	Problems Were Identified in the CBP Round 1 Bidding Process in Providing Suppliers with Bid Submission Information, but Some Improvements Were Made in the CBP Round 1 Rebid Process

For CBP round 1, we found problems with the bidding process, including  poor timing and lack of clarity in bid submission information and CMS’s  inability to inform suppliers of missing financial documentation. In  comparison with CBP round 1, CMS provided CBP round 1 rebid bidding  information to suppliers earlier, and its financial documentation  instructions were clearer and suppliers were notified of missing  documentation. For example, CMS provided new bidding information several times after  the bid window opened, such as announcing the 10 financial measures  used to evaluate the financial viability of bidding suppliers; clarified CBP  round 1’s bidding information in response to supplier confusion, such as  providing additional explanatory information concerning the request-for- bid instructions; and extended the bid window deadline. These changes in  bidding information made it more difficult for suppliers to submit correct  bids. Prior  to the bid window opening, the rebid’s request-for-bid instructions had  been available to potential bidding suppliers for over 2 months, since  August 3, 2009, and CMS had already held seven informational bidder  conference calls. First, on the day the bid window  opened, CMS provided the actual bid submission deadlines, including the  covered document review date, and provided further instructions on how  a supplier needed to approve a bid in the online bidding system and   would submit the required hard copy financial documents. The request-for-bid instructions included a  chart—Required Financial Documents by Business Type—that more  clearly explained which documents were to be submitted by business type. CMS officials told us that 791 suppliers  submitted their financial documentation by the CBP round 1 rebid covered  document review date and 321 were notified that they had missing  documentation. Electronic Bid Submission System Used in CBP Round 1 Had Operational Problems, and CMS Developed a New Bid System for the CBP Round 1 Rebid

CMS acknowledged that CBP round 1’s competitive bid submission  system—CBSS—had operational problems that affected suppliers’ ability  to submit their bids. CMS officials also acknowledged that the CBSS user guide  was not very detailed or user friendly. CMS developed a new electronic bid submission—DBidS—for the CBP  round 1 rebid. CMS officials told us that DBids did not have significant operational  issues and only a few suppliers experienced minor problems. CMS Did Not Effectively Notify All Suppliers about the Postbidding Review Opportunity in CBP Round 1, and Plans to Communicate with All Losing Suppliers in the CBP Round 1 Rebid after Contract Suppliers are Announced

In CBP round 1, CMS sent notification letters to both the winning and  losing suppliers before announcing the final winning suppliers that  accepted contracts for the CBP. We found that CMS had not effectively notified suppliers  about the opportunity for this postbidding review process. To improve  future rounds of the CBP, we recommended in our 2009 report that if CMS  decides to conduct a review of disqualification decisions made during the  CBP round 1 rebid and future rounds, CMS should notify all suppliers of  any such process, give suppliers equal opportunity for such reviews, and  clearly indicate how they can request a review. CMS officials said the letters will explain the process by  which suppliers may ask questions and express concerns. CMS officials  also stated that in the course of responding to such questions or concerns,  if CMS determines an error was made, it is possible that a CBP contract  may be offered to the supplier. Agency Comments

In commenting on the information presented in this testimony, CMS  officials stated they appreciated GAO noting the administrative  improvements to the competitive bidding process the agency made for the  round 1 rebid. The officials further stated that they believe that CMS made  many improvements to the CBP. Medicare: CMS Working to Address Problems from Round 1 of the  Durable Medical Equipment Competitive Bidding Program. GAO-10-27. Medicare: Covert Testing Exposes Weaknesses in the Durable Medical  Equipment Supplier Screening Process.
Why GAO Did This Study

To reduce spending on durable medical equipment (DME) and related items, under federal law the Centers for Medicare & Medicaid Services (CMS) is phasing in, with several rounds of bidding, a competitive bidding program (CBP) for certain DME and other items. Because of numerous concerns, the Medicare Improvements for Patient and Providers Act of 2008 (MIPPA) terminated the CBP round 1 supplier contracts and required CMS to repeat the CBP round 1, the rebid that began in 2009. In November 2009, GAO issued the report Medicare: CMS Working to Address Problems from Round 1 of the Durable Medical Equipment Competitive Bidding Program (GAO-10-27) that documented problems in CMS's implementation of CBP round 1. This statement discusses some of the problems GAO identified and how CMS has or plans to address them in the ongoing CBP rebid bidding process, particularly (1) the bid submission information provided to suppliers, (2) the electronic bid submission system, and (3) the bid disqualification notification process. For the 2009 report, GAO reviewed data provided by CMS and relevant laws and regulations, and interviewed CMS officials. For this statement, GAO also obtained select information on how CMS addressed the CBP round 1 problems identified in GAO's report by reviewing agency documents and interviewing CMS officials in August and September 2010.

What GAO Found

In the November 2009 report on CBP round 1, GAO noted that problems with the bidding process included poor timing and lack of clarity in bid submission information and the inability to inform suppliers of missing financial documentation. Several times after the CBP round 1 bid window opened, CMS provided new bidding information and clarified other bidding information. The bid window was also extended beyond the initial deadline. These changes made it more difficult for suppliers to submit correct bids. CMS improved implementation of these steps in the bidding process for the CBP round 1 rebid. For example, for the CBP round 1 rebid, CMS provided bidding information to suppliers prior to the bid window opening, including the rebid's request-for-bid instructions, which were available to potential bidding suppliers for over 2 months before the bid window opening. CMS also provided clearer financial documentation instructions and additional financial documentation tools to guide suppliers in the CBP round 1 rebid. For example, the request-for-bid instructions included a chart that more clearly explained which documents were to be submitted by the supplier's business type, for example, a sole proprietorship. CMS also conducted a financial document review during the round 1 rebid, which informed suppliers whether their bid submission was missing required financial documents. Of the 321 suppliers that were notified they had missing documentation, only 14 did not subsequently submit the missing documents. As CMS acknowledged, suppliers had difficulty entering bidding information in the bid submission system used in CBP round 1 and its user guide was not sufficiently detailed. CMS developed a new electronic bid submission system for the CBP round 1 rebid. CMS officials told us that the new system did not have significant operational issues and only a few suppliers experienced minor problems. GAO found that CMS had not effectively notified all suppliers about the opportunity for a postbidding review process in CBP round 1. To address GAO's 2009 recommendation that the agency effectively notify all suppliers of all aspects of the CBP round 1 rebid and future rounds, including any process to review disqualifications, CMS officials stated that the agency plans to notify the losing suppliers of the disqualification reasons by sending each of these suppliers a letter that will explain the process for asking questions or expressing concerns. Officials also stated that in the course of responding to suppliers' questions or concerns, if CMS determines an error was made, it is possible that the supplier may be offered a contract. In commenting on the information presented in this testimony, CMS officials stated they appreciated GAO noting the administrative improvements to the competitive bidding process the agency made for the round 1 rebid. The officials further stated that they believe that CMS made many improvements to the CBP.