CMS Proposes Market-Oriented Reforms for Competitive Bidding

WASHINGTON, D.C. (July 11, 2018)—The Centers for Medicare & Medicaid Services (CMS) took steps toward changing Medicare’s DME fee schedule payments, proposing market-oriented reforms to the durable medical equipment prosthetics, orthotics and supplies (DMEPOS) competitive bidding program (CBP).

Beginning January 1, 2019, and until new contracts are awarded under the DMEPOS competitive bidding program, beneficiaries may receive DMEPOS items from any Medicare enrolled DMEPOS supplier.

The process for recompeting contracts with suppliers currently in effect under the DMEPOS competitive bidding program has not yet been initiated, according CMS. As a result, CMS notes that the current contracts for the DMEPOS CBP will expire on December 31, 2018.

The proposed rule also addresses oxygen equipment and other fee schedule changes.

On new payment classes for oxygen, oxygen equipment and methodology, the rule proposes:

• New, separate payment classes for portable gaseous oxygen equipment, portable liquid oxygen equipment, and high flow portable liquid oxygen contents.
• New methodology for ensuring that all new payment classes for oxygen and oxygen equipment are budget neutral in accordance with section 1834(a)(9)(D)(ii) of the Act. The new oxygen payment classes are estimated to be budget neutral to the Medicare program.
• New rules to address payment for certain ventilators that are subject to the payment rules at section 1834(a)(3) of the Act but also perform the functions of other items of durable medical equipment (DME) that are subject to payment rules other than those at section 1834(a)(3) of the Act.

On adjustments to fee schedule amounts, the rule proposes:

• Transitional fee schedule adjustments for DMEPOS items and services furnished on or after January 1, 2019 in areas that are currently competitive bid areas (CBAs) and in areas that are currently not CBAs.
• Three different fee schedule adjustment methodologies depending on the area in which the items and services are furnished: (1) one fee schedule adjustment methodology for DME 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; (2) another fee schedule adjustment methodology for items and services furnished from January 1, 2019, through December 31, 2020, in areas that are currently not CBAs, are not rural areas, and are located in the contiguous United States; and (3) another fee schedule adjustment methodology for items and services furnished from January 1, 2019, through December 31, 2020, in areas that are currently not CBAs and are either rural areas or non-contiguous areas.

Adjustments to the DMEPOS fee schedule will account for just over $1 billion in Medicare payments and $260 million in Medicare beneficiary cost sharing for the two-year period beginning January 1, 2019 and ending December 31, 2020.

On competitive bidding, the rule proposes:

• Implementing lead item pricing based on maximum winning bid amounts.
• Revising the definition of bid to mean an offer to furnish an item or items for a particular price and time period that includes, where appropriate, any services that are directly related to the furnishing of the item or items.
• Revising the definition of composite bid to mean the bid submitted by the supplier for the lead item in the product category.
• Revising the definition of lead item to mean the item in a product category with multiple items with the highest total nationwide Medicare allowed charges of any item in the product category prior to each competition.

Tom Ryan, president and CEO of the American Association for Homecare, said at first glance the proposal looks promising. “It looks like CMS has incorporated significant recommendations from HME stakeholders into the new rule, which should help improve the bidding program,” Ryan said. “While we look forward to doing a thorough analysis of the rule and sharing our findings with the HME community, it appears that CMS has taken an important step towards stabilizing reimbursement policy for our industry, setting the stage for us to advocate for additional reforms and relief going forward.”

The July 11, 2018 action is follow-up and potential fix for action in November 2016 when CMS released the 2016 ESRD PPS final rule (81 FR 77834) to implement section 522(a) of the Medicare Access and CHIP Reauthorization Act (MACRA) of 2015. 

The latest action offers insights into bid and price methodology, and comments. View the CMS press release here. The proposed rule (CMS-1691-P) solicits stakeholder feedback on CMS’s approach to establishing the fee schedule amounts for new DME technologies.