Auction expert reacts to CMS’s proposed big changes

‘I get little comfort from knowing I was right’
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Friday, August 3, 2018

COLLEGE PARK, Md. – When CMS outlined significant changes to its competitive bidding program in a recent proposed rule, one person came to mind: Peter Cramton.

Cramton, an economics professor at the University of Maryland and an auction expert, has been a vocal critic of the way CMS originally designed the program—going back to at least 2010.

Here are Cramton’s thoughts on CMS’s about-face on competitive bidding and the agency’s plans to finally reform the program with more standard auction principles, including a clearing price/maximum winning bid methodology.

HME News: Remind me, how did you get interested in CMS’s bid program to begin with?

Peter Cramton: Nancy Johnson, the six-time congresswoman from Connecticut, called me and asked if I would take a look at the DME auction rules. I did and I was shocked. I told her, “These rules can’t work. There are fatal flaws.” She then asked if I would be willing to talk to congressional leaders about this and I said yes. Thus began my multi-year effort to reform DME auction rules.

HME: At one point, you were one of 166 auction experts who wrote CMS detailing the flaws in its program. You even hosted a mock auction to demonstrate how more standard auction principles would work better.

Cramton: Together with my colleagues, I made quite an effort to convince HHS, CMS and Congress about the problems, and how they could be fixed.

HME: What were you—and the industry—up against?

Cramton: CMS acted like its mission was to defend the status quo and had no interest in fixing the mess. HHS had too many fires to put out. I was told, “We have dozens of programs needing reform and can only fix five. Why should this make the top five?” I explained that it was actually easier to fix it than to stumble along. Congress was the most supportive, but getting legislation passed was a huge ask.

HME: Have you been keeping up with how the bid program has been going?

Cramton: I have had a few meetings with folks at the top of HHS on this matter, beginning in March. I found there was consensus about the flaws and a true desire to address the key problems: non-binding bids, median pricing rule, and zero transparency. I’m hopeful that the program will be fixed. CMS did retain an auction expert, which is a very good sign.

HME: Did they not retain an auction expert previously?

Cramton: The rules were created without any guidance from any expert in auctions. It is like building a bridge without a bridge expert. The bridge will fail.

HME: Have you examined the recent proposed rule?

Cramton: I have yet to carefully review the proposed design, so I will not comment on specifics, but I am now optimistic that the rules will be fixed. Of course, the details matter. I hope to take a closer look and comment on the rules later this month.

HME: Since the proposed changes are ones that you and other experts have argued for, do you feel validated?

Cramton: Yes, but I get little comfort from knowing I was right. I just want to see the program fixed, which will save lives and money, and improve the care that beneficiaries receive.

HME: How do you predict the bid program will run differently if the proposed changes are implemented?

Cramton: I do expect prices to increase in many cases, but most importantly, I expect services to improve. The net effect will be lower cost and better service for beneficiaries. The reason prices can rise but costs can fall is that improved utilization will reduce the number of unserved beneficiaries from ending up in the emergency room.

HME: Last words?

Cramton: It has been a long ride. I am hopeful that the needed reforms will be made. Better late, than never.