United States: CMS Proposes Medicare DMEPOS Policy Updates, Including New Methodology For Pricing New Codes

The Centers for Medicare & Medicaid Services (CMS) is planning a potentially-significant overhaul of Medicare pricing rules for new items of durable medical equipment (DME), prosthetics, orthotics and supplies (DMEPOS) as part of its proposed annual DMEPOS policy update for calendar year (CY) 2020. The proposed rule also includes DMEPOS competitive bidding program (CBP) updates and proposals to streamline requirements for ordering DMEPOS items.

Under a decades-old policy, CMS uses a highly imprecise "gap-fill" process to establish fees for new items of DMEPOS for which charges in the statutory "base year" are unavailable. In such cases, CMS and its contractors use fees for comparable items, supplier prices, manufacturer's suggested retail prices, or wholesale prices plus a markup to approximate current pricing. To remove the impact of inflation, CMS next "deflates" the prices back to the base year period (1986 or 1987 depending on the item – well before the time the item was available or likely even invented). CMS then applies the annual covered item update factors specified in the statute to establish current rates.

CMS notes that it has "heard frequently from manufacturers that do not agree that their newly developed DMEPOS item is comparable to older technology DMEPOS items and services." Nevertheless, CMS contends that there are benefits to identifying and basing rates on comparable items, including avoiding providing a competitive advantage to manufacturers of new items. To improve transparency and predictability in the sources of data and selection of comparable items and services for gap-fill purposes, however, CMS proposes to codify a framework for establishing fees for new DMEPOS items (i.e., new Healthcare Common Procedure Coding System (HCPCS) codes) that do not have a fee schedule pricing history).

CMS' proposal is complex. In general, under the proposal, CMS would first seek to use existing fee schedule amounts for DMEPOS that it determines to be "comparable" based on one or more of the following "components and attributes":

Comparable Item Analysis (Any combination of, but not limited to, the categories below for a device or its subcomponents)

Components Attributes
Physical Components Aesthetics, Design, Customized vs. Standard, Material, Portable, Size, Temperature Range/ Tolerance, Weight.
Mechanical Components Automated vs. Manual, Brittleness, Ductility, Durability, Elasticity, Fatigue, Flexibility, Hardness, Load Capacity, Flow-Control, Permeability, Strength.
Electrical Components Capacitance, Conductivity, Dielectric Constant, Frequency, Generator, Impedance, Piezo-electric, Power, Power Source, Resistance.
Function and Intended Function, Intended Use.
Additional Attributes and Features ''Smart'', Alarms, Constraints, Device Limitations, Disposable Parts, Features, Invasive vs. Non-Invasive

If CMS determines that there are no items with existing fee schedule amounts considered comparable to the new item, CMS would establish the fee schedule amount based on either:

  1. What CMS describes as "more accurate sources of commercial pricing data," including supplier price lists (including catalogs and other retail price lists such as internet retail prices), payments made by Medicare Advantage plans, and verifiable information from supplier invoices and non-Medicare payer data. Such pricing would be deflated to the fee schedule base period and updated by the annual covered item update factors.
  1. A technology assessment performed by biomedical engineers, certified orthotists and prosthetists, and/or others knowledgeable about the cost of DMEPOS items and services to determine the relative cost of new items and services to those with existing fee schedule amounts. The relative cost would be translated into a "pricing percentage," and applied to the existing fee schedule amount to calculate the rate for the new HCPCS code. CMS proposes to use technology assessments "when supplier or commercial price lists are not available or verifiable or do not appear to represent a reasonable relative difference in supplier costs of furnishing the new DMEPOS item relative to the supplier costs of furnishing DMEPOS items from the fee schedule base period."

CMS also proposes to revise such newly-established gap-filled prices if it finds "excessive fee schedule amounts in cases where the market for the new category of items is not yet competitive due to a limited number of manufacturers and suppliers." Specifically, if supplier or commercial prices are used to establish fee schedule amounts for new items, and the prices are shown to decrease within 5 years of establishing the fee schedule price, CMS proposes a one-time rate adjustment to reflect "a market that is more established, stable, and competitive" than when fee schedule amounts were initially established. CMS would only make a downward adjustment to fee schedule prices if the new supplier or commercial prices would be no more than 15% lower than the initial fee schedule amounts; if the change were more than 15%, presumably CMS's separate "inherent reasonableness" adjustment authority would apply. CMS does not propose to make a similar adjustment for increases in prices "since the fee schedule calculation methodology already includes an annual covered item update to address increases in costs of furnishing items and services over time." The proposed rule also would establish policies to address the continuity of pricing when HCPCS codes are divided or combined.

CMS believes that its DMEPOS pricing proposal would "foster improvements and innovations in DMEPOS technology and ensure more competitive prices." However, CMS's emphasis on tying the prices of innovative technologies to older equipment that it chooses to characterize as "comparable" may raise stakeholder concerns that CMS prioritizes ensuring that "taxpayers are getting the best deal" over encouraging innovation in this area.

In addition to addressing pricing for new DMEPOS items, the proposed rule would, among other things:

  • Streamline requirements for ordering DMEPOS items, including adopting one set of required written order/prescription elements for all DMEPOS items.
  • Consolidate into one "master list" those DMEPOS items potentially subject to a face-to-face encounter, written orders prior to delivery, and/or prior authorization requirements (the proposed master list is set forth in table 10 of the proposed rule).
  • Ease various DMEPOS CBP change of ownership (CHOW) requirements, including requiring contract suppliers to notify CMS 10 days after the effective date of the CHOW, rather than 60 days in advance. CMS also solicits comments regarding sources of market-based data for the national mail order CBP for diabetic testing supplies.

CMS will accept comments on the proposed rule until September 27, 2019.

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

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Similar Articles
Relevancy Powered by MondaqAI
In association with
Related Topics
Similar Articles
Relevancy Powered by MondaqAI
Related Articles
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Mondaq Free Registration
Gain access to Mondaq global archive of over 375,000 articles covering 200 countries with a personalised News Alert and automatic login on this device.
Mondaq News Alert (some suggested topics and region)
Select Topics
Registration (please scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions