At a March 20 news conference, Centers for Medicare & Medicaid Services (CMS) Acting Administrator Kerry Weems announced that the agency has sent letters via overnight mail to suppliers who submitted bids to participate in the first round of competitive bidding. The letters will arrive Friday, March 21.

Competitive bidding rates in the first 10 metropolitan statistical areas (MSAs) will be implemented July 1.

Weems indicated that three different types of letters had gone out, including invitations to sign contracts with CMS if suppliers’ bids were within the winning price ranges. A second type of letter told non-winning suppliers that they would not currently be invited to sign a contract, but may be offered a contract in the future if a winning supplier in the same area for some reason dropped out of the program. He added that some suppliers were disqualified from competing for contracts because they fell short of CMS’ “safeguards,” which included failure to meet basic supplier enrollment standards or submitting bids that did not comply with terms and conditions outlined in the requests for bids.

Weems said during the bidding period, CMS had received “thousands of bids — more than 6,300 — from hundreds of different suppliers.” But during the news conference’s Q&A session, he declined to answer Mobility Management’s question as to how many suppliers were offered contracts as “winning bidders.”

Weems noted that suppliers that were offered contracts would have 10 days to respond to CMS to indicate whether or not they wanted to participate.

According to Weems, 64 percent of the bidders being offered contracts were small businesses. Under questioning about the program’s potentially negative impact on small businesses, Weems said he was “pleased with the 64-percent figure.”

Weems said overall, Medicare expected to save $1 billion per year once competitive bidding is implemented in the first- and second-round MSAs.

The 10 first-round metropolitan statistical areas are Charlotte, N.C.; Cincinnati, Ohio; Cleveland, Ohio; Dallas, Texas; Kansas City, Mo.; Miami, Fla.; Orlando, Fla.; Pittsburgh, Pa.; Riverside, Calif.; and San Juan, Puerto Rico.

Cost Savings Expected by CMS

In the press conference, Weems gave several examples of the ranges of savings Medicare expected for different product categories.

“For oxygen and oxygen equipment, we’re going to see savings of 22 percent in Riverside, California, and 32 percent in Orlando, Florida,” he said. “Medicare currently pays about $199.28 a month for an oxygen concentrator. Under this competitive bidding program, on average across the bidding areas, Medicare will now pay $140.82.”

For “standard power mobility devices,” Weems said competitive bidding would earn Medicare a “savings of 12 percent lower in Kansas City, and 30 percent in Miami. Medicare pays $4,063.96 on average across the bidding areas for the purchase of the most commonly used power wheelchair. Under the competitive bidding program, on average across the bidding areas, Medicare will now pay $3,072.65.”

Weems also compared competitive bidding prices to Internet pricing in some of his examples. “The Office of the Inspector General issued a report in October 2007 showing the median Internet retail price of $2,959 for this power wheelchair based on a survey of 222 prices.”

Weems said mail-order diabetic supplies savings under competitive bidding would be 36 percent in San Juan and 57 percent in Riverside.

Weems added that Medicare in 2006 paid about 889,000 monthly payments for oxygen concentrators; 15,000 claims to purchase standard power chairs; and 2 million claims for 50-count boxes of diabetes test strips for the 10 MSAs involved.

“We were overpaying for those items,” Weems said.

In answer to a Mobility Management question, Weems said anticipated savings on complex rehab was about 15 percent on average, nationally. “That varies by market,” he explained. “In Charlotte, it’s 10 percent. In Cincinnati, it’s 19 percent.”

CMS expected to save 29 percent on CPAP equipment, Weems said.

“Promising” First Round Results, Says Weems

Results of the first round of bidding are promising, Weems said.

He indicated that all product categories originally mentioned were indeed included in the bidding.

Said CMS’ Joel Kaiser on how “winning bids” were determined: “We selected the lowest-bidding suppliers, that is, suppliers with composite bids on the lowest end of the array, up to the point where the reported capacity of those suppliers met our projected demand.”

Weems added, “One way to think about this is taking the lowest bid and working up the chain to a market-clearing price.”

For more information on competitive bidding, go to www.cms.hhs.gov/CompetitiveAcqfor DMEPOS/. Details were also posted at www.dmecompetitivebid.com/SPA.