we reported that medicare paid more than the median surveyed retail price for five categories of equipments including eyeglasses frames catheters and two types of catheter insertion trays and i just point to that as one example of our work so my remarks today will be based on our previously issued work and we have said that competition is a fundamentally different way to pay for services than fee schedules based on historical charges and that competitive bidding and this is also come up today differs from medicare as usual practice of accepting any willing him qualified provider by selecting among providers based on  criteria such as price and quality we believe that competition could really do smith a care spending by creating an incentive for providers to accept lower payments in exchange for their ability to retain medicare business and to increase market share in the demo demonstration of competitive bidding that happen from one nine hundred ninety nine to two thousand and two approximately fifty to fifty five percent of the biz from suppliers were accepted and the evidence suggests that competition help lower payments resulted in estimated savings of seven point five million from the medicare program and one point nine million for beneficiaries who paid lower co payments based on the results of the demonstration congress enacted the permanent program for a method of comparative for medicare competitive bidding that's under discussion today  and i think i won't elaborate on all of their own months of that except the couple and one is that the accreditation process which is new and the fact that suppliers must submit financial documents that include income statements credit reports and balance sheet you know our view this additional scrutiny could help c m s screen out providers that are not stable or legitimate businesses and it could help reduce the improper payment rate of ten point seven percent for medical supplies in a in quitman which is more than double that for other medicare providers but we have also said that the competitive bidding program raises concerns about a ccessing quality of care because it could encourage providers to cut costs by providing lower quality of care worker tailing services therefore we believe that it's important in fact adequate oversight of the program is critical and when we evaluated the competitive bidding demonstration we made a number of recommendations to c s to c m s and that was that they monitor beneficiaries satisfaction that they step standards for providers to participate that they provide beneficiaries with the choice of suppliers and that they select winning bid on the basis of quality in addition to price and one of the ways they could do that would be routine monitoring of beneficiary complaints concerns and satisfaction i should point out to you and i know you have someone on the panel today from the independent evaluation but the evaluation of the demonstration did not see any major adverse effects on access or quality of care there were a few concerns raised by decline in the use of portable oxygen among new users and a possible shift away from providers making home delivery when you when you acted competitive bidding program he was also directed us to look at the impact on suppliers manufacturers and beneficiaries and we were directed to look at access on the quality of items and services we now have a team working on that and we have also been asked by the committees of jurisdiction to assess medicare respiratory home equipment to people with medical conditions and disabilities i appreciate the opportunity to testify about our very serious concerns regarding the competitive bidding program i'm speaking today on behalf of the american association for home care where i recently served as chairman and currently serve as a member of the executive committee our members operate home care practices that will be impacted by the competitive bidding program and concerned about the problems that i have playing round one of this program my company is scheduled to be in  round two of the bidding program i will be blunt this medicare building program is a train wreck but this program jumps off the tracks the attitude to see mrs clinton lets go full steam ahead the building program is poorly conceived  fundamentally flawed and it does not account for the way home care providers currently compete for business as a result of these flaws the problem has been plagued with problems since its inception this program will drive people out of business a large portion of high quality local home care providers will be driven out of business and it will no longer be able to serve the communities that they've been serving for years the real tragedy is a negative impact on the medicare beneficiaries problems with the design and operation of the building program was seriously reduce beneficially access the quality of care and products that benefit from u c today the problem is not the free market miracle that some of characterize it to be in light of these problems the american association for home cash strongly urged congress to immediately halt implementation of this program we urge congress to develop an alternative process that achieves not only accurate reimbursement rates for home equipment but most importantly ensures appropriate access to quality care for the medicare beneficiaries the betting program will drive thousands of qualified provided out of the marketplace and as a consequence severely limit the services available to millions of seniors and people with disabilities providers currently compete on the ability to improve quality that's what attracts me for sources to give us business the new medicare but he program will stifle that competition there are multiple problems with various projects products subject to bid on that in just a few in the area of complex power wheelchair is long time consumers of customize wheelchairs will be forced to switch to new providers for patients who rely on the specialty wheelchairs for daily activities this is a drastic change in the diabetic treatment area diabetic patients will be forced to switch to different monitoring systems and supplies which has serious implications for patient compliance the same point is true for cancer patients who depend on interim attrition for tube feeding as a result of the new medicare policy for home oxygen therapy disruptive changes in the area of home oxygen therapy are scheduled to take place very soon the transfer of ownership of oxygen equipment in the thirty six month payment cap go into effect on january first two thousand and nine this will cause confusion among and will we do still level and quality of services new bidding rules only complicate these problems with respect to the back in the home care providers sixty three percent of the credited home care providers submitted bids around one and they were disqualified most of these disqualifications were for technicalities a sixty three percent exclusion rate is totally unacceptable and we feel is a serious breakdown in the building program home and equipping providers are overwhelmingly small to mid sized companies just like myself we typically see produce and our business for medicare the loss of the ability to serve these patients will result in widespread layoffs and business failures the term competitive bidding is dead wrong the betting program will in fact radically reduce the number of accredited suppliers that are allowed to compete the bidding programs widely touted savings are misleading small providers that are reasonably low to have an opportunity to stay in the game since the alternative was to go out of business the fact that sixty four percent of the suppliers there were of a contract with small validates that we believe the extraordinary low bid rates will be unsustainable over a three year contract period and any savings will be at the expense of services to the beneficiaries of significant aspects of the development of and implementation of this bidding program have been shrouded in secrecy the lack of transparency the unwillingness by seeing missed and share key information mass deficiencies of the program and make it impossible to evaluate why c m s which is various decisions more of a  mandated working with the payout community they have not worked with the payer community there are thirty three business days before around one of this program takes effect the program will be a historic change affecting as many as three million beneficiaries in the first phase alone yet medicare is not even announced was one the bije it leaving the education of provider providers and beneficiaries to the last minute for this reason the american association of home care urges congress to immediately halt the implementation of this program the wide range of problems and questions about the program must be independently evaluated and an alternative process of determined payment rates for home equipment must be explored the association stands ready to work with members of this committee and other members of congress immediately to address these issues in closing i want to remind you that home care is part of the solution to medicare it's not part of the the voice of the medicare beneficiary through the consortium for citizens with disabilities c c d is a group coalition of one hundred national disability related organizations includes some of the major disability groups in the country including the brain injury association of america the united cerebral palsy associations the national multiple sclerosis society and then the others and let me just take a moment to say that that we've talked a lot about devices and products today and i just need to bring home to the committee how vital these devices and services and items really are to beneficiaries across the board across medicare program but especially for those with long term needs with severe disabilities with chronic conditions these these items and services and related devices are a lifeline to independent living and to functionality and to health care good solid health care  in addition to the senior population of course the medicare program covers over six million people below the age of sixty five that are only on the program because they have disabilities that permit them or that do not permit them to work i hope that that this committee and c m s really takes this into account and implementing the program in the post items and services fortunately in fact people with disabilities this is a relatively vulnerable population in the medicare program and assistive devices really mean a great deal for function and health care the c c d groups have opposed competitive bidding since the since the beginning in one thousand nine hundred seven with the demonstration projects in two thousand and three when the and then they passed and of course now less than two months before it's being implemented under the current fee schedule price is a constant and the suppliers compete on a range of other variables including good service to patien being responsive to referral sources and physicians and exercising good business practices that's that's what competition is currently in the in the medicare system for this benefit when price becomes the sole determinant of who gets the contract all of those other provisions become secondary so the c c t opposes competitive bidding for three main reasons one it will reduce choice two it will reduce quality and three it will reduce access as the choice choice of supply or the competitive bidding program clearly reduces the choice of suppliers as all a large number of longstanding high quality providers did not receive bids thousands and thousands of people with disabilities will wake up on july first and have disruptions in their provider patient relationships many of whom will not know the first thing as to how to how to address the those new needs to in terms of brand names people with disabilities and chronic conditions often use brand names because they have particular needs or they have particular preferences that a particular brand of d m me item or service will really address and so we're very concerned with shrinking margins and with lesser providers that you're going to have a restriction in the number and bret's of devices covered on the program number two is quality we believe that there will be in fact a race to the bottom in the area of quality with respect to competitive restricted in their provider choice and would like to save some on co payments they can join the medicare advantage plan but if they're in the fee for service plan we feel strongly that they should maintain them to have the of the right to choose their provider and the services that that provider provides in terms of access we also believe that the competitive program will dramatically limit access to not only the number of suppliers and in fact cause additional need to travel long distances and a leg so we have a series of recommendations the first would be in our hope is to simply repeal or eliminate the competitive bidding program we believe there are mechanisms that are currently in place that c m s has to adjust prices if they need they deem them unreasonable and to use those existing authorities to adjust reimbursement levels when necessary if competitive bidding is not repealed or eliminated we do think that congress should delay round one because of the  concerns that i've raised in my testimony if in fact that is not possible certainly around to should be delayed because round two is where you were able to learn what what what occurred in round one and hopefully apply those lessons learned we do think that exempting specific uniquely fitted and individualized items and services are extremely important and so we do support the medicare access to complex rehabilitation assistive technology act h r twenty two thirty one which would exempt seating positioning mobility devices and speech generating devices from competitive bidding and finally let me also say that we think that there should be an opt out provision for beneficiaries to choose to opt out of competitive bidding and simply pay the twenty percent of the fee schedule announced at least in the first or second year of this program to act as a real safeguard and a safety measure to to ensure compliance with with quality  care there is one other recommendation before i end and that simply is for c m s to create a separate toll free number and have an ombudsman person or people who are quite well qualified to answer these questions and address the concerns that we are sure are going to come to them on july first and beyond thank you very much thank you mr chairman and members of the committee i'm pleased to appear before you today my name government and private sector clients since nine hundred ninety one i've led a series of studies on competitive bidding for medicare part of the services all of these studies were funded by c m s in one of these studies my colleagues and i evaluated the impact texas we evaluate the impact of the demonstration on medicare expenditures beneficiary access to care quality of the care components of the market and the reimbursement system our full evaluation report was included as part of the required report to congress on the demonstration project and is available for downloading from the r t i website briefly me reached the following conclusions competitive bidding produced lower prices leading to lower allowed charges for the medicare program and reduced co payments by beneficiaries we estimated that the demonstration reduced medicare allowed charges by nine point four million or one hundred percent the demonstration had relatively little effect on beneficiary access quality and product selection beneficiaries and that result was probably due negatively by suppliers in general overall we concluded that the impact of the demonstration were largely positive looking more broadly at these the competitive bidding for demi poses the basic rationale for comp relatively simple pacifiers how much they are willing to accept in payment for providing give me pause to beneficiaries then offer contracts to those suppliers offering the lowest prices ensuring that enough suppliers who are credited are selected to although the basic rationale for competitive bidding for danny pearl is the simple implementing competitive bidding is more complicated as i say the devil's in the details and there are a lot of details when it comes to implementation and then here is the time i will only mention three of the most important issues first and foremost is quality the biggest concern with competitive bidding is that after offering low prices winning betters will provide low cost quality products and little or no service to beneficiaries congress and c m s have attempted to address this issue by requiring this requires the enough to carefully better balance beneficiary access and program expenditures because selecting more suppliers will cause the winning bid to increase or converse late to try to keep the winning bid too low access may be reduced is important to achieve the right balance third supplier should be treated fairly in the bidding process this means providing adequate information about the program in the bidding process and general information about how bids will be evaluated however c m s cannot release the proprietary bids of individual suppliers i will be happy to answer the question thank you for your time thank you and we're going to just question for about ten minutes and we'll look at that point of happily have to adjourn the i am afraid mr ryan that you're stuck i don't think you get any quarrel from anybody on the diet day and that's on him and said important falter that case is useless concept but to the extent that we're going to change it the congressional budget office who is  fiddler to whom we have to dance here has said that one year delay in round one would lose three and a half billion dollars in projected savings war as we look at it if we're going to have a one year delay we got to come up with three and a half billion dollars in savings over five years the current program is north of six billion dollars over the next five years industry prepared to have their fees adjusted downward to the extent of three and a half billion dollars over five or and as i said yes the industry is ready and willing today to sit and talk about alternatives we gave at the office quite a but it's well if you look at the history of what this industry given back i've heard it in significant and we also have to understand this legislatively and that we may not we're going to have to come up with six billion bucks overed five years you'd you know the drill and the question is is your industry willing if we just write a bill aren't we say this to secretary cut out the building and come up with a cost savings to adjust its price structure you willing to live with that mr chairman the industry is willing to work with this committee and yes we're willing to see if we cannot come up with six billion bucks die i mean i know you're willing to work with us on my question is are you willing to come up with the six billion dollars yes to get rid of the in finding offsets and talking about payment issues as a pack suppliers but in this instance because these discounts and are so deep wherever it does impact access we do tend to speak up and the only truth that principles that we would suggest that if you do move in that direction that we would hope that whatever discounts or offsets are found obviously do not impact quality choice and and the beneficiary and also we are acting secretary to do that dr heard make a plan to see the didn't happen here and ok well i thank you mr chairman frankly asked the exact question i was going to ask and i know we're running up against a vote and so i i  don't think i need to repeat it but that is exactly my concern in terms of what we do with the paygo problem that we're facing and i i was going to ask in a more open ended way how we might get out from under this and i think that something that you can provide us later but the fact that you've admitted your willingness to support this paygo result i think is an important so i thank you for stepping up and you offer your to my company or the association i'm sorry members of the association companies like yours that are members of the association well i mean my particular company has fifty two employees were six million dollar company and how many members are members of the association how many companies five hundred and it was the average is it fifty two the average or twenty five i would say it's in the area of thirty to forty perhaps eighty five percent are considered small and  and what would you say that a hundred percent of the members of this organization share your concern ninety percent seventy five percent i believe that the one hundred percent of the revise this system but i want to thank you mr ryan because we are faced with rules scamp and i might have written the rules differently but we didn't write it and that there is no other way we're boxed into this and it would be better if c m s would cooperate with us but they may not and in which case we're faced with meeting these budgetary will because the the more it expands across the country the bigger the problem it will be and saw it like to find a way to see if we could get a resolution to this early on appreciate your industry i appreciate representation of the of the consumers it's important g a o it's got some more information to give us we'll look forward to that doctor hurry or i think you're going to probably get another consulting contract before this is all done