Bid Evaluation Process

Product Categories

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 Two Product Categories:

• Oxygen Equipment & Supplies
• Respiratory Assist Devices & CPAPs
• Standard Power Mobility Devices
• Complex Power Rehab
• Enteral Nutrition
• Hospital Beds & Accessories
• Walkers
• Negative Pressure Wound Therapy Devices

Supplier Capacity

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.

Bidding

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:

• Furnishing the item throughout the CBA
• Providing the item and all services related to the item, including:
• Beneficiary training
• Follow-up
• Manufacturer shipping charges
• Maintenance of rented equipment
• Delivery
• Set-up
• Retrieval
• Providing the item for the entire duration of the bidding contract period
• Provisions of non-discrimination
• Medicare beneficiaries must receive the same products the contract supplier makes available to other customers, including:
• Brand names
• Makes
• Models
• Furnishing items on either a rental or purchase basis

Product Weights

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.

For example, see product category Standard Power Mobility Devices.  HCPC code E2365, Sealed Lead Acid Battery, has a bid limit of $112.17 and a bid weight of .1555523791.  All Group 1 and Group 2 Mobility Devices (17 total HCPC codes) have a combined bid weight of .121802869.  The Group 1 and Group 2 Mobility Devices have reimbursement amounts ranging from $1,292.77 to $6,269.30, and an average of $3,245.81.  The mobility devices themselves, the product the category surrounds, have less total bid weight than one particular type of battery.

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.

Composite Bid

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.

Pivotal Bid

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.

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