Round Two Winners’ Compliance Called Into Question

Significant portions of contract winners do not hold required state licenses, certifications.

Many DMEPOS providers that were awarded contracts by CMS to provide Medicare services to beneficiaries in Round Two of competitive bidding lack the required licensure or accreditation for the specific states in which they won contracts, according to analysis of Medicare and state regulatory data that was circulated at last week’s Washington Legislative Conference.

The problem is extensive. The analysis shows that as of May 1, more than 30 percent of Round Two contract holders did not possess licenses or permits in some or all of the states for which they held contracts. For instance, more than 20 percent of all contract winners in Tennessee do not have licenses required by the Volunteer State to legally provide services to patients.

Other examples exposed by the analysis are just as alarming:

  • Fifty-two percent of contracted suppliers in Washington, Baltimore and Philadelphia bid areas lack the required RSA license to provide DMW services in the state of Maryland.
  • Twenty-eight of the 79 providers that signed contracts for Richmond, Va. Do not have required Board of Pharmacy permits.
  • In South Carolina, more than 50 percent of providers holding contracts do not possess the required licenses or permits.
  • More than 90 contracts for Ohio were signed by companies not qualified to provide services to beneficiaries in the Buckeye State.


Medicare required all companies submitting Round Two bids to have the necessary state licenses or similar certifications in place by May 1, 2012. In fact, according to CMS’s rules for the competitive bidding program, contract winners that do not meet licensing requirements will be disqualified, meaning that they will lose every contract in every bid area.

However, the analysis shows many bidders — and CMS itself — let the requirement slide. In fact, letters circulated last month by the CMS’s competitive bidding implementation contractor (CBIC) show that CMS has warned providers in violation of the requirement that they must have the licenses in place by July 1, a whopping 14 months after the original deadline.

This presents serious problem for beneficiaries needing access to care, because even if the unlicensed providers chose to subcontract, they still must possess those state licenses or permits, according to CMS’s rules. With a month to go before July 1, that leaves exceedingly little time to obtain the correct certifications.

“Across Tennessee, providers are enraged by the manipulative efforts of CMS to break its own rules to allow non-licensed companies to shut out legitimate, local companies and jeopardize access to care for our state’s most vulnerable citizens,” said Ashley Plauche, director of communications and PR at Tennesse provider Lambert’s Health Care. Plauche also serves as vice president of the Association for Tennessee Home Oxygen and Medical Equipment Suppliers.

“CMS is deliberately allowing these illegitimate companies to produce the low prices that the rest of us are held to in an effort to show false savings for the government,” She continued. “This is not a technicality. Unlike CMS, Tennessee remains committed to Medicare beneficiaries, and is more concerned with their safety and wellbeing than with a headline about false savings.”

“My company would have bid in more areas, but we didn’t think we could get licenses in time,” said Joel Marx, chairman of Cleveland, Ohio provider Medical Service Company. “If we’d known that we actually had an extra 15 months, we definitely would have submitted more bids. This deadline change is grossly unfair to the honest companies who played by the published rules.”

More Problems

State licensure, permits and accreditation are only part of the problems with many Round Two contract holders. Another key problem concerns location. Many providers hold contracts for CBAs in which they have no location. In fact, many are hundred and even thousands of miles away from the patients they are supposed to serve.

According to the analysis, more than 20 percent of Round Two contract holders have only one location — despite the fact they might have secured contracts for competitive bidding areas more than 2,000 mile away. And more than 50 percent of bid winners are located more than 500 miles from their contracted CBAs.

Some additional details:

  • A whopping 74 percent of providers winning contracts for Hawaii were on the mainland, more than 2,500 miles away.
  • More than 50 percent of the winning providers for New York are located outside the state, with the average distance for those out-of-state providers being 600 miles away.
  • Twenty-four of the 35 providers contracted to provide oxygen to patients in Allentown, Pa. are outside of Pennsylvania.
  • Fewer than 14 percent of bid winners in Florida’s eight CBAs were local.

All in all, more than 20 percent of all the companies that CMS contracted for Round Two are not qualified in at least one of that round’s 91 CBAs.

This alarming trend has prompted lawmakers to push CMS to implement an administrative delay of implementation for Round Two of competitive bidding. Representatives Glenn Thompson (R-Pa.) and Bruce Braley (D-Iowa) have urged their fellow Congress members to sign a letter to CMS Administrator Marilyn Tavenner calling for the administrative delay.

 “CMS really should acknowledge the problems, stop the program, and allow time for it to be fixed,” said Tyler Wilson, president of AAHomecare. “It’s not unreasonable to expect a federal agency to abide by its own rules. Medicare beneficiaries, state regulators who expect their own state’s rules not to be circumvented by CMS, and DME providers should insist on nothing less.”

About the Author

David Kopf is the Publisher and Executive Editor of HME Business and DME Pharmacy magazines. Follow him on LinkedIn at and on Twitter at @postacutenews.

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