Get Ready for 2011 Physician Fee Schedule Rule, Too

WASHINGTON — Competitive bidding isn’t the
only thing providers have to contend with as of January. On Nov. 2,
CMS released its Medicare physician fee schedule final rule for
2011. Among other provisions, the new rule finalizes elimination of
the first-month purchase option for power wheelchairs and
authorizes the implementation of a national mail order bid for
diabetes supplies.

The rules take effect Jan. 1, 2011.

You can download a PDF of the final rule (CMS-1503-FC), entitled
“Medicare Program; Payment Policies Under the Physician Fee
Schedule and Other Revisions to Part B for CY 2011.” But get ready
to read: It’s 2,023 pages long.

CMS issued the Medicare physician
fee schedule proposed rule in late June, and the final rule’s
provisions impacting DME are largely the same as the agency
proposed, according to Cara Bachenheimer, senior vice president of
government relations for Invacare. The only exception, she noted,
is that CMS did not finalize its oxygen policy proposal from the
draft rule, which would have addressed beneficiaries who relocate
outside the provider’s service area in months 18-36.

The rule does:

• Adjust the 2011 DMEPOS fee schedule;
• Eliminate the first-month purchase option for standard power
  wheelchairs (not effective in Round 1 competitive bid areas);
  and
• Address a number of issues related to competitive bidding,
  including:
  • the addition of 21 areas to Round 2;
  • the subdivision of large metropolitan areas;
  • a national mail order bid program for diabetic supplies;
  • continuing consideration of grandfathering rules for oxygen and
    capped rental equipment;
  • an appeals process for contract suppliers terminated from the
    bid program; and
  • addition of “off-the-shelf” orthotics to a bid program
    exemption if furnished by a physician.

The rule is expected to be published in the Nov. 29 Federal
Register, and the comment period closes Jan. 3.

Courtesy of Bachenheimer, following is a synopsis of the
final rule’s provisions affecting DME and oxygen:

Productivity Adjustment

The CMS rule addresses the “productivity adjustment” that
impacts the annual update to the DME fee schedules. Section 3401 of
The Affordable Care Act incorporates a productivity adjustment into
the update factors for certain payment systems, including DMEPOS,
starting in calendar year 2011. CMS has determined that the
productivity adjustment for CY 2011 1.2%. CMS estimates that this
will achieve $60 million in savings under the DMEPOS benefit in
2011. The CPI update for 2011 is 1.1%; therefore, DMEPOS fee
schedules will be reduced by .1 percent as of January 1, 2011.

No Change to Rules for Oxygen and Oxygen Equipment

CMS had proposed to revise the 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 explained 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 had proposed 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.

Based on comments received and other information, CMS states
that it is not finalizing this proposal at this time. CMS does say,
however, that “If in the future, beneficiaries’ access to oxygen
equipment becomes a problem following the relocation of
beneficiaries, we may consider this proposal or similar
proposals.”

Elimination of First Month Purchase Option for Standard Power
Wheelchairs

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 power wheelchairs. The
provision applies to Group 1 power wheelchairs, and most Group 2
power wheelchairs. It does not apply to “complex rehabilitative
power wheelchairs” which CMS defines as power wheelchairs that are
classified as: (1) Group 2 power wheelchairs with power options
that can accommodate rehabilitative features (for example,
tilt-in-space), or (2) Group 3 power wheelchairs.”

Payment for standard power wheelchairs 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.

This provision does not apply to standard power wheelchairs that
are provided under Round 1 of the competitive bidding program
scheduled to start January 1, 2011. In these nine bid areas, the
contract suppliers furnishing power wheelchairs pursuant to
contracts entered into prior to January 1, 2011 will continue to be
paid based under the current regulations using 10 percent of the
purchase price for months 1 through 3 and 7.5 percent for each of
the remaining months.

Competitive Bid Program Provisions

1. 21 Additional Bid Areas – CMS is finalizing
its decision to add the following 21 metropolitan areas to be
included in Round 2 of the bid program — these are the same
as CMS proposed this summer. Round 2 is scheduled to be implemented
January 2013 with bidding to begin in the spring of 2011. CMS
announced the initial 70 areas to be included in Round 2 in January
2008:

Philadelphia-Camden-Wilmington, PA-NJ-DE-MD
Washington-Arlington-Alexandria, DC-VA-MD-WV
Boston-Cambridge-Quincy, MA-NH
Phoenix-Mesa-Scottsdale, AZ
Seattle-Tacoma-Bellevue, WA
St. Louis, MO-IL
Baltimore-Towson, MD
Portland-Vancouver-Beaverton, OR-WA
Providence-New Bedford-Fall River, RI-MA
Buffalo-Niagara Falls, NY
Rochester, NY
Tucson, AZ
Honolulu, HI
Albany-Schenectady-Troy, NY
Worcester, MA
Oxnard-Thousand Oaks-Ventura, CA
Springfield, MA
Bradenton-Sarasota-Venice, FL
Poughkeepsie-Newburgh-Middletown, NY
Stockton, CA
Boise City-Nampa, ID

2. Subdivision of Large MSAs – CMS finalized
its decision to subdivide the Chicago, Los Angeles and New York
metropolitan areas into smaller bid areas. The Chicago area is
being divided into four separate bid areas; the Los Angeles area
into two separate bid areas, and the New York area into six
separate bid areas. The Chicago bid area will be finalized as
proposed. The Los Angeles area will be finalized as proposed with
Los Angeles County and Orange County being the two bid areas, with
the exception that it will not include Santa Catalina Island and
San Clemente Island.

Following are the four Chicago bid areas:

Indiana-Chicago Metro CBA — includes Lake, Jasper, Newton
and Porter, IL
South-West Chicago Metro CBA — includes Will, Grundy,
Kendall, DeKalb and Krone, IL
Central Chicago Metro CBA — includes Cook and DuPage,
IL
Northern Chicago Metro CBA — includes Lake and McHenrie, IL
and Kenosha, WI

The New York bid area will be finalized as proposed with three
changes: it will exclude Pike County from the North-West NY Metro
CBA; it is splitting the North-West NY Metro CBA into two new CBAs
– a CBA containing the New Jersey counties from the proposed
North-West NY Metro CBA, and a smaller CBA containing the New York
counties from the proposed North-West NY Metro CBA. Further, CMS is
removing Richmond County, NY from the proposed South New York
Metro, leaving this CBA to be comprised of six counties in New
Jersey. CMS is, therefore, moving Richmond County, NY to the
Nassau-Brooklyn-Queens-County Metro CBA and has changed the name of
the CBA to Nassau-Brooklyn-Queens- Richmond County Metro CBA.

Following are the six New York bid areas:

Nassau-Brooklyn-Queens-Richmond County Metro CBA —
includes Nassau, Kings, Queens and Richmond, NY
Suffolk County CBA — includes Suffolk, NY
Bronx-Manhattan CBA – includes Bronx and Manhattan, NY
Northern NJ Metro Area CBA — includes Hudson, Bergen,
Passaic, Essex, Morris and Sussex, NJ
North East NY CBA Metro — includes Putnam, Rockland and
Westchester, NY
Southern NY Metro CBA — includes Hunterdon, Union, Middlesex,
Monmouth, Ocean, and Somerset, NJ.

3. National Competitive Bid Program for Mail Order
Diabetic Supplies (42 C.F.R § 414.402) – CMS finalized its
proposal for a national bid program for mail order diabetic
supplies largely as proposed. CMS will establish a national mail
order competitive bid program that will take place after 2010 to
award contracts to suppliers to furnish replacement diabetic
testing supplies across the nation. CMS re-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.

CMS is finalizing the rules related to a national mail order
bid:

(1) A new definition for what constitutes mail order – which
includes anything other than when beneficiary/caregiver picks up at
local retail pharmacy. CMS is defining mail order as items shipped
or delivered to the beneficiary’s home, regardless of the method of
delivery, and non-mail order is defined as items that a beneficiary
or caregiver picks up in person at a local pharmacy or storefront.
“National mail order DMEPOS” competitive bid program is defined as
a program where contracts are awarded to suppliers for the
furnishing of mail order items across the nation. Beneficiaries
will still have choice of picking up their diabetic strips at local
retail pharmacies.

(2) A rule that requires 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. This will
apply to any bid program after Round 1, national or other, for
these products. CMS is implementing this requirement that was in
the 2008 MIPPA law. The OIG is conducting a study to generate
volume data for various diabetic testing strip products furnished
on a mail order basis. CMS says it will use this data in providing
guidance to implement this special rule for mail order contract
suppliers to ensure that their bids cover at least 50 percent of
the volume of testing strip products currently furnished to
beneficiaries via mail order. The OIG is required to complete their
study before 2011 and will make their data available to the public;
and

(3) A prohibition against influencing and incentivizing
beneficiaries to switch their brand of monitor and testing
supplies. The rule will 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. Continuing CMS Consideration of Grandfathering Rules
in Competitive Bid Program for Oxygen and Capped Rental
Items – In the proposed rule CMS asked for public comments
on whether or not the current rules should be changed to reduce the
number of payments the contract supplier would receive when a
non-contract supplier choose not to be a grandfathered supplier for
its capped rental or oxygen beneficiaries. Under current policy, a
contract supplier receives a minimum of 10 months of rental
payments for oxygen, and a minimum of 13 months for capped rental.
CMS points out that since it established these rules in 2007, two
significant changes have occurred. First, with respect to oxygen,
the supplier retains ownership at month 36; in 2007 was that the
beneficiary would assume ownership at month 36. Second, with
respect to standard power wheelchairs, the Affordable Care Act
mandates that after Round 1 standard power wheelchairs will be a
capped rental item with no first month purchase option.
Beneficiaries whose non-contract suppliers choose not to be
grandfathered suppliers could be forced to pay an additional 13
months of copayments.

CMS states in this final rule that it will take into
consideration comments it received on this issue in a future
proposed rule.

5. New Appeals Process for Contracts Terminated under
the Competitive Bid Program (42 CFR § 414.423) – CMS is
finalizing its a new administrative appeals process for contracts
terminated under the bid program largely as proposed with a few
minor adjustments. CMS is establishing to a new appeals process for
contracts terminated under the competitive bid program. The rule
establishes 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. The rule
includes a process for review and reconsideration before the
contract is actually terminated. The appeals process is in addition
to, and will 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 if they are furnished by a physician or other practitioner,
if they are provided to their own patients as part of their
professional service. The exemption had been limited to crutches,
canes, walkers, folding manual wheelchairs, blood glucose monitors,
and infusion pumps. In this rule, CMS expands the exemptions from
the competitive bidding program to certain off-the-shelf orthotics
when they 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.)

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