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June 12, 2007
To: Providers in Round One Competitive Bidding Areas
Subject: Bid Weighting Analysis
Manufacturers are aware of the incredible task in front of those providers that will be submitting bids to CMS. We are each doing what we can to assist you in this process. The below information authored by The Roho Group is being passed along with their permission. We think you will find it useful in preparing your bid strategy. Other useful information, including a Competitive Bid Worksheet that includes a listing of appropriate Sunrise Medical products, can be found at http://marketing.sunrisemedical.com/Funding/Competitive_Bidding.htm.
The information below should enhance your understanding of “bid weighting”.
Bid Weighting
CMS has published bid weighting data on the CBIC website: http://www.dmecompetitivebid.com/cbic/cbic.nsf/(pages)/Suppliers. If you go to this site and select “Competitive Bidding Areas (CBAs) and Bidding Information Chart” you can then select the specific CBA that interests you. From there, you can obtain information specific to that CBA including geographical area, HCPCS codes and the “bid weights” for each code.
Many providers are misinterpreting the weighting information that CMS is providing. The weights included are actually a formula that identifies what the utilization of each HCPCS code is relative to the total utilization of all codes in the category. It may actually be better to consider this as a “multiplier” because it does not factor in the actual allowable associated with each code and the impact the allowable has on the composite bid. Consider the following hypothetical example:
Item / Code |
CMS Weighting (multiplier) |
Current Allowable |
Allowable x multiplier |
% of Composite Bid |
Exxx1 |
5% |
$4000.00 |
$200.00 |
72.40% |
Exxx2 |
30% |
$100.00 |
$30.00 |
10.85% |
Exxx3 |
25% |
$80.00 |
$20.00 |
7.25% |
Exxx4 |
25% |
$60.00 |
$15.00 |
5.40% |
Exxx5 |
15% |
$75.00 |
$11.25 |
4.10% |
Composite Bid |
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$276.25 |
100.00% |
As you can see, if you equated the CMS weighting to overall value you would have assumed that Exxx1 was rather unimportant (5%). However, when you factor in the allowable associated with the code and consider its impact on your composite bid you discover that Exxx1 represents over 72% of the value associated with the total bid.
If you apply this to the product categories that are included in the first round of Competitive Bidding you will realize that only a handful of the listed HCPCS codes make up the large majority of the bid weight for each category. Using power wheelchair category 2 as an example, two codes (K0822 and K0823) make up approximately 73.5% of the total bid weight (depending on the CBA) and only seven codes contribute 2% or more to the total bid weight. The total for the remaining 100 codes is just over 14% of the overall weight of the bid, with most of these codes individually representing only a very small fraction of the total bid weight.
We have taken the time to work through the detail of the category 2 bid weighting for the Miami CBA, which is attached for your reference. The spreadsheet is sorted to indicate the weight / value of each code to the overall composite bid. The analysis leads to the obvious conclusion that the bid award will ultimately be determined by those few HCPCS codes that represent the large majority of the composite bid weighting and, as such, must be a primary area of focus for prospective bidders.
As you focus on your bid strategy for this handful of codes that will ultimately determine the bid award, we encourage careful consideration of the impact of your bid on the ultimate bid pricing determination. Whereas in the past CMS has established payment allowables for HCPCS codes, now the responsibility for determining the ultimate bid price under Competitive Bidding rests with the providers themselves. Specifically in the case of category 3 power wheelchairs, is there really much more to give in terms of additional discounting, given the service requirements of the assessment process, the set up and delivery functions and the ongoing adjustment and maintenance requirements?
Finally, please offer your active support of Congress HR2231, the Allen-Lewis legislation that would exempt complex rehab and assistive technology products from the Medicare competitive acquisition program. The future shape of the rehab industry will certainly be impacted by this important legislation!
We hope this helps you with your bidding strategy for at least one small portion of the complex Competitive Bidding challenge!