A Senate Finance Medicare provider "giveback" bill authorizes up to three competitive bidding demonstration projects for diagnostic tests.

Eligible products include x-rays and clinical lab tests as well as "other" diagnostic tests. The demonstration projects would be conducted over a three-year period and the Centers for Medicare & Medicaid Services would provide an initial progress report by Dec. 31, 2004.

The "Beneficiary Access to Care and Medicare Equity Act" (S 3018) was introduced Oct. 1 by Finance Committee Chairman Max Baucus (D-Mont.) and Ranking Member Charles Grassley (R-Iowa). The measure instructs CMS to wrap up the two ongoing durable medical equipment competitive bidding demonstrations in Polk County, Florida and San Antonio, Texas by the end of 2002.

Meanwhile, a report submitted by HHS to Congress Sept. 12 on the two demonstrations notes generally favorable results.

The report suggests "substantial savings are likely from competitive bidding." Results from the second round of Polk County's demo (July 2000-September 2001) showed 21% annual cost savings. Total projected savings in the last year of the project are roughly $1.5 mil., "21% less than what would have been incurred" under the 2001 Medicare fee schedule.

In San Antonio's single round (spring 2000-September 2001), savings on Medicare expenditures were 22%, or $2.3 mil. for a three-county area.

In terms of beneficiary access to services, a survey of Polk County demonstrated overall that "access remains strong" under competitive bidding. However, the report notes a decline in receipt of portable oxygen. The decline was not statistically significant in all patients, but in new users it was 34%, a "substantial" amount, according to HHS. Beneficiary access to medical equipment remained mostly unchanged.

In San Antonio, problems with access were associated with the early transition period, the report states, but are expected to subside. Surveys of Polk County suggest that quality has not deteriorated under the program, according to the report. In San Antonio, though, results from site visits were "mixed." Problems included improper wheelchair adjustments, lack of appropriate follow-up on malfunctioning equipment and inaccurate orders. The results are based on nonstatistical data, HHS noted.

The report also addresses market competitiveness. In Polk County, there were 26 second-round bidders. Bids for urological supplies and surgical dressings declined, likely because of the low revenue associated with the products, HHS said, adding that future bidding designs may need to be modified to ensure sufficient participation. Overall, while the "demonstration does not bear the long-term effects on market competition, several observations and site visit results...generally suggest sustained competitiveness in the Polk County market so far," HHS said.

In San Antonio, of the 79 firms that submitted 169 bids in five product categories, 51 won supplier status. HHS noted that suppliers had "mixed opinions" on long-term effects of competitive bidding.

While competitive bidding is opposed by a number of senators, one opponent, Sen. Max Cleland (D-Ga.), has indicated he would be willing to work on compromise language, some of which appeared in the Finance measure (¹ Also see "DME Bill Should Protect Small Firms In Competitive Bidding Process – Cleland" - Medtech Insight, 23 September, 2002., p. 26).

For instance, the bill addresses issues that have been identified with market competition. It would establish protections for participating small businesses. Suppliers could bid not only for an entire portion of a competitive acquisition area but also for a single or a few product categories. Suppliers could also band together to form a network, provided their combined market share did not exceed 25%.

The bill also requires a "phased-in implementation" for additional competitive bidding projects over the next four years, with one-fourth of the implementations to occur in 2003. Competitive acquisition areas are defined in the bill as a "metropolitan statistical area...with a population in excess of 500,000."

The HHS report emphasizes the importance of an adjustment period, noting that "in future site planning, CMS might need to allow more time for the consumer side of the market to prepare."

In an Oct. 2 response, the Coalition for Access to Medical Services, Equipment and Technology asserts that the report actually "supports CAMSET's position, further acknowledging that it is too soon to extend competitive bidding nationally." CAMSET, formed to oppose competitive bidding for durable medical equipment, says it will continue to lobby members of Congress to refine bill language.

Diagnostics Competitive Bidding Makes Provider Giveback Measure

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