Adult Diaper Vendors Fight Competitive Bid

Call it a bad case of adult diaper drama: Incontinence product vendors are facing off against the state comptroller’s office over plans to competitively bid underpads, catheters and other supplies for Texas Medicaid patients.

Right now, more than 1,400 companies bill the state’s Medicaid program a combined $140 million a year for incontinence products. The comptroller’s office says that paring down the list of vendors to a few select partners would save Medicaid $15 million a year and reduce the fraud they say is rampant in an industry that serves 100,000 of the state’s Medicaid patients. The state Health and Human Services Commission agrees.

“It’s certainly legitimate to look at what our actions will do to the vendor community,” said Chuks Amajor, the comptroller’s director of strategic sourcing. “But we have to be wise stewards of taxpayer dollars. We have to think about how much things cost.”

Sellers of incontinence products understand the state’s budget woes but argue competitive bidding is dangerous. They say trimming the number of vendors will force mom-and-pop health care suppliers — many of whom operate in remote corners of the state — out of business, leading to thousands of job losses in an already struggling economy. They argue there are far better ways to curb fraud and abuse than eliminating competition, or worse, settling on a single out-of-state vendor.

“Eliminating providers equals eliminating jobs,” said Liz Moran of the Medical Equipment Suppliers Association, a Texas corporation that represents 215 state incontinence product vendors. “It will eliminate a lot of choice for patients.”

Concerns over adult diaper fraud have been central to the bidding debate. Both the comptroller’s office and the health services agency said diaper schemes are commonplace: Vendors bill for incontinence products that are unnecessary or never make it to patients. In some cases, patients who do not need the products get approved for them, then sell them for a profit. Health services agency officials said they refer about 20 incontinence fraud cases a year to the state attorney general; in 2006, the AG’s office indicted 33 people in one day in connection with a Dallas diaper fraud ring.

“The competitive bidding process allows for deeper background checks on the companies and allows the state to focus its resources on monitoring fewer providers,” said Stephanie Goodman, a health services agency spokeswoman. “This makes everything easier and more efficient.”

Vendors, many of whom refused to talk on the record for fear of being retaliated against in the bidding process, said the allegations of fraud in the industry are overblown. They have already put mechanisms in place to reduce it, from expensive accreditation to posting surety bonds in case they are caught billing in error. They said forcing upward of 1,000 providers off the market is a heavy-handed solution. “We are dead set against any fraud, waste or abuse,” Moran said, “but we have people who have been in this business for generations who are looking at having to close their doors.”

Amajor said the competitive bidding idea developed after reviewing the incontinence product rates in a couple of other states, where there are far fewer Medicaid vendors. He said the comptroller’s office will probably settle on several vendors as opposed to selecting a single one because of the size and regional variations of the state. “We can accomplish two things,” Amajor said. “We can get a better product, and we can save money.”

If the state is serious about improving the quality of incontinence products, the supply companies argue, they should not be narrowing the pool of vendors. “We know our customers on a personal level. We provide more of a service than a product,” said Rolando Lozano, a partner at Miracle Medical Equipment and Supplies in Weslaco. “In the business world, competition drives quality.”

Vendors contend the state should have been better about including them in the planning process — as opposed to relying on savings estimates calculated using rates from other states, which they say aren’t apples to apples. “We understand the financial position the state is in right now,” Mr. Lozano said, “but this is not the avenue to take.”

Amajor acknowledged this is the comptroller’s first foray into competitively bidding Medicaid products, an area generally under the purview of the Health and Human Services Commission, but it most likely will not be the last. “We wanted to start here,” he said. “We have a little bit more procurement experience when it comes to strategic sourcing.”

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