Outdated Categories Leave Providers Paying the Bill

Embedded in its annual proposed payment rule for End Stage Renal Disease (ESRD) providers, the Centers for Medicare and Medicaid Services (CMS) issued on July 8, 2013, a proposed regulation to reclassify about 80 DME HCPCS codes that are currently paid for on a purchase basis into the capped rental payment category.

CMS believes that these items do not meet the intent of Congress’ 1987 statutory purchase payment category—they are $100 or less. CMS believes it will save money with this proposal. It believes many beneficiaries do not need a rental item for the 13 months required for CMS to pay the full purchase price.

CMS explains, “We are clarifying the existing definition of routinely purchased equipment at §414.220(a)(2) and providing notice that certain HCPCS codes for DME/DME accessories added to the HCPCS after 1989 that are currently classified as routinely purchased equipment should be reclassified as capped rental items. This applies to all expensive items for which Medicare claims data from July 1986 through June 1987 does not exist or does not indicate that the item was acquired by purchase on a national basis at least 75 percent of the time.”

For accessories that are furnished for use with complex rehabilitative power wheelchairs, the purchase option would apply. The supplier would have to give the beneficiary the option of purchasing these accessories at the time they are furnished. Stakeholders have a number of serious concerns with CMS’s proposal. Many of the HCPCS codes are complex rehab by industry definition, although they do not meet CMS’ narrow definition of complex rehab which is limited to certain power wheelchairs. As complex rehab items only provided to beneficiaries with life-long needs, it is safe to say that they will not be rented for less than the 13-month rental period.

CMS is relying on legal authority from the Omnibus Budget Reconciliation Act of 1987, which relies on 1986-1987 claims data to classify items as capped rental. Most items are newer technology and should not have 1987 criteria applied to them. The resulting payment rule change could significantly impede beneficiary 
access to the technology, given the significant up-front service costs complex rehab providers incur.

CMS asked for public comments on the effective date(s) for reclassifying items previously classified as routinely purchased equipment to the capped rental payment class. Because some of the HCPCS codes are included in the Round 2 or Round 1 Recompete phases of the competitive bidding program, CMS does not believe it can change the classification for items furnished under these programs until the contracts awarded expire on July 1, 2016, and January 1, 2017, respectively.

CMS also asked how it should implement dates for the reclassifications of items from the routinely purchased DME class to the capped rental DME class. CMS suggests January 1, 2014, for items furnished in all areas of the country if 
the item is not included in Round 2 or Round 1 Recompete CBP; July 1, 2016, for items furnished in all areas of the country if the item is included in a Round 2 CBP and not a Round 1 Recompete CBP and for items included in a Round 1 Recompete CBP but furnished in an area other than one of the 9 Round 1 Recompete areas; and January 1, 2017, for items included in a Round 1 Recompete CBP and furnished in one of the nine Round 1 Recompete areas. CMS proposes to base the effect dates on when the competitive bidding programs end.

Alternatively, CMS proposed that the effective date for the reclassifications could be January 1, 2014, for all items paid under the fee schedule. Reclassification would not affect payments for items furnished under the Round 2 or Round 1 Recompete CBPs in the respective CBAs until the contracts expire on July 1, 2016, and January 1, 2017, respectively. CMS states this alternative would result in a 2.5-year period from January 2014 through June 2016 where Medicare payment would be on a capped rental basis for the items in half of the country (non-CBAs) and on a purchase basis in the other half of the country (109 Round 2/Round 1 Recompete CBAs). CMS believes that this division in payment classifications would create confusion and difficulty.

CMS submits the final proposal by November 1, 2013. Stay tuned to see if CMS adopts our collective recommendations for changes to the proposal.