Bid Evaluation Process
CMS Final Rule states that HME providers bid on the right to service Medicare beneficiaries in selected competitive bidding areas (CBAs) with selected products. Products affected by the competitive bidding process are broken down into product categories. Bidding is done by product category and requires bidders to submit bids on multiple items (by HCPC code) within the category. Bidders may bid in any or all product categories, but MUST bid on ALL products within the product categories they elect to bid.
Round One Recompete Product Categories:
Bidding suppliers are required to estimate the amount of products (by HCPC code) that they realistically anticipate having the ability to provide.
The specific process for determining a supplier capacity number has not been released. CMS has stated that they will be using a record of previous Medicare billing by supplier, along with the bid capacity amount to determine a supplier’s capacity. The process is a bit arbitrary, and is not transparent.
Note: For the purposes of this example we will be using a method similar to the process industry analysts anticipate will be used by CMS. Understand that this does not necessarily give an exact method for calculating what CMS will determine to be your capacity. We will be using a composite weighted capacity number. Each individual HCPC code will be given a weighted capacity, which will be the product of the capacity (provided by the bidder per HCPC code) and the bid weight (provided on the RFB). The composite capacity will be the sum of the individual weighted capacities for the product category.
Bidders are required to submit an individual bid amount for each product (by HCPC code) within the product categories they chose to bid. Form B may only be submitted when a bid amount has been submitted for ALL products within a given product category. Bid amounts cannot exceed the current fee schedule amount. Bid limits are available on each CBAs request for bid sheet (RFB).
Bid amounts include the cost of:
Products within the product categories are weighted based on utilization. The weights are assigned not by cost or Medicare reimbursement dollars, but instead utilization. The more a product is billed to Medicare, the higher its bid weight will be. Low cost-high utilization products have high weights, whereas high cost-low utilization products will have lower bid weights.
When weights are applied within the product category, the effect is to possibly distort the composite bid amount in a way that is not immediately obvious. (An example of the composite bid/weight issue and further commentary from actual Round Two bidding may be found here.)
CMS will aggregate individual bids into a composite bid, giving a means of comparing bidders with each other. The “composite bid” will be equal to the sum of the weighted bids within the product category.
The “pivotal bid” is the point at which beneficiary demand for the CBA has been met by aggregate supplier capacity. CMS starts with the lowest bona fide bid, and works toward the highest, until demand is met. The last bid taken (the highest bid) is the pivotal bid. Bidders with composite bid amounts at or below the pivotal bid (and meeting all other eligibility requirements) are considered “winning bidders” and will be offered a contract by CMS. Bidders submitting bids above the pivotal bid amount will generally be non-contract suppliers.