Proposed Rule Names More Round 2 CBAs, Calls for Oxygen Changes

BALTIMORE — On June 25, the Centers for Medicare and
Medicaid Services posted online its 2011 Proposed Medicare
Physician Payment Rule, which includes a number of provisions
related to durable medical equipment and oxygen.

According to a summary from Cara Bachenheimer, senior vice
president of government relations for Invacare Corp., the rule
includes a number of key areas related to the HME industry:

• Announcement of the 21 additional areas that will be included
  in Round 2 of the DME
  competitive bidding program;
• A proposed national bid program for mail order diabetic
  supplies;
• Possible reconsideration of the special payment rules for
  oxygen and capped rental items under the bid program;
• A proposed appeals process for contractors whose contracts are
  terminated under the bid program;
• A proposal to move up to month 18 the responsibility for oxygen
  providers to continue furnishing oxygen through month 36 (to
  address problems of traveling beneficiaries in months 18-36),
  and;
• Implementation of the elimination of the first month purchase
  option for standard power wheelchairs, contained in the new health
  reform law.

Bachenheimer reminds that this is a proposed rule, with public
comments due 60 days from the rule’s publication, likely this week,
in the Federal Register. A final rule will be issued in
late October/early November with an effective date of Jan. 1,
2011.

Courtesy of Bachenheimer, following is her discussion of the
details contained in the rule:

Competitive Bid Program Provisions

1. 21 Additional Bid Areas

CMS is proposing the following 21 additional metropolitan areas
to be included in Round 2 of the bid program. Round 2 is scheduled
to be implemented January 2013 with bidding to being in the Spring
of 2011. The initial 70 areas to be included in Round 2 were
announced in January 2008. (CMS provided the total population of
the proposed additional 21 areas as well.)

2. Subdivision of Large MSAs

Consistent with CMS’ March 17, 2010 announcement at the PAOC
(Program Advisory and Oversight Committee) meeting that it would
subdivide certain large metropolitan areas in Round 2 into several
smaller areas, CMS proposes to subdivide the New York, Chicago and
Los Angeles MSAs into smaller bid areas. The New York area is
proposed to be divided into five separate bid areas; the Chicago
area into four separate bid areas; and the Los Angeles area into
two separate bid areas.

3. Proposed National Competitive Bid Program for Mail
Order Diabetic Supplies – 42 C.F.R § 414.402

CMS is proposing to establish a national mail order competitive
bid program that would take place after 2010 to award contracts to
suppliers to furnish replacement diabetic testing supplies across
the nation. CMS notes that its decision to proceed with a national
mail order competition after 2010 does not prevent CMS from phasing
in competitions for non-mail order diabetic supplies or from
conducting competitions for diabetic supplies in general in the
future. CMS states that currently based on claims data from fiscal
year 2009 over 62 percent of beneficiaries receive their
replacement diabetic testing supplies from mail order suppliers.
(None of these proposals would apply to Round 1 of the bid program
currently underway.)

CMS is proposing three requirements related to a national mail
order bid:

(1) A new definition for what constitutes mail order – which
would appear to include anything other than when
beneficiary/caregiver picks up at local retail pharmacy. CMS
proposes to define that term as a program where contracts are
awarded to suppliers for the furnishing of mail order items across
the nation. (Beneficiaries would still have choice of obtaining at
local retail pharmacies) CMS states: “We are proposing to define
“mail order item” … to mean any item (for example, diabetic
testing supplies) shipped or delivered to the beneficiary’s home,
regardless of the method of delivery. We are also proposing to
define “non-mail order item” as any item (for example, diabetic
testing supplies) that a beneficiary or caregiver picks up in
person at a local pharmacy or supplier storefront. Therefore, the
only items excluded from the mail order definition and mail order
competition would be those that a beneficiary or caregiver picks up
in person at a local pharmacy or other local supplier
storefront.”

(2) A rule that would require contract suppliers to provide at a
minimum 50 percent of all of the different types of diabetic
testing products on the market by brand and model name. CMS is
implementing this requirement that was in the 2008 MIPPA law.
Before 2011, the Office of Inspector General will conduct a study
to determine products on market and their relative share; and

(3) A proposed prohibition against influencing and incentivizing
beneficiaries to switch their brand of monitor and testing
supplies. CMS states: “We are proposing to prohibit suppliers
awarded contracts for diabetic testing supplies from influencing or
incentivizing the beneficiary in any way to switch the brand of
glucose monitor and testing supplies they are currently using.” CMS
believes this requirement is essential if they are to enforce the
“50 percent rule” above.

4. Reconsideration of Payment Rules in Bid Program for
Oxygen and Capped Rental Items

Under current CMS competitive bidding rules, contract (winning)
suppliers will get a minimum of 10 months of rental payments for
oxygen beneficiaries, and a minimum of 13 months of rental for
capped rental items. Given the fact that the underlying competitive
bid regulation was issued when the law required beneficiaries to
retain ownership of the equipment after the 36th month of rental,
CMS is reconsidering the minimum 10 months of rental payments for
oxygen. CMS is also soliciting public comments on whether or not
the current rules should be changed to reduce the number of
payments the contract supplier would receive in for capped rental
items. CMS also plans to solicit advice from the PAOC on this
subject at a future committee meeting.

5. Proposed New Appeals Process for Contracts Terminated
under the Competitive Bid Program – 42 CFR § 414.423

CMS is proposing to a new administrative appeals process for
contracts terminated under the bid program. CMS is proposing to a
new appeals process for contracts terminated under the competitive
bid program. The proposed rule would establish policies and
procedures relating to CMS’ determinations of a breach of contract
and the appeals process for contract suppliers that are considered
to be in breach of contract. CMS is proposing a process for review
and reconsideration before the contract is actually terminated. The
proposed appeals process would be in addition to, and would not
replace, existing CMS regulations regarding other appeals
mechanisms.

6. Addition of Off-the-Shelf Orthotics to Bid Program
Exemption if Furnished by Physician – 42 CFR § 414.404

Currently, certain items are exempt from the competitive bid
program is they are furnished by a physician or other practitioner
if they are provided to their own patients as part of their
professional service. The current exemption is limited to crutches,
canes, walkers, folding manual wheelchairs, blood glucose monitors,
and infusion pumps. In this proposal, CMS proposes to expand this
exemptions from the competitive bidding program to certain
off-the-shelf orthotics when they are provided by physicians or
other practitioners (as defined by the Secretary) if furnished to
their own patients as part of their professional service.

(The 2008 Medicare Improvements for Patients and Providers Act
extended the same exemption to hospitals — therefore,
crutches, canes, walkers, folding manual wheelchairs, blood glucose
monitors, and infusion pumps, when furnished by hospitals to the
hospital’s own patients during an admission or on the date of
discharge are not be subject to the competitive bid program.)

Proposed Changes to Payment Rules for Oxygen and Oxygen
Equipment – 42 CFR §414.226

CMS is proposing to revise the payment rules for oxygen and
oxygen equipment to address situations where beneficiaries relocate
outside the service area of a supplier during the 36-month rental
payment cap period for the oxygen equipment. CMS explains that
Medicare “beneficiaries are experiencing great difficulties in
finding suppliers willing to furnish oxygen equipment in situations
where only a few months are left in the 36-month rental payment
period at the time they relocate.” As a result, CMS is proposing to
revise the regulation to require the supplier that furnishes the
oxygen equipment and receives payment for month 18 or later to
either furnish the equipment for the remainder of the 36-month
rental payment period or, in the case where the beneficiary has
relocated outside the service area of the supplier, make
arrangements for furnishing the oxygen equipment with another
supplier for the remainder of the 36-month rental payment period.
The supplier that is required to furnish the equipment on the basis
of this requirement must also furnish the equipment after the
36-month rental payment period.

CMS further explains that this proposal would allow either a new
supplier in the beneficiary’s new service area or a supplier in the
old service area to receive at least half of the 36 monthly
payments allowed for under the current statutory payment rule for
oxygen equipment. “We believe this approach would be fair to
suppliers in either scenario since the same minimum number of
payments applies,” states CMS.

According to CMS, only 38 percent of the beneficiaries are still
on oxygen by the 18th month, and that “relocation between the 18th
to the 36th month is not a common occurrence. Such relocation
happens with less than 0.5 percent of the beneficiaries using
oxygen equipment. In addition, between the 32nd and 35th month,
relocation happens with the beneficiaries in about 0.06 percent of
the time on average.”

Elimination of First Month Purchase Option for Standard Power
Wheelchairs – 42 CFR § 414.229

CMS is implementing the provision in the new health care law
(Patient Protection and Affordable Care Act, PPACA) that eliminates
the first month purchase option for standard (Group 2) power
wheelchairs. Payment for these items will be 15% of purchase price
in months one through three, and 6% of purchase price in months
four through 13. This will apply to Group 2 power wheelchairs
furnished on or after January 1, 2011.