Ready, Set, Wait Some More: CMS Releases Proposed NCB Rule

WASHINGTON–After months of speculation and if-then scenarios,
the waiting for HME industry stakeholders continues. In its Notice
of Proposed Rulemaking on Medicare competitive bidding, published
in this morning’s Federal Register, CMS did answer some
questions on how it intends to implement the DME bidding program,
set to begin in 2007.

But the 203-page document still does not identify exactly which
products will be included in the bid or name the 10 cities where it
will be phased in next year.

The Medicare Modernization Act of 2003 mandates DME competitive
bidding to begin in 10 of the nation’s largest metropolitan
statistical areas in 2007 and expand to 80 MSAs in 2009, after
which the government has the authority to expand the program
nationwide.

Though the 10 initial cities were not named, CMS did publish a
formula detailing how they will be selected. Factors include the
total population in an area, total Medicare DMEPOS spending in the
area, per beneficiary spending and the number of suppliers per
beneficiary. The rule also proposes excluding New York, Los Angeles
and Chicago–the three largest MSAs in the country–to allow the
agency more time to gain experience with the bidding program, and
selecting no more than two cities from each state.

“After we have gained experience operating competitive bidding
programs in [areas] that encompass smaller MSAs in 2007 and 2008,
we would propose to implement programs that include” the three
cities, the rule said. CMS conducted competitive bidding
demonstrations in Polk County, Fla., and San Antonio, Texas, from
1999 to 2002.

Based on CMS’ proposed formula, the cities that would be up for
bid using 2003 data would be Miami; Riverside, Calif.; Pittsburgh;
Cincinnati; Houston; Dallas; Charlotte, N.C.; Orlando, Fla.; San
Juan, Puerto Rico; and Atlanta. Other top MSAs based on CMS’
formula include San Antonio, Texas; Tampa, Fla.; Kansas City, Mo.;
Virginia Beach, Va.; St. Louis; San Francisco; Cleveland; Detroit;
Baltimore; Philadelphia; Washington, D.C.; and Boston.

However, CMS said, the actual cities will be selected using 2005
data–which has yet to be published.

CMS also does not say what products would be put up for bid,
although the rule does propose selecting products based on
potential savings. It also proposes grouping similar items into
product categories, such as hospital beds and accessories, so that
beneficiaries would be able to get all related items in that
category from one supplier. The agency will identify the top 20
product categories in terms of total Medicare spending from which
to choose items for the first phase of the program. The bid items
also may vary by competitive bidding areas, CMS said.

The proposed rule includes a complex formula for evaluating
supplier bids based on the total capacity needed to meet Medicare
demand in the area, with winners chosen based on the weighted
median of the bids that are submitted. CMS would use the bids
submitted to set Medicare payment amounts, which would be the
median of the winning suppliers’ bids. According to the proposal,
suppliers whose bids are lower than the payment amount set under
the bidding program could offer a rebate to beneficiaries.

To participate in the Medicare bidding program, suppliers must
be accredited by a CMS-approved accreditation organization to
ensure they meet applicable quality standards. CMS is expected to
issue those standards this spring and, at some point after that, to
name approved accreditors.

The proposed rule also provides what CMS calls “an opportunity
to develop a network to collectively bid to furnish items included
in a product category … [that] would provide important assistance
to small suppliers.” And the agency proposes a grandfather
provision to allow suppliers that are not bid winners to continue
to serve their existing customers.

The agency contends that, within five years, its DMEPOS
competitive bidding program will save $1 billion annually. Because
prices would be lower under competition, the agency says, the
program also would reduce co-payments and cut beneficiaries’
out-of-pocket costs.

“We intend to implement these DME competitive reforms to get
savings for beneficiaries and taxpayers, while maintaining and
improving quality,” said CMS Administrator Mark McClellan. “This is
another way in which Medicare is now using competition to bring
lower-cost, up-to-date care to our beneficiaries.”

CMS said it is seeking comments on a number of key elements of
the competitive bidding program, including:

• the proposed methodology for selecting the 10 MSAs for
  2007;
• alternatives to defining competitive bidding areas;
• the proposed methodologies for determining whether an area
  within an urban area that has a low population density is not
  competitive;
• standards for exempting particular rural areas from competitive
  bidding;
• methodologies for setting the single payment amount;
• the proposed approach for calculating market demand and
  estimating supplier capacity;
• best method of weighting individual items within a product
  category to determine the composite bid;
• financial standards evaluation criteria and required
  documentation;
• additional options to ensure that small suppliers have
  opportunities to be considered for participation in the
  program;
• a process to determine items and/or HCPCS codes for identifying
  off-the-shelf orthotics subject to competitive bidding;
• the proposed rebate process outlined and how to handle those
  cases in which the rebates would exceed the co-payment amount.

Comments will be accepted until June 30, 2006, and a final rule
will be published later this year.

To view the rule,
click here.

For a summary of key provisions in the proposed rule, visit
www.aahomecare.org.