United States: CMS Proposes Medicare DMEPOS Rate Changes And Competitive Bidding Reforms

Agency Anticipates Temporary Lapse in Competitive Bidding Program after 2018

CMS is proposing a number of changes to Medicare durable medical equipment, prosthetics, orthotics and supplies (DMEPOS) reimbursement policies for 2019, including fee schedule adjustments to account for a "temporary lapse" in the competitive bidding program (CBP). Consistent with the Administration's stated goal of reducing regulatory burdens on providers and suppliers, CMS also proposes changes to CBP bidding rules for future rounds of bidding and other policy changes that generally have been welcomed by industry. CMS will accept comments on the proposed rule until September 10, 2018.

Provision of DMEPOS During Competitive Bidding Gap. With regard to DMEPOS competitive bidding, CMS acknowledges that there will be a lapse in the competitive bidding program (including the national mail-order program for diabetic testing supplies) because the agency has not begun the recompete process for current contracts that end on December 31, 2018. Therefore beginning January 1, 2019, beneficiaries may receive DMEPOS items from any Medicare-enrolled supplier until such time as new CBP contracts are awarded. CMS anticipates that the next round of bidding "could potentially be delayed until January 1, 2021."

Future Competitive Bidding Program Rules. CMS proposes a number of "market-oriented reforms" and technical policy changes that would apply to future rounds of competitive bidding, including the following:

  • CMS proposes to expand its "lead item" bidding methodology, which now applies to a limited number of items that are prone to "price inversions," whereby the single payment amount (SPA) for an item with fewer features is higher than the SPA for the item with more features (e.g., non-powered versus powered mattress). Under these current rules, HCPCS codes for similar items with different features are grouped together and priced relative to the bid for the "lead item" – defined as the item in the grouping with the highest allowed services during a specified base period. Under the proposed rule, an expanded "lead item pricing" policy would replace the current bidding methodology. Suppliers would no longer submit a bid for each item/HCPCS code in the product category. Instead, the bid for the lead item would be the "composite bid" used to establish the SPAs for the lead item and all other items in the product category. The lead item would be identified based on total national allowed charges, rather than total national allowed services. CMS would make conforming changes to CBP rules to take into account the lead item bidding, and the agency expects to split some of the larger "conglomerate product categories" (e.g., general home equipment) under this proposal. On the whole, CMS expects its proposed methodology to "greatly reduce the complexity of the bidding process and the burden on suppliers."
  • CMS proposes to use the maximum winning bid for the lead item in a product category – rather than median bids — to establish SPAs for all of the items in the product category. Specifically, the SPA for the lead item in each product category and competitive bidding area (CBA) would be based on the highest amount bid for the item by suppliers in the winning range. The SPAs for a non-lead item would be based on the relative difference in the fee schedule amounts for the lead and non-lead item before the fee schedule amounts were adjusted based on information from the CBP. Since suppliers in the winning range would be paid at least what they bid for the lead item, CMS believes this change would "ensure access and long term sustainability of the CBP."
  • CMS requests comments on whether larger CBAs should be split into smaller CBAs "to create more manageable service areas for suppliers."

Fee Schedule Updates. CMS also proposes a complex set of adjustments to DMEPOS fee schedule amounts depending on the area in which the items and services are furnished.

  1. Items and services furnished on or after January 1, 2019, in areas that are currently CBAs, in the event of a gap in the CBP – CMS would adjust the fee schedule amounts based on the SPAs in effect on the last day before the CBP contract periods of performance ended, increased by the projected percentage change in the Consumer Price Index for all Urban Consumers (CPI–U) for the 12-month period on the date after the contract periods ended. If the gap in the CBP lasts for more than 12 months, the fee schedule amounts would be increased annually on the anniversary date of the first day after the contract period ended, based on the projected percentage change in the CPI–U for the 12-month period ending on the anniversary date. However, payment for non-mail order diabetic testing supplies would continue at the current SPA rates for mail order diabetic testing supplies until new rates are established under the national mail order program (i.e., they would not be updated for inflation).
  2. Items and services furnished in 2019 or 2020 in areas that are currently not CBAs, that are rural areas or not located in the contiguous U.S. — CMS would extend through December 31, 2020 its current methodology that bases fee schedule amounts on a blend of 50% of rates that are adjusted to take into account CBP pricing information and 50% of unadjusted fee schedule amounts.
  3. Items and services furnished in 2019 or 2020 in non-CBAs that are not rural or non-contiguous areas – The fee schedule amount would equal 100% of the adjusted payment amount. CMS requests comments on whether the 50/50 blended rates should apply to these areas as well.

Other DMEPOS Policies. CMS also proposes: adding payment classes for portable gaseous oxygen equipment, portable liquid oxygen equipment, and high flow portable liquid oxygen contents on a budget-neutral basis; establishing payment rules for certain ventilators that also perform the function of other items of DME; and including the Northern Mariana Islands in future rounds of competitive bidding. In addition, CMS seeks comments on potential changes to its longstanding "gap-fill" process for establishing fees for new items of DMEPOS. CMS is particularly interested in data sources or methods for estimating historic allowed charges for new technologies that satisfy DMEPOS payment rules while "preventing excessive overpayments or underpayments for new technology items and services." Finally, CMS includes requests for information on (1) promoting interoperability and electronic healthcare information exchange through possible revisions to patient health and safety requirements; and (2) price transparency/improving beneficiary access to provider and supplier charge information.

This article is presented for informational purposes only and is not intended to constitute legal advice.

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