Cramton Continues Ringing up Round One's Costs

In addition to staggering drop in claims, only a fraction of contracted providers are making claims.

• By David Kopf
• Jan 26, 2012

The number of Medicare claims has not only dropped during Round One of competitive bidding (read more here), but not all Round One contract providers are filing claims, according to The Hidden Costs of a Flawed Medicare Auction, the now-available, 165-page report from University of Maryland economist and auction model expert Peter Cramton has released

Available at www.cramton.umd.edu/papers2010-2014/cramton-hidden-cost-of-flawed-medicare-auction.pdf, the report breaks down the number of providers making claims for each category in each of the Round One bidding areas, and shows that in many areas, the number of contracts providers actually making claims is significantly low.

"For example, of the 25 enteral Feed contracted suppliers in the Orlando Bidding Area, only 13 have actually provided enteral pumps and supplies," wrote Rob Brant, advisor to the Accredited Medical Equipment Providers of America, and general manager and COO of City Medical Services, in an analysis of Cramton's data. "Surprising to legislative staff but not to enteral suppliers as 48 percent, 12 of the 25 Contracted Suppliers have not delivered any services according to the utilization records that Cramton received. Similar results are apparent as 11 of 23 Contracted enteral suppliers in Cincinnati and 13 of 29 in Pittsburgh have also not provided enteral supplies or pumps in those bidding areas."

Cramton's analysis is based on four data sources.

• The Contract Supplier lists (the winners in the auction).
• The PDAC procedure code utilization data, obtained through Freedom of Information Act rsequest.
• PDAC procedure code utilization data, also obtained through FOIA.
• CMS public access files, available at www.cms.gov/DMEPOSCompetitiveBid/01A3_Monitoring.asp.

Cramton says that the data demonstrates exactly how "destructive" CMS's competitive bidding program has been in its first year of implementation, and how likely it is to actually cost more money than it saves.

"Recent CMS data show the implication of the decline in utilization: higher risk of death, higher frequency of ER visits and hospitalization, and longer hospital stays," Cramton writes in his report. "These results suggest that the cost savings in Medicare DME are dwarfed by the much higher costs to Medicare coming from increased hospital care."