On April 2, the Centers for Medicare & Medicaid Services (CMS) issued a final rule to implement the new competitive bidding program in Medicare. The initiative aims to reduce beneficiary out-of-pocket costs, improve the accuracy of Medicare payments, and ensure beneficiary access to high quality medical equipment and supplies. No orthoses were included in this first round of competitive bidding.
The final rule was published in the Federal Register on April 10.
Projected savings
According to a CMS press release, the new program is an opportunity to improve and modernize Medicare, using the competitive marketplace to obtain better value for beneficiaries and taxpayers. It builds upon the success of competitive bidding demonstration projects in San Antonio, Texas and Polk County, Fla., which produced a cost savings with uninterrupted beneficiary access to high quality medical items and supplies.
The competitive bidding program, mandated by Congress in the Medicare Prescription Drug, Improvement, and Modernization Act of 2003, will replace the current Medicare fee schedule for certain durable medical equipment, prosthetics, orthotics and supplies (DMEPOS) in 10 of the largest metropolitan statistical areas (MSAs) across the country and will apply initially to 10 categories of medical equipment and supplies. As of press time, CMS’ timeline was to begin the bidding process in late April and announce the winning suppliers in December. Payments under the program are scheduled to take effect in April 2008.
The earliest that orthotic devices could come under the program would be in 2009, at which time the program will be expanded into an additional 70 MSAs and the list of devices could be modified. After 2009, CMS will expand the program to additional areas and items. When fully implemented in 2010, the competitive bidding program is projected to save Medicare $1 billion annually.
“For DME items and services, beneficiary coinsurance is 20% of the total Medicare payment amount, said Leslie V. Norwalk, Esq., CMS acting administrator, in a CMS press release. “The savings this program will generate will directly translate to lower coinsurance for Medicare beneficiaries, thus significantly reducing their out-of-pocket costs for health care.�
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Medical equipment and supplies
The competitive bidding process is designed to ensure the availability of a wide variety of medical equipment and supplies for beneficiaries. When combined with the supplier quality standards and accreditation requirements released by CMS last year, the program’s goal is to ensure that high quality medical equipment and supplies are available to Medicare beneficiaries.
Approximately 60% of diabetic supplies (i.e., test strips and lancets used with blood glucose monitors) are currently delivered to Medicare beneficiaries through mail-order arrangements. Under the competitive bidding program, beneficiaries can continue to have the option of obtaining these supplies through mail order or other modes of delivery, as only mail-order diabetic supplies are subject to competitive bidding at this time.
If a beneficiary living in a competitive bidding area chooses to obtain these supplies through mail order, they are expected to reduce their costs for these supplies by obtaining them from one of the suppliers awarded a contract under the competitive bidding program. If the beneficiary chooses to obtain diabetic supplies from a local pharmacy or supplier storefront or by supplier delivery other than mail delivery, then they can obtain the supplies from any enrolled Medicare supplier and payment for the supplies will be based on the current fee schedule payment methodology. Blood glucose monitors are not presently subject to competitive bidding, and suppliers who furnish replacement test strips through the competitive bidding mail-order program will be required to furnish the same brands of test strips they furnish to non-Medicare patients.
CMS created a limited exception to the competitive bidding requirement that allows certain health care professionals to furnish items on the competitive bidding list to their own patients without having to participate in bidding and without becoming a contract supplier. The exception applies to certain specified items furnished by physicians, physician assistants, clinical nurse specialists, nurse practitioners, occupational therapists in private practice, and physical therapists in private practice. In addition, the item must be furnished as part of their professional services.
The rule also adopted special protections for beneficiaries who are already renting certain DMEPOS items when the program becomes effective. When suppliers that furnish home oxygen and other rented durable medical equipment in a competitive bidding area (CBA) are not awarded contracts, these suppliers and the Medicare beneficiaries they serve will have the opportunity to continue their rental agreements and supply arrangements under the program.
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Small supplier protections
CMS officials said that a number of protections have been included to ensure small supplier participation and access to the competitive bidding market. After working with the Small Business Administration, CMS defined a small supplier for purposes of this program as one having gross revenue of $3.5 million or less in annual receipts. The protections include establishing a target number for small suppliers equal to 30% of the number of winning suppliers in each product category, allowing small suppliers to form networks to participate in the bidding process, and granting small suppliers the flexibility to choose the product categories on which they will submit bids. Suppliers are not required to submit bids for all product categories.
To qualify for a contract under the competitive bidding program, a supplier must meet certain criteria, including:
- Be in good standing with the Medicare program and not under any current sanctions by Medicare or any governmental agency or accreditation or licensing organization
- Have an active National Supplier Clearinghouse number
- Meet any local or state licensure requirements for the item being bid
- Submit a bid as a prerequisite to becoming a winning supplier
- Be accredited or have an accreditation application pending to participate in bidding
- Provide capacity estimates of the number of units for each item included in the product category that the supplier would be capable of furnishing under the program
- Agree to service the entire CBA regardless of where the beneficiary is located, although the supplier will not be required to be capable of servicing 100% of the beneficiaries in that geographic area.
If a supplier has multiple locations in a CBA, then it must submit a single bid for all locations and if the supplier is selected as a contract supplier, than all of its locations within the CBA would be considered to be contract suppliers. CMS officials said this helps ensure geographic distribution of suppliers.
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Kristine Houck, ELS is the managing editor of O&P Business News.
