Is CMS Playing “Bait and Switch” in San Diego?

ATTEMPTING TO WRITE THE ASSESSMENT of the Medicare Clinical Lab Services Competitive Demonstration Project that you will read in this issue earned a unique distinction: since our founding in 1995, this has been the single most difficult story we have ever tried to explain to our clients and regular readers.

At the same time, it is likely to be one of the most important stories in the laboratory medicine profession in the past two decades. The Centers for Medicare & Medicaid Services (CMS) is now just six weeks away from collecting bids from labs hoping to preserve their access to Medicare fee-for-service patients in the San Diego-Carlsbad-San Marcos MSA (metropolitan services area).

You’ve probably read lots of news items about this competitive bidding demonstration. But what you haven’t read is a serious, detailed critique about its design, its operation, and the ways it is likely to change how laboratories serve Medicare patients in the San Diego MSA. That’s because it is a complex, subjective, and opaque scheme. CMS and RTI have delivered a demonstration project that lacks clear, objective standards. But that’s only part of the story.

CMS is preparing to conduct a multi-step bidding auction. After opening the bids and evaluating the applications (using non-price criteria that are not objectively defined), it will begin a second round of bidding and negotiating with laboratories it has selected. Thus, labs will find themselves in an open-ended selection process. Not only do they not understand the criteria upon submitting their bids, but they don’t know the precise terms and conditions of the provider contract CMS will require them to sign should they be selected.

Why all this obfuscation and not a transparent, objective bidding process? Smarter minds than I are dissecting the CMS/RTI scheme to implement the San Diego MSA pilot site in an attempt to answer that question. Many of us have come to a similar conclusion: CMS officials involved in designing the pilot demonstration had another agenda beyond meeting the Congressional mandate of finding a lower price while maintaining beneficiary access and service. Rather, their motive seems to use the demonstration as a way to extract bids from laboratories facing total loss of access to Medicare beneficiaries. CMS will then use these bids as a prototype for a new national Part B laboratory test fee schedule. If this proves to be true, then the laboratory industry is likely to feel like it was the victim of a CMS “bait and switch” tactic.