Guest Post: A DME Owner’s Perspective on Competitive Bidding

sam-headAs the owner of a durable medical equipment company, pharmacy and the parent of a Type 1 diabetic child, I participated in Medicare’s competitive bid program and watched closely as Medicare decimated the reimbursement amounts for diabetes supplies.

My company successfully bid and was offered a contract for the initial round of mail order diabetes testing supplies in addition to other DME equipment. This was a trial for mail order diabetic supplies before it was rolled out nationwide.

I chose not to accept the bid for diabetes supplies but did accept other DME contracts. In hindsight, I should have accepted that contract but it also prepared me for the national bid that was to come. I looked at it as practice for the success of my future business.

I bid the first round of the national roll out along with many of my peers. The statistical numbers were something like 2500 DME providers that had billed for diabetic testing supplies prior to the national bid. Medicare awarded 15 contracts. Medicare estimated 10 million beneficiaries had diabetes and 60% used mail order for diabetes supplies. (That gives you some idea of how many patients would be affected.)

Competitive Bidding Program

The Competitive Bidding Program was flawed from the start, allowing any qualified bidder to submit “lowball” bids and then decide whether or not to accept the bids after the bid amounts were published. Basically, you could bid well below your cost, get a contract offer, and then decide to accept the bid or not.

If your business relied on that product category, then you bid low and crossed your fingers. Unfortunately, this creates an artificial price point in the bid amounts because if the low ball bidder chooses to not accept the bid price, the median price was not recalculated by Medicare.  Many economists and scholars evaluated the Medicare bid process and published article about how the entire process was flawed.


Now let’s talk diabetic supplies. Even before competitive bidding I was looking for quality, inexpensive meters and strips that I could provide to my Medicare patients. I would test the “off brand strips” on my Type 1 diabetic son compared to name brand strips to see how the readings compared. My son was already checking his sugar up to ten times a day as a very active, very self-managed type 1 diabetic so it didn’t even require an extra finger stick.

If I could find good off brand strips that only required small sample sizes and no-coding they would be offered to my Medicare patients. I did not consider strips that required coding or the large “hanging drop” of blood sample size. I had thousands of Medicare patients, so I was able to get very good contract pricing from large name brand companies. If a small percentage of patients chose less expensive strips, I would be saving a considerable amount on my cost of goods because the Medicare reimbursement was the same on every strip regardless of brand or quality.

If what you’ve read so far disturbs you, you can do something about it. Click the image below and send a message to Congress, letting them know this isn’t acceptable. 


The Math

To simplify pricing we will only discuss pricing on 50 strips. Meters were almost always free from the manufacturers or distributors because they wanted the strip business. My contract pricing on name brand strips was about $20 for 50 strips. Medicare reimbursed about $32. Most patients got either 100 strips every 3 months (if they needed them) or 300 strips every 3 months depending on if they were Type 1 or Type 2.

Factor in shipping costs of about $5.50 per shipment and the profit was pretty good. Keep in mind, there is a lot of administrative cost associated with the required paperwork, delivery confirmation, and billing Medicare. Depending on the scale of your business this cost varies. I did not buy the super cheap strips that had 10 year old technology, required giant sample size, needed to be coded and the readings were very poor. The cost on those was about $9.00 and were most often a never heard brand.

Here is the breakdown on how Medicare’s competitive bidding changed diabetics’ lives.

  • – The small market trial reduced the reimbursement to about $18.00.
  • – The first round of nationwide competitive bidding reduced the thousands of providers to just 15 providers for the entire country and a few other markets like Puerto Rico.
  • – The reimbursement dropped to $10.41 per 50 test strips.
  • – In 2016, the National Mail Order contracts were re-bid again, reducing the providers to just 11 providers and the price came in at $8.32 for 50 test strips.

What’s Happening Now

$8.32 is the reimbursement as of July 1, 2016 through December 31, 2018. The last I checked, my contacts in the industry said they could buy cheap, inaccurate strips for about $5.00. Then you add in your shipping cost, administrative cost and billing cost. Also, because of rampant fraud, Medicare conducts a lot of audits and denies a lot of claims for supplies. That eats in to your profit substantially.

I ask you to add those few figures up that I have given you. There are other rules built into to the bid process that are supposed to protect the end user of diabetic supplies; rules designed to keep the companies from switching your meter/strip brand to another model (because they are cheaper) but the rules can be manipulated.

Gone are the good, modern meters. You can call and ask for a known name brand but the suppliers will tell you they don’t stock that brand and to call someone else.

All I can say is I’m glad I am not a Medicare patient. Competitive bidding has been implemented on most highly utilized DME products like oxygen and CPAP supplies. The suppliers have been forced to file bankruptcy or just close their doors, leaving patients to suffer. The diabetic supply competitive bid is an example of how bad other DME categories will get; it is not an if, but when.

I sold my business to a national competitor in 2013 because I was able to successfully “win” many bids for home oxygen and CPAP supplies. Because my son is a Type 1 diabetic, I volunteer and donate to JDRF as they actively fund many other businesses that develop new devices and medicines that help all diabetics.

Note: Curious as to what meters and strips are currently offered through the Medicare Competitive Bidding Mail-Order program?

Out of nine national mail-order suppliers, three “household” name brands are offered: Bayer Contour/Contour Next, Abbott Freestyle Lite, and Roche Accu-Chek Aviva.

The others? How many of these have you heard of?

On Call Express, On Call Plus, Solus V2, True Balance, True Result, True Test, Prodigy Autocoder, Clever Choice, Clever Choice Voice, Advocate Redi-Code, Advocate Redi-Code Plus, Evencare, Embrace, True Metrix, Glucocard Expression, Glucocard Expression Vital, Caresens, Caresens N, Novammax, Unistrip I, Easy Plus II, Easy Step, Easy Talk, Easy Track, Gmate.

It’s important to not lose access to quality, accurate meters and strips.

Use this link to learn more and take action. 


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