CA Competitive Bidding

CA Competitive Bidding

SHERRY L DALEY

8/16/2004

Thank you to all California members who sent suggestions for responding
the Governor's recommendation that O&P be placed alongside DME for
competitive bidding purposes. Following is COPA's response to the
proposal, aka HHS25.

The California Performance Review (CPR), the document that recommends the
competitive bidding, relies on the DMEPOS San Antonio study. Some of our
comments reference it. If you would like to see the entire report - it is
significant, please go to:
<URL Redacted> and click on the tab
at the bottom that says full report. It is 189 pages. Ignore the
Florida data, there was no O&P in that project - reference the San
Antonio data. Also look closely at the appendix at the end. It shows
exactly what codes were used in the project and what the bid prices were
compares to regular Medicare. For instance: L4360 $162.54, L3982 $222.63
and L3730 $613.20.

COPA is working behind the scenes with DHS and Legislative contacts to
resolve this issue. As soon as there is more news I will post it here.

COPA's offficial response is as follows:

August 16, 2004

California Performance Review
Health & Human Services Agency
Stakeholder Survey

Re: CPR Item HHS25

Dear CPR Advocates:
On behalf of the California Orthotics and Prosthetics Association (COPA)
and the physically challenged population of California, I must register
our complete disapproval of the recommendation to require competitive
bidding for orthotics and prosthetics products. There are several
important reasons why competitive bidding is not advisable for these
products.
The nature of the products themselves make them inappropriate for
competitive bidding. Orthotics and prosthetics require a significant
professional service component due to the custom, individualized, highly
specialized nature of the devices. Competitive bidding is only
appropriate for mass produced, commodity type items that are identical in
each application. (Oxygen is oxygen, a walker is a walker, a crutch is a
crutch). In most cases, orthotic and prosthetic devices are individually
crafted for the individual end user.
Commodity purchasing is not possible where individual single unit
fabrication, design, fitting is required to accommodate or prevent
deformity, reduce pain and/or restore function to the disabled
individual. Orthotic and prosthetic devices are not durable medical
equipment, as they are fabricated to each individual patient either my
means of a cast mold or series of measurements, evaluated for, taken by
and fit by a certified O&P professional. The inapplicability of
competitive bidding for O&P services causes COPA�s board to question
whether the inclusion of this category was a strategy that was not
thought through to its practical application.
COPA strenuously objects to the CPR�s assumption that the O&P field is
somehow a part of the DME industry and vehemently denies that any
significant fraud is taking place on the part of certified practitioners.
Unlike DME retailers, all O&P providers participating in the Medi-Cal
program must keep current certification. The Department of Health
Services has produced no evidence that fraud on the part of certified O&P
Providers is a problem. Lumping legitimate, highly respected
professionals who have dedicated their careers to helping injured
servicemen and physically challenged children in with DME �scam artists�
is an insult. There has been absolutely no reason to suggest that there
is fraud that would warrant any onerous approach to O&P claims.
As for the data suggested by the Florida study, O&P fraud was indicated
in that state and the primary cause for the fraud was the state�s
resistance to require that practitioners show reliability through
certification. Since the Florida Grand Jury Report, the Legislature
enacted licensure for this category as a means of attacking fraud. In
California, the DHS took further action in this area in October of this
year by removing the asterisk from numerous codes included in the O&P
category which had previously been supplied by non-certified individuals.

Since this change, there are virtually no O&P products that can be
provided under the state�s Medi-Cal system unless they are prescribed by
a physician and provided by a certified practitioner or otherwise
licensed physician. Requiring professional distinction in order to
distribute the products creates a gate-keeping function whereby
providers entering the program are invested in their professions and also
gives the Department the ability to bar fraudulent persons from
participation by reporting violations to their respective certification
or licensure boards.
Unlike DME, there are very few large O&P companies, with only one company
having facilities in a majority of the state. More than half of the
profession in California consists of small private companies owned by an
individual practitioner. These businesses provide consumers with
individualized care on which they depend for mobility.
For arguments sake, if there were more than one company that could bid
for services on a regional basis, no single entity could replace the care
given to rural patients. Unlike DME where a patient can be shipped a
product via UPS, O&P patients most often require multiple visits spanning
years, or in the case of an amputee, a lifetime. If competitive bidding
were even possible, its implementation would create access to care issues
that would never withstand the scrutiny of the courts.
When reviewing the sources indicated for making this recommendation it is
clear that there are very little savings to be found in including O&P
products in a competitive bidding program. In the Texas program, the RFP
process was halted due to provider concerns and threatened litigation. In
the Medicare study there was only one test market for competitive bidding
and it only encompassed simple orthotics requiring very little
customization. The savings demonstrated were small, ranging from about
3% to 25%, depending upon the product. The overall savings for the simple
orthotics was less than $100,000 and even less in the second year. The
report also admits that part of this savings could have come from reduced
utilization, however there has been no data collected by the study to
demonstrate whether access to care and product availability had been
effected for the O&P category specifically.
It is interesting to note in the study that several companies that do not
specialize in O&P were included as bidders, which would ultimately have
downward pressure on pricing. �Cherry-picking� a few simple orthotic
items and inviting the �Wal-Marts� of the medical supply industry to bid
on them against full service O&P facilities is not a realistic assumption
of how competitive bidding would occur if the entire category were placed
under competitive bidding. The large medical supply distributors do not
apply more complex devices and would not be capable of bidding for them.
As the Medicare report points out, there are significant costs associated
with a competitive bidding reimbursement program. The total reimbursed
charges for the orthotics portion of the demonstration project (both
years) was $719,319, with the total for all products (wheelchairs, etc)
being $34,194,518. Orthotics thus was 2% of the product mix being tested
by the project. 2% of the total cost of the project ($4.8 million) is
$96,000. The In other words, if the orthotics program took only its fair
share of the cost to implement the program, savings would have been les
than $50,000 per year for the two year program.
Given the inapplicable nature of applying competitive bidding to the rest
of the product category, it seems logical that pursuing cost savings in
this manner is unwarranted. Many of the lower cost items used in the
study have such a small percentage markup from their wholesale cost, that
the expense involved in starting a patient chart and billing for the
product is not even covered by the margin. In that only 14 providers
participated in San Antonio for the category, it is doubtful that the
program would be successful on a statewide basis for a limited number of
low cost products. The actual effect would be that access to these
products would be unavailable for most patients.
When evaluating current DHS spending for the categories of O&P and DME,
it should be noted that where DME products have seen steady increases
amounting to an over 200% increase for their category, O&P products have
slowly been reduced to the point where many common products are being
provided by orthotists and prosthetists at below wholesale cost.
The balance of products that are steadily being reimbursed at below
wholesale cost (see attached list) is growing and many businesses are
near the point of turning patients away. At many meetings practitioners
have stated that they are subsidizing the Medi-Cal patient because these
patients, who rely on their devices for simple human dignity, have no
alternative for care. In addition, some have said that the state has
eliminated the benefit de facto, through negative profit margins, leaving
practitioners to deliver the axe to patients, while the administration
and the legislature are not held responsible for leaving patients
�limbless.�
Where the CPR recommends cost cutting at every opportunity, COPA
earnestly suggests that it recommend using some of the savings obtained
by utilizing competitive bidding for DME to augment the budget for O&P
before California�s most vulnerable population of aged and disabled
patients find themselves carting themselves in homemade devices on the
streets of our cities similar to what can be seen in most Third World
Countries.
While COPA commends the work of the new administration in trying to
develop cost savings plans during this crisis period, we must be
realistic in what can be achieved in this area. Medi-Cal reimbursement is
the lowest reimbursement received by this profession. While there may
still be savings available in the DME category, the state has wrenched
all possibilities of savings from O&P through years with no increases for
the category, no reimbursement for the service component involved with
the products and increasing administrative burdens.
At this point in time it may be best for the authors of the CPR to ask
themselves, �Is California really at the point where we need to ask those
stricken with the most horrible deformities or those who have suffered
amputation, to give a little more?�
COPA looks forward to a response to this document.

Sincerely,

Rick Chavez, CPO
President, COPA

Pricing attachment:

CODE MODEL # MEDICAL REIMBURSMENT $ COST $
L6700 MODEL #3 $165.52 $493.90
L6705 MODEL #5 $130.52 $241.41
L6710 MODEL #5X $169.02 $236.79
L6715 MODEL #5XA $169.02 $241.41
L6720 MODEL# 6 $349.04 $854.47
L6725 MODEL#7 $196.79 $280.49
L6730 MODEL#7LO $373.57 $462.28
L6735 MODEL#8 $171.39 $241.41
L6740 MODEL#8X $169.80 $298.75
L6745 MODEL#88X $194.53 $246.44
L6750 MODEL#10P $169.80 $244.98
L6755 MODEL#10X $169.80 $245.48
L6765 MODEL#12P $169.80 $265.76
L6775 MODEL#555 $222.11 $291.70
L6780 MODEL#SS555 $169.02 $316.85
L6795 HOOK, 2 LOAD $562.04 $867.37
L6800 APRL VC $446.34 $773.71
L6805 MODIFIERUNIT $157.33 $225.82
L6806 TRS GRIP VC $807.80 $950.00
L6807 TRS ADEPT $583.36 $580.00
L6809 TRS SUPER $182.88 $235.00
L6825 DORRANCE VO $527.65 $738.32
L6830 APRL VC $610.94 $1,039.08
L6835 SIERRA VO $557.35 $897.36
L6840 BECKER IMP $408.60 $490.52
L6845 BECKER LOCK $348.25 $437.01
L6860 ROBIN AIDS VO $259.49 $362.13
L6865 PASSIVE HAND $172.40 $135.85
L6868 PASSIVE HAND $116.55 $139.93
L6870 CHILD MITT $112.24 $95.89
L6872 NYU CHILD HAN $472.59 $502.90
L6875 OTTO BOCK VC $371.31 $408.41
L6880 OTTO BOCK VO $290.47 $201.34
L8420 PROS. SOCK W $11.79 $10.38
L8430 PROS. SOCK W $11.79 $13.05
L8435 PROS. SOCK W $11.99 $7.28