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Medicare News
New Medicare Bidding Process to Provide Seniors
Better Quality, Prices
For certain durable medical equipment, prosthetics,
orthotics, and supplies
April 2, 2007 - The Centers for Medicare & Medicaid
Services (CMS) yesterday issued a final rule that will reduce
beneficiary out-of-pocket costs, improve the accuracy of Medicare’s
payments for certain durable medical equipment, prosthetics, orthotics,
and supplies (DMEPOS), help combat supplier fraud, and ensure
beneficiary access to high quality DMEPOS items and services through a
new competitive bidding program.
In 2008, the competitive bidding program will
operate in competitive bidding areas (CBAs) within 10 of the largest
Metropolitan Statistical Areas (MSAs), excluding the New York, Los
Angeles, and Chicago MSAs and will apply to 10 of the top DMEPOS product
categories based on criteria outlined in the final rule.
The program will be expanded into 70 additional
MSAs in 2009. After 2009, CMS will expand the program to additional
areas and items.
“The final rule we are announcing today is focused
on improving both service delivery and the quality of care, while
getting savings for beneficiaries and taxpayers.” said CMS Acting
Administrator Leslie V. Norwalk.
“Given the need to tackle the continued and
unsustainable growth in health care costs, this new program represents
yet another way to use the competitive marketplace to bring the best
possible and most efficient care to Medicare beneficiaries.
“And when combined with the accreditation and
quality standards initiatives that are already underway, this program
will provide assurance that high quality service and items are available
to those who need medical equipment for home use.”
The new competitive bidding program, which is
required by the Medicare Prescription Drug, Improvement & Modernization
Act of 2003 (“Medicare Modernization Act” or “MMA”), will replace the
current payment amounts, for the items being bid, under Medicare’s
DMEPOS fee schedule with payment rates derived from the bidding
process.
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How Beneficiaries Benefit
CMS issued a Fact Sheet with the news
release that details the following benefits for beneficiaries of
the Medicare program.
Improvements for Beneficiaries:
The new competitive bidding program will
ensure beneficiary access to quality medical equipment and
DMEPOS supplier services. Although some beneficiaries may have
to switch from their current supplier to a contract supplier for
some items of DMEPOS, the program will improve beneficiary
access to quality suppliers and is will reduce their
out-of-pocket costs.
Out-of-pocket savings for
beneficiaries who use DME will come from lower coinsurance,
since beneficiaries pay 20 percent of the Medicare allowed
payment amount for equipment, supplies and services.
The program is also designed to be user
friendly for beneficiaries. For example, a beneficiary
who maintains a permanent residence in a CBA and travels to or
spends part of the year in another geographic area could obtain
items in those areas. If a beneficiary is traveling in a CBA
when he or she needs an item of DMEPOS that is included in the
competitive bidding program for that CBA, Medicare will pay for
the item only if obtained from a contract supplier in the CBA,
thus ensuring that the beneficiary receives high quality at the
best price.
A beneficiary who owns a competitively
bid item would be allowed to obtain repairs for that
equipment from any supplier with a valid supplier number,
not just a contract supplier. Medicare rules for servicing and
maintenance of DMEPOS equipment remain unchanged in this final
rule. However, if the equipment meets Medicare standards for
replacement, the beneficiary would need to obtain the
replacement from a contract supplier.
Recognizing the many new features of the
program, CMS is preparing extensive educational materials – with
specific targeting of the 10 initial MSA’s – to explain
competitive bidding.
Preserving the Physician-Patient
Relationship
CMS recognizes that under existing
Medicare law and policies, physicians and other treating
professionals sometimes supply certain items of DMEPOS to their
patients as part of their professional service. . Therefore,
the final rule allows physicians, physician assistants (PAs),
clinical nurse specialists (CNSs), nurse practitioners (NPs),
occupational therapists (OTs) in private practice, and physical
therapists (PTs) in private practice to continue furnishing
certain types of competitively bid items to their own patients
when furnished as part of their professional services without
participating in the bidding process. . Physicians and other
treating professionals would be paid the single payment amount
established for the item of DMEPOS in the CBA.
The final rule allows a physician or
treating practitioner to prescribe a specific item or brand, or
mode of delivery when necessary to avoid an adverse medical
outcome. When this occurs, the contract supplier must take the
following steps in this order:
1. Make a reasonable effort to furnish
the particular brand or mode of delivery as prescribed by the
physician or treating practitioner;
2. Consult with the physician or treating
practitioner to find a suitable alternative product for the
beneficiary; and
3. Assist the beneficiary in finding
another contract supplier in the CBA who can provide that
particular brand or mode of delivery.
Contract suppliers should include the
cost of identifying alternate contract suppliers or appropriate
substitute items in their bids. Contract suppliers would be
paid based on the single payment amount regardless of whether a
particular brand or mode of delivery is ordered. |
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Suppliers that wish to furnish competitively bid
items in a CBA will be required to submit bids to furnish those items.
Contracts will be awarded to a sufficient number of winning bidders in
each CBA to ensure access and service to high quality DMEPOS items. The
winning bids will be used to establish a single Medicare payment amount
for each item.
For beneficiaries in the selected CBAs, this
program will reduce out-of-pocket expenses while ensuring that they
receive high quality items and services.
This is because the rule requires all contracting
suppliers to be accredited by an approved accreditation organization as
meeting CMS’ quality standards. CMS has designated 10 entities as
qualified to accredit DME suppliers, based on quality standards that
were posted on the CMS website in August 2006. The single payment
amounts established through competitive bidding will be lower than the
current fee schedule amounts for the items. In addition, contract
suppliers must accept the single payment amount established through
competitive bidding as payment in full. The beneficiary’s liability is
limited to 20 percent of the payment amount and any unmet Part B
deductible.
For taxpayers, the competitive bidding program
means potentially significant savings for Medicare. When fully
implemented in 2010, it is projected that these savings will amount to
$1 billion annually.
“For DME items and services, beneficiary
coinsurance is 20 percent of the total Medicare payment amount,” said
Norwalk. “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.”
CMS is creating a limited exception to the
competitive bidding requirement that will allow certain treating
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.
This exception would apply 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.
CMS believes that allowing this type of arrangement
to continue will promote the efficient and uninterrupted delivery of
care to beneficiaries.
The rule also adopts some special protections for
beneficiaries in the CBAs who are already renting certain DMEPOS items
when the program becomes effective. For example, the final rule
includes a grandfathering provision that may enable these beneficiaries
to continue renting these items from their existing suppliers if the
supplier chooses to continue renting the item under grandfathering rule
(called “noncontract suppliers”), rather than having to switch to a
contract supplier.
If the beneficiary continues to need the item that
they are renting from a non-contract supplier and switches to a contract
supplier, access to items and services will be ensured because the
contract supplier that assumes responsibility for serving the
beneficiary will be able to take advantage of special payment
provisions.
For suppliers of oxygen equipment, the final rule
provides for a minimum of 10 months of payment to a contract supplier
who assumes the responsibility for providing oxygen to a beneficiary who
had been receiving services from a non-contract supplier.
Similarly, if a beneficiary who is renting capped
rental equipment switches from a noncontract supplier to one that has
been awarded a contract under the competitive bidding program, the new
contract supplier will receive 13 months of rental payments. These
payment provisions apply without regard to the number of months of
payments Medicare previously made to the noncontract supplier; however,
payment can only be made if medical necessity for the equipment
continues.
The final rule allows beneficiaries who own an item
of DMEPOS that is part of the competitive bidding program to obtain
maintenance and servicing from any Medicare supplier that has a valid
billing number, and is not limited to seeking repairs from contract
suppliers. However, if the standards for obtaining a total replacement
of an owned item that is part of the competitive bidding program are
met, the beneficiary will have to obtain the replacement item from a
contract supplier, and payment will be made for the item at the single
payment amount.
After reviewing comments on the proposed rule, CMS
has included in the final rule a number of provisions that will modify
the rule’s impact on small suppliers, which are defined for purposes of
this program as those suppliers having gross revenue of $3.5 million or
less in annual receipts.
CMS worked closely with the Small Business
Administration to establish a new definition of small suppliers that is
reflective of this area of the health care industry. The use of this
new definition, in conjunction with policies established in the final
regulation, will enhance the ability of small suppliers to participate
in the competitive bidding program.
As they did when CMS published the proposed
competitive bidding rule, small suppliers account for approximately 85
percent of DMEPOS suppliers enrolled in the Medicare program.
The final rule provides for a 30 percent target
number for small supplier participation. If CMS determines after the
initial evaluation of bids that there are not enough small suppliers
with winning bids to meet the target goal of 30 percent in each product
category, then contracts will be offered to small suppliers that
submitted bids higher than bug close to the winning bids. The small
suppliers will have the option to accept the single payment amounts
based on the winning bids until the 30 percent goal is met or there are
no additional small suppliers.
The final rule also allows small suppliers to form
networks in order to participate in the bidding process, provided that
these networks comply with all federal and state laws including the
federal antitrust laws. In addition, small suppliers will not be
required to submit bids for all product categories. As a result, small
suppliers will have the flexibility of deciding for which product
categories to submit bids.
The Medicare law requires that CMS first implement
the DMEPOS competitive bidding program in 10 of the largest MSAs. In
selecting the specific MSAs for the program, CMS took into account
allowed DMEPOS charges per beneficiary, the number of suppliers per
beneficiary, the total population of the MSA, and the MSA’s geographic
location.
CMS has the discretion to exempt from DMEPOS
competitive bidding, rural areas and areas with low population density
within urban areas that are not competitive unless there is a
significant national market through mail order for a particular item or
service.
The Medicare law gives CMS the discretion to phase
in the types of DMEPOS items to be subject to competitive bidding. In
evaluating an item’s savings potential and selecting the items to be
subject to bidding, CMS considered the amount of allowed charges, the
growth in expenditures, the number of suppliers of the item, savings
realized in the DMEPOS competitive bidding demonstration projects, and
reports and studies by entities such as the Health and Human Services
Office of Inspector General and the Government Accountability Office.
In order to qualify for a contract under the
competitive bidding program, a supplier must generally 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 (NSC)
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 application for
accreditation pending in order 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 percent of the beneficiaries in
that geographic area.
If a supplier has multiple locations in a
competitive bidding area, then it must submit a single bid for all of
its 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. This will help ensure geographic distribution of
suppliers.
In developing the DMEPOS competitive bidding
program, CMS built on experiences gained during DMEPOS competitive
bidding demonstrations conducted in Polk County, Florida and San
Antonio, Texas from 1999 through 2002. The two demonstration sites
proved successful in terms of generating substantial program savings,
maintaining consumer access and satisfaction, upholding the quality of
items, preserving competition and administrative feasibility.
Additional information on the DMEPOS competitive
bidding program, including the CBAs and competitive bidding items for
the first round of competitive bidding, is available at the following
web site:
http://www.cms.hhs.gov/CompetitiveAcqforDMEPOS/Downloads/CMS-1270-F.pdf
Editor’s Note: This information was provided by CMS
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