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Am I recommending cheating or doing something illegal? No.
But my friend Rick wrote me about how Medicare’s competitive bidding program is killing his business.
I did a little digging and found this article in Forbes: http://medgroup.biz/bidding-fiasco
“While it’s said that bids are evaluated based on the supplier’s eligibility, its financial stability and the best bid price, it’s simply not true. Contracts are awarded to the Medicare suppliers who offer the best price and meet applicable quality and financial standards. Contracted suppliers will be paid the bid price amount. The bid price amount is derived from the median of all winning bids for an item.”
And explains, “The auction rules established by CMS actually encourage low balling, because the low ball bidders understand the awarded price will actually be higher.”
So, go ahead. Bid $30 to win a bid, even though it’s below your cost. You’ll probably win at a higher price and eke out a profit.
What do you think of that strategy?
It’s legal. And you can be one of the “lucky few” who win a bid.
Write your comments below. And I hope my go-to person on reimbursement Beth Brooks chimes in with her comments.
Beth and InterMountain’s Nic Anderson will teach a 3-hour workshop on Reimbursement and Health Economics at the 10x Medical Device Conference.
See http://medgroup.biz/10x for details.
UDI WEBINAR WEDNESDAY
Unique device identification (UDI) webinar at http://medgroup.biz/UDI-next-steps at 12 p.m. New York time.
5 events and 2 chances to meet
Money-back guarantee in product development: Good or desperate?
Quality Metrics for Medical Device Manufacturers
Seeking Angel/VC Funding
FDA Considers Regulating Medical Device Refurbishers and Other Third Parties
3rd party device service, FDA questions
Conflict of Interest
Your OEM contract unrenewed
Make it a great week.
P.S. Very exciting news. Katie Weimer, VP for Medical Devices at 3D Systems, just joined our 10x faculty. Her talk, “3D Printed Medical Devices: What’s Next?” is in four weeks. Can you make it? http://medgroup.biz/10x
Loren J. Decker
Marc Timothy Smith
Marc Timothy Smith
A n old, but good, read on Snopes: http://msgboard.snopes.com/cgi-bin/ultimatebb.cgi?ubb=get_topic;f=96;t=000012;p=0
I admit I was surprised to see the old $500 hammer thing come up after all these years.
I agree with Michael K’s assessment, but I also don’t think this is all that unique to CMS. They may structure it a bit differently, but whenever there is competitive bidding for anything, there will always be low-ballers, some of whom will be prepared to stand by their “below-cost” bids, and then cut corners to reduce their costs below their bid and turn a profit.
Marc Timothy Smith
I will say that the $500 hammer thing was long ago and few people actually knew the facts. Anyone who works in supplying the DoD in the US understands why, years ago, that happened. I “cut my teeth” in QA working in DoD suppliers in the 1980’s. If the DoD (or any buyer for that matter) puts enough requirements in the RFQ you can get a $500 hammer today. E.g.: The Lockheed Martin F-35. And – Just go to any hardware store – You’ll find hammers in a significantly wide price range.
Personally I believe that every bidder should have to submit data on some aspects such as consumer/customer returns and reliability data with their bid. I fully agree that price alone should not be the determining factor.
Regrettably, the government doesn’t subscribe to a philosophy of fairness today – if it ever did. We operate on the Federal Supply side of the street and one of the favorite procurement acronyms is LPTA, short for lowest price technically acceptable. It’s much like the Medicare bid system, except the winner takes all, and no pesky arithmetic. Another favorite phrase is “…for the convenience of the government”, which never seems to go out of use. It perfectly encapsulates the vast gulf between what the government says and what the government does – and perhaps even explains why. By the way, bidding below cost is almost never a good idea. Eking out a narrow profit is rough ; being turned into an involuntary not-for-profit organization is even rougher.
This is a terrible fiasco.
I’ve seen it from the contract/supply side, as well as unfortunately at the end in caring for my parents and the crap devices that they receive and need to have repaired/replaced and are dysfunctional at best more of the time than they are useful for the immediate need.
The practices of the CMS need to be brought in line with the universe of capable and consistent providers, delivering quality products serving Patient needs. Cost cutting from administrative and contract perceptions are actually creating further financial costs and burdens that are simply displaced line items – as in “not my problem here anymore, I’ve done my job…”
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