March 17, 2009 Ms. Charlene Frizzera Acting Administrator Centers for Medicare and Medicaid Services Department of Health and Human Services Hubert H. Humphrey Building Room 445-G 200 Independence Avenue, SW Washington, DC 20201 RE: Medicare Program: Changes to the Competitive Acquisition of Certain Durable Medical Equipment, Prosthetics, Orthotics and Supplies (DMEPOS) by Certain Provisions of the Medicare Improvements for Patients and Providers Act of 2008 (MIPPA); Interim Final Rule Dear Acting Administrator Frizzera: On behalf of The SCOOTER Store (TSS), a nationwide supplier of power mobility devices (PMD) headquartered in New Braunfels, Texas, we respectfully submit the following comments concerning the Notice of the Interim Final Rule (IFR) entitled, Medicare Program: Changes to the Competitive Acquisition of Certain Durable Medical Equipment, Prosthetics, Orthotics and Supplies (DMEPOS) by Certain Provisions of the Medicare Improvements for Patients and Providers Act of 2008 (MIPPA) published in the Federal Register on January 16, 2009.1 TSS has been in operation since 1991 and takes very seriously its commitment to the Medicare beneficiaries it serves, as well as its strong commitment to compliance with all Medicare rules and regulations. Responding to concerns over the government acquisition program, Congress intervened in the MIPPA legislation to delay the program until 2009. Congress further required the Centers for Medicare and Medicaid Services (CMS) to include a process for providing appropriate feedback to suppliers regarding missing documentation and requiring contractors to disclose to CMS accreditation information concerning subcontractor relationships. Despite documented concerns over the program and congressional intervention, CMS issued an IFR on January 16, 2009 to reactivate the program with only a few superficial changes. TSS understands that the CMS has a daunting task to implement this program; however, we strongly recommend that the agency immediately rescind the IFR to allow the Administration the opportunity to appropriately review a rule that would have such a dramatic and negative impact on our nation’s delivery of healthcare products and services. This rule, if implemented, would force thousands of homecare providers out of business, create significant job loss and 1 74 Fed. Reg. 2873-2881. reduce quality of care to Medicare beneficiaries. As a result, thousands of Medicare beneficiaries who rely on these service providers will be forced out of their homes and into costly long-term care facilities at an enormous cost to the taxpayer. At a minimum, CMS should rescind the rule and reissue it under normal notice and comment so that all affected stakeholders will be ensured that their voices are heard. Furthermore, we would encourage the Agency to reconvene the congressionally mandated Program Advisory and Oversight Committee (PAOC) to review the rule and discuss the many issues that arose prior to implementation of round-one. As it now stands, the competitive acquisition program will go into effect April 17, 2009, regardless of what comments are submitted to CMS. We contend that this is contrary to law and contrary to sound public policy. TSS will continue to make substantive proposals with the goal of working with CMS to improve the Medicare program. The following comments are offered in this spirit of partnership. In light of the few changes made to the overall scope of the program, we respectfully submit our previous comments to the rule Medicare Program; Competitive Acquisition for Certain Durable Medical Equipment, Prosthetics, Orthotics, and Supplies (DMEPOS) and Other Issues published in the Federal Register on March 1, 2006. 71 Fed Reg 25654-25703. Very truly yours, Doug Harrison Founder, President & CEO The SCOOTER Store Formal Notice and Comment Should Be Required: We urge CMS to rescind the IFR and reissue as a proposed rule subject to meaningful notice and comment. In issuing an IFR instead of a proposed rule, we contend that CMS has not provided adequate justification to bypass the longstanding notice and comment requirements set forth in both the Administrative Procedure Act and Social Security Act. 5 U.S.C.S. § 553; 42 U.S.C.S. § 1395hh(a)(2);. While CMS may issue an IFR if it finds notice and comment procedures to be “impracticable, unnecessary, or contrary to the public interest,” such “good cause” has not been established in this instance. 5 U.S.C.S. § 553(b)(B). In the IFR, CMS asserts good cause because it would be “redundant to, in effect, propose a rule to incorporate the words of a provision already contained in the statute.” 74 Fed. Reg. 2873, 2878. This constitutes an abrogation of responsibility by an agency entrusted to oversee the health care for our nations’ elderly and disabled. Congress highlighted concerns regarding document review and subcontractor relationships and delayed the program due to many legitimate complaints from interested parties. Failure to address the magnitude of these issues via a proper notice and comment period is inappropriate and does not meet with the intent of Congress, which was to delay this program so its many problems could be addressed. This cannot be achieved unless the public is given an opportunity to comment and for CMS to respond, prior to the regulation being in effect. CMS further claims that it “would not be able to revise the changes to this regulation in response to public comment because this regulation reiterates the statutory language found in MIPPA and because the statute requires implementation to occur in 2009.” 74 Fed. Reg. 2873, 2878. Once again, this argument is flawed. The statutory deadline for implementation of competitive acquisition is 2009 with no specific date required, leaving adequate time for notice and comment procedures to be followed. Here are some of the issues that should be thoroughly addressed via an appropriate notice and comment period: Government Mandated Consolidation of Business: We urge CMS to significantly modify the program to ensure that no more than half of the businesses in each CBA are eliminated or Medicare beneficiaries will go unserved. Section 302 of the Medicare Prescription Drug, Improvement and Modernization Act of 2003 called for a “Payment for Durable Medical Equipment; Competitive Acquisition of Certain Items and Services.” A literal reading of the law suggests that CMS is not following Congressional intent but merely consolidating the homecare community. The initial results of round-one of the acquisition program produced a total of 376 winners compared to over 9,000 that provided the same services in those CBAs in 2007. Those winners were expected to meet 100% capacity of products and services in each of the initial CBAs. CMS has created an environment that reduces competition and limits choices by eliminating over 95% of qualified providers. Furthermore, we feel that fewer providers will result in lower quality and the appropriate access to care for seniors and people living with disabilities. If this program is not rescinded, quality of care will undoubtedly diminish and beneficiary’s lives will be negatively affected. Additionally, over 95% of the longstanding lawful providers will be forced out of business. In a time where the Obama Administration is trying to create jobs, we do not think the Agency should move forward with a program destined to drive thousands of legitimate providers out of business and eliminate jobs. Furthermore, we do not believe this was Congress’ intent when passing this law. We urge CMS to significantly modify the program to ensure that no more than half of the businesses in each CBA are eliminated or Medicare beneficiaries will go unserved. Supplier Standards and Accreditation Must Be a Mandatory Requirement: We urge CMS to require that all providers be required to adhere to the accreditation and quality standards mandate prior to submitting a bid. Pursuant to 42 C.F.R. § 414.414(c) of the Social Security Act (SSA), each “supplier furnishing items and services directly or as a subcontractor must meet applicable quality standards developed by CMS” and “be accredited by a CMS-approved organization…unless a grace period is specified by CMS.” CMS has apparently left open the possibility of some type of accreditation grace period. In the IFR, CMS references Section 1834(a)(2)(F)(I) of the SSA which requires suppliers “on or after October 1, 2009, directly or as a subcontractor for another entity, to have submitted to the Secretary [of Health and Human Services] evidence of accreditation by an accreditation organization.” An October 2009 accreditation deadline may potentially allow non-accredited suppliers to bid and be awarded contracts in those CBAs. This process will allow substandard suppliers to taint the bid pool and manipulate the bid price. This is detrimental to the integrity of the program as it allows companies with different cost structures the opportunity to bid for the same items and then leave the Medicare program if they cannot live up to the standards. Supplier compliance with quality standards and accreditation requirements is essential to keep out fraudulent and substandard suppliers from gaining access to Medicare beneficiaries and federal healthcare dollars. TSS recommends that CMS allow no grace period and instead issue clear notice requiring that all suppliers be accredited and comply with applicable supplier standards prior to submitting a bid. Balance Budget Act of 1997-Surety Bond Mandate: We urge CMS to expedite the surety bond requirement and use bonding agencies to assist in validating submitting companies’ financial and business plans. The United States Congress, during the Balance Budget Act of 1997, mandated that all home medical equipment providers must be bonded as a minimum requirement to bill the Medicare program. We applaud CMS for implementing this long overdue, front-end antifraud deterrent. This requirement, along with the accreditation mandate and increased quality standards should go a long way in eradicating fraud in the Medicare program. We urge CMS to expedite the surety bond requirement and use the bonding agencies, as well as the accreditation inspectors, as a source to review financial and business plans for those companies wishing to submit bids. Those companies with little to no history in each product category that intend to submit a bid should be subject to increased scrutiny to ensure that those businesses are in fact financially legitimate and can meet the demands of the increased capacity in each CBA. Notification of Missing Financial Records: We strongly recommend that CMS re-establish a three-year audited financial record as a minimum standard for entering a bid. CMS has proposed to weaken, rather than strengthen, necessary financial standards governing this government acquisition program. In the preamble to the IFR, CMS issued the following statement: The RFB issued for the Round 1 rebid will require suppliers to submit the same categories of financial documents as we requested for the previous Round 1 competition. In the previous round of competition, we required suppliers to submit financial documents from the most recent three years. As stated in 42 C.F.R. 414(d), the required financial documents will be specified in the RFB. Based on experience from the previous round of competition, we are modifying the required financial documents to lessen the burden on suppliers; instead of 3 years of documentation, we will require only 1 year. We believe that we can determine whether a supplier demonstrates financial soundness by reviewing one year of documentation.2 We disagree with this proposed change. Suppliers with minimal financial history should not be awarded a bid unless they can clearly demonstrate they have the financial stability and an immediate service plan in place to serve the entire capacity of that CBA proposed by the current rule. Rather than weaken the standards, CMS should strengthen them by mandating that all suppliers be required to submit financial reports which have been reviewed by an outside independent accounting firm or CPA. Companies who have audited financial statements and use GAAP should be given greater priority because their information conforms to general accounting principles and has passed an extensive review by external parties. A company who demonstrates having poor financial conditions will undoubtedly provide poor service to Medicare beneficiaries. These companies will not likely survive the lower bid price. We strongly recommend that CMS re-establish a three-year audited financial record as a minimum standard for entering a bid. 2 74 Fed. Reg. 2876. Required Growth of Winning Bids in Round-One Were Unrealistic: We strongly urge CMS to ensure that winning bidders account for at least 75% of the previous year’s market share. The results of the round-one acquisition program proved that many winning suppliers had little to no history in the selected product categories. A careful review of the bidding process resulted in companies submitting bids with unrealistic financial bids and delivery expectations. For example, when filling out the bid applications, suppliers were merely asked if they could meet the capacity (up to 20%) of the CBA they intended to serve. Companies, including The SCOOTER Store, submitted multiple bids for products outside their primary business. Many times over, these companies had little to no experience or previous year market-share in the product category year yet proposed they could meet substantial capacity overnight. In an effort to better understand the unrealistic growth that would have been required from the winning bidders, we calculated CMS’ own data to determine the combined market share of the winning bidders in the year prior to the implementation of the bidding program for each CBA. The results of round-one would have required the winning bidders to grow at an unrealistic rate, overnight. The day the bid became effective (7/1/08), winning bidders in certain categories were expected to grow by over 5,000%. The results of our findings are as follows: Standard Power Wheelchairs: The combined market share of all winning bidders in the year prior to NCB ranges from a low of 3.9% in Riverside, CA, to a high of 49.2% in Kansas City, MO; • This would require all winning bidders in Riverside, CA, to grow by nearly 2,500% in one day. • In a best case scenario, the Kansas City, MO, winners would have to grow by 100% overnight. Glucose Monitors: The combined market share of all winning bidders in the year prior to NCB ranges from a low of 1.9% in Miami, FL, to a high of 3.3% in Orlando, FL. • This would require all winning bidders in Miami to grow over 5,000% overnight. • Best-case scenario, the Orlando winners would have to grow 3,300%. Enteral Nutrition: The combined market share of all winning bidders in the year prior to NCB ranges from a low of 1.8% in Cincinnati, OH, to a high of 28.2% in Charlotte, NC. • This would require all winning bidders in Cincinnati to grow 2,500% the day bidding started. • In a best-case scenario, the Charlotte providers would have to grow nearly 400% overnight. The above examples clearly demonstrate the Medicare beneficiaries would have been served by providers who had little to no market share the year prior to submitting a bid. Rather than CMS requiring specific financial information and a service plan as proof to meet that capacity, they simply took the bidder’s word. CMS should require a detailed business plan from each of these suppliers planning for substantial growth prior to issuing them a winning bid. We are concerned that CMS’s primary goal is producing a superficial financial saving and not quality patient care. As the agency is clearly aware, winning bidders, by law must service every patient they come in contact with. It is hard to imagine that a company can immediately begin servicing Medicare patients overnight without the appropriate personnel and products in place. CMS should put quality controls in place to ensure that all suppliers submitting a bid demonstrate that they have the appropriate business model in place to serve the capacity of these cities. Additionally, any subcontractor who enters into an agreement with a winning bidding should also be subject to these same business process controls. We strongly urge CMS ensure that winning bidders account for at least 75% of the previous year’s market share. Current Bidding Program Guarantees No Returns: We recommend that CMS provide certainty of market share to winning bidders. Suppliers are required to submit bid proposals to CMS with no guarantee of market share. It is pointless for a supplier, regardless of size to submit a discount of any size without truly knowing there is guaranteed market share for them. If CMS wants to truly make this a market based bidding process, then suppliers should be provided some certainty of market share. We recommend that CMS provide certainty of market share to winning bidders. Suppliers Should Be Allowed to Bid Fair Market Price We recommend that either Standard Power Wheelchairs be excluded from the bidding process or CMS allow suppliers to bid above the fee schedule so that the price accurately reflects current market price. By mandating that suppliers bid below the current fee schedule, CMS is establishing an artificial, non-market based ceiling. Rather than letting the market establish the price, CMS is creating a new set of rules and guidelines that are contrary to the Federal Acquisition Regulations (FAR). In essence, CMS is creating an overly restrictive, anti-competitive price fixing program. This gimmick resembles an unfortunate, one-sided game of Russian roulette. In July 2008, Congress delayed the program through Medicare Improvements for Patients and Providers Act (MIPPA) as a result of the fundamental flaws associated with the initial rollout. One such flaw was that suppliers were bidding out of fear rather than true economies of scale. While there was no guarantee that a supplier who bid artificially low would be granted a bid, this practice put the supplier in a “no-win” situation. Their fear-based bid created a new median price that most providers could not deliver (despite signing an agreement) and placed Medicare beneficiaries at risk. As a result of the delay, the durable medical equipment community was forced to accept a 9.5% fee schedule reduction until bidding resumes. Medicare prices for power wheelchairs have been cut dramatically in recent years. In November 2006, CMS implemented a new coding structure and fee schedule for all power mobility devices that reduced the fee schedule by over 27%. Furthermore, to CMS’ own admissions, the Gap Filling methodology used to establish the 2006 power mobility device (PMD) codes and fee schedule is outdated and flawed. We recommend that either Standard Power Wheelchairs be excluded from the bidding process or CMS allow suppliers to bid above the fee schedule (on power wheelchairs as well as all other products) so that the price accurately reflects current market price. CBO Scored the Bidding Delay as “Budget Neutral”: CMS should restore the 2008 base fee schedule as the baseline for the bidding process. As previously stated, the national durable medical equipment community was forced to accept a 9.5% fee schedule reduction as a result of a Congressional delay of this acquisition program. According to the Congressional Budget Office (CBO), the fee schedule reduction was budget neutral over a five-year period. Therefore, the “savings” previously announced by CMS should be derived from the June 30, 2008, fee schedule. We urge CMS to restore the 2008 base fee schedule as the baseline for the bidding process because the 9.5% fee schedule reduction fully paid for the delay. CMS’ Bidding Contractor Should Be Wary of “Gaming”: CMS should not award contracts that clearly engaged in price collusion with other suppliers. The results of the round-one acquisition program identified irregularities in the “Standard Power Wheelchair” category in Riverside, CA, that clearly demonstrated a practice of “gaming.” For example, the code K0824 (heavy duty power wheelchair with solid seat pan/sling back) in Riverside had the single greatest reduction over the current fee schedule amount (70.73%) for any power wheelchair base in any Competitive bid area in the Standard category. Regardless of a company’s economies of scale (large or small), it is unequivocally impossible for these winning bidders to purchase this product at the winning rate, much less deliver and service it for Medicare beneficiaries. Unscrupulous actors clearly undermined the bidding process by bidding at an unrealisticly low rate to ensure inclusion in the market or to sell their bid to a company who did not win. This strategy artificially lowered the single bid price. We are also concerned about supplier networks that enter into “wholesaling” agreements. While we have no issue with the concept of supplier networking, we are concerned that these agreements lead to price fixing and should be subject to additional scrutiny. We would recommend that CMS and its contractors investigate pricing irregularities such as these prior to establishing the single rate payment. CMS should investigate financial relationships between supplier networks and wholesale agreements that are established during the bidding process. We strongly recommend that CMS not award contracts that clearly engaged in price collusion with other suppliers. Winning Bidders with No Intent to Deliver Products and Services: CMS should not award a contract to a supplier whose sole intent is to sell their contract and should not use their bid price to calculate the single unit price. The results of the round-one acquisition program also identified irregularities in a winning bidders intent to deliver products and services in a CBA. On several occasions, winning suppliers, through either direct or indirect contact with The SCOOTER Store, made attempts to sell their winning contract. Many times, these suppliers informed us that they had no intention of ever selling to or servicing their winning bid. It is our belief that the same results occurred in both the Polk County and San Antonio demonstration projects. We are concerned that providers will again bid artificially low for the sole purpose of selling their contract. Unless new controls are in place, this scheme will continue if/when CMS re-initiates the program. As stated above, we would urge CMS to require an appropriate business from all winning bidders prior to submitting a bid. We would also recommend that CMS reiterate that all winning suppliers are fully expected to adhere to rules and regulations of the program and cannot turn away any Medicare patients. Allowing the “scam” bids to be used to calculate the single payment amount clearly undermines the integrity of the whole process and does not represent fair market price. CMS should not award a contract to a supplier whose sole intent is to sell their contract and should not use their bid price to calculate the single unit price. Administrative or Judicial Review and Compliance With the FAR: CMS should clarify that all contract awards and invitations to participate will be subject to the traditional review of procurements conducted by the government. CMS is about to pursue a government acquisition program that precludes administrative and judicial review. In order to ensure a transparent process that ensures public trust and confidence, we call on CMS to allow interested parties the right to contest questionable determinations. Failure to do so sends the exact wrong message, especially during these troubled economic times. CMS has further decided on its own to avoid the tried-and-true government contract rules set forth in the FAR. While Congress may have allowed the Secretary of Health and Human Services to waive the FAR, Congress did not mandate that the Secretary do so.3 As a basic premise, CMS seeks to accomplish through the Medicare DMEPOS competitive acquisition program the same goals and results as those of the Department of Heath and Human Service and other federal agencies seeking to accomplish when they utilize the Federal Acquisition System to procure a product or service for themselves – i.e., to obtain on a 3 42 USCS § 1395w-3(a)(1)(C). timely basis the best value product or service that it can while maintaining the public's trust and fulfilling public policy. See FAR 1.102(a). Instead of adopting the tried, tested, and relatively effective representations and certifications language contained in the FAR, CMS has established a new set of criteria to govern the competitive acquisition program. Considering the number of procurements that are set aside each year by the General Accountability Office (GAO) and the United States Court of Federal Claims based upon government error, it is inconceivable that CMS would even suggest such a secret and insulated process. That is a recipe for arbitrary and erroneous awards, if not a direct invitation for the perpetration of fraud. CMS should clarify that all contract awards and invitations to participate will be subject to the traditional review of procurements conducted by the government. Change of Ownership Timeline: CMS should be required to notify the supplier(s) within 30 days of receipt of the letter of intent to sell either approving or disapproving the acquisition of the winning contract. Section 414.422(d)(1) requires that a successor contractor must meet "all requirements applicable to contract suppliers for the applicable competitive bidding program." CMS should make clear that a change of ownership will be approved if the new entity meets the applicable quality standards, accreditation requirements, and adheres to the terms of the original contract. CMS, pursuant to 42 C.F.R. § 414.422 (d), states that a “contract suppliers must notify CMS if it is negotiating a change of ownership 60 days prior to the anticipated effective date of the change.” In addition, the successor entity must submit a novation agreement to CMS 30 days before the anticipated change of ownership takes effect, stating that it will assume all obligations under the contract.4 For example, The SCOOTER Store had previously arranged for an acquisition of a mobility provider in Miami, FL, prior to the Congressional delay. The acquired company notified CMS on April 17, 2008, of its intent to be acquired by The SCOOTER Store. Despite the numerous inquiries in that 90-day period, The SCOOTER Store was never notified by CMS as to whether the acquisition had been approved or disapproved. We are concerned that there are no time restraints given to CMS as to when the agency will notify the supplier of the approval of such acquisition. CMS should be required to notify the supplier(s) within 30 days of receipt of the letter of intent to sell either approving or disapproving the acquisition of the winning contract. Conclusion: As highlighted above, we are concerned that the competitive acquisition program will result in less quality healthcare while eliminating thousands of businesses and jobs throughout the country. In closing, we strongly urge that: 4 42 C.F.R. § 422(d)(2)(iii)> • CMS to rescind the IFR and re-issue as a proposed rule subject to meaningful notice and comment; • CMS to significantly modify the program to ensure that no more than half of the businesses in each CBA are eliminated or Medicare beneficiaries will go unserved; • CMS to require that all providers be required to adhere to the accreditation and quality standards mandate prior to submitting a bid; • CMS to expedite the surety bond requirement and use bonding agencies to assist in validating submitting companies’ financial and business plans; • We strongly recommend that CMS re-establish a three year audited financial record as a minimum standard for entering a bid; • We strongly urge CMS to ensure that winning bidders account for at least 75% of the previous year’s market share; • We recommend that CMS provide certainty of market share to winning bidders; • We recommend that either Standard Power Wheelchairs be excluded from the bidding process or CMS allow suppliers to bid above the fee schedule so that the price accurately reflects current market price; • CMS should restore the 2008 base fee schedule as the baseline for the bidding process; • CMS should not award contracts that clearly engaged in price collusion with other suppliers; • CMS should not award a contract to a supplier whose sole intent is to sell their contract and should not use their bid price to calculate the single unit price; • CMS should clarify that all contract awards and invitations to participate will be subject to the traditional review of procurements conducted by the government; • CMS should be required to notify the supplier(s) within 30 days of receipt of the letter of intent to sell either approving or disapproving the acquisition of the winning contract. Rescinding this IFR would provide the current Administration with the appropriate opportunity to review a program that will result in massive job loss and reduced quality of healthcare services. Furthermore, a delay will give the Administration an opportunity to determine how, or if, this government consolidation program fits into the long-term goals of healthcare reform. TSS looks forward to working with CMS on this important issue and other issues of mutual interest.