CMS Issues NCB Final Rule

BALTIMORE — Years of conjecture and mounting anxiety about the final rule for national competitive bidding ended on April 2 when the Centers for Medicare and Medicaid Services unveiled the document, then opened official registration for bidding on April 9, then set Aug. 31 as the accreditation deadline for first-round bidders.

Mandated by the Medicare Modernization Act of 2003, the bid project will replace the current Medicare fee schedule for some DMEPOS with a single-payment amount. Leslie V. Norwalk, CMS acting administrator, said that when fully implemented in 2010, the program would save taxpayers $1 billion annually.

“Given the need to tackle the continued and unsustainable growth in health care costs, this new program represents yet another way to use the competitive marketplace to bring the best possible and most efficient care to Medicare beneficiaries,” Norwalk said at a press briefing.

She said the request for bids was expected to be issued at the end of April (although at press time the RFB had not come) with a bid window of 60 days for providers in the 10 MSAs where bidding will begin.

Published in the April 10 Federal Register, the long-awaited rule generated shock and surprise among industry stakeholders. Some pointed to litigation and/or legislation as possible shelters from its stipulations.

“This has got to give us a tremendous amount of ammunition for the Tanner-Hobson bill because there is not a lot of good that will come out of it,” said Cara Bachenheimer, vice president of government relations at Elyria, Ohio-based Invacare.

She referred to H.R.1845, the Medicare Durable Medical Equipment Access Act of 2007, introduced in March by U.S. Rep. John Tanner, D-Tenn., and co-sponsored by Reps. David Hobson, R-Ohio, and Mike Ross, D-Ark. (the only HME owner in Congress). The bill would ensure accessibility for beneficiaries and soften some of competitive bidding’s effects by allowing any qualified provider who had submitted a bid below the current allowable to continue doing Medicare business.

Tyler Wilson, president of the American Association for Homecare, pledged the association “will aggressively enlist cosponsors” for the proposed legislation. “This bill would fix some of the larger flaws in the competitive bidding program,” he said.

Meanwhile, VGM Group general counsel Jim Walsh said Last Chance for Patient Choice, an advocacy organization backed by the Waterloo, Iowa-based buying group, plans to file lawsuits in Texas and Ohio challenging the implementation of NCB.

Last Chance will argue that the MMA creates a “second class” of Medicare beneficiaries because it requires CMS to select a group of low-cost providers to serve beneficiaries in the competitive bidding areas.

“It doesn’t take a genius to realize that if you’re a Medicare beneficiary in a bid area, you are not going to get the same level of care or the same quality as someone in a non-bid area,” Walsh said. “You are forcing a Medicare beneficiary to get a lesser standard of care that nobody who is not under Medicare has to put up with.”

Too Many Questions, Too Little Time

While HME stakeholders commented on additional areas of concern, notably the few weeks providers were given to prepare for bidding, most said the 401-page final rule simply left them with lots of questions — and little time in which to get them answered.

Hoping for additional information, more than 1,100 callers dialed in to a special Open Door Forum on the rule held April 11.

Don Clayback, senior vice president of networks for The MED Group in Lubbock, Texas, led off audience questions when he expressed concern about the agency’s plan to open the bidding so soon. “What are the opportunities to modify the timeline that we’re working under?” he asked, noting that the rule would affect more than 3 million beneficiaries and thousands of providers, yet “there basically is going to be less than a 21-day education period to get everybody up to speed prior to starting the bid.”

CMS will hold to the deadline, an official responded, because “we do need to implement the prices on April 1, 2008 … There is a 60-day bid window, and we believe that should provide opportunity for suppliers to submit their bid.”

Clayback then noted that “given that this has been going on for more than three years and the final rule took more than a year to be finalized, it seems like [you’re] really setting the collective group of us up for failure in not giving enough time for people to actually prepare and submit an educated bid.”

The official said “there has been information about what our thoughts were concerning the program through a variety of sources,” including open meetings with the Program Advisory and Oversight Committee and the proposed rule “that everyone had a chance to look at.” CMS has also planned a Web cast about bid submission and an online “tool kit” to assist suppliers through the bid application process, the official said.

Days after the forum, however, Clayback was still shaking his head over the timeline.

“This is a program that has been in the works for three years, and even today we still don’t have all the information we need yet they are still moving forward.

“I think it’s incredible,” he said, adding that it is shortchanging providers to expect them to digest the contents of the rule, get all their questions answered and come up with intelligent bids in such a short period of time.

“We’re at the starting line and we have one foot on the banana peel,” Clayback said.

Following are several key provisions of the final rule and initial reaction from across the industry.

Check further in this section for additional information on elements of the rule, and be sure to check the Competitive Bidding Implementation Contractor (CBIC) Web site, www.dmecompetitivebid.com, frequently for updates on the national bidding program as it moves forward.

Initial Cities, Products

The first round of competitive bidding will take place in 10 of the country’s largest MSAs and will include 10 product categories (see the list on page 12). The project will expand to 70 more of the country’s largest MSAs — including New York, Los Angeles and Chicago — in 2009, after which CMS will include additional areas and items, Norwalk said.

According to CMS, three-year contracts will be awarded to multiple suppliers for each product category in each competitive bidding area, and winners will be required to furnish all of the items in a product category to beneficiaries throughout the entire geographic area that is included in the CBA.

Dave McCausland, senior vice president of planning and government affairs for The Roho Group, Belleville, Ill., expressed disappointment that CMS would require a provider to cover the entire bidding area.

“Based on the size of the supplier and the size of the CBA, this could really hurt small, specialty providers,” he said.

Complex Rehab

Advocates said another big disappointment is the inclusion of the hard-hit complex rehab sector, which many had hoped would be a carve-out.

“We were shocked and dismayed,” said Sharon Hildebrandt, executive director of the National Coalition for Assistive Rehab Technology, which had lobbied strenuously against the inclusion.

“We had talked to CMS, and not only us but clinicians and consumers had testified … that complex rehab would not work as a competitive bidding item.”

CMS’ decision is “confusing and disappointing,” added NCART President Rita Hostak, vice president of government relations at Sunrise Medical, Longmont, Colo.

“From consumer groups through suppliers and manufacturers, there has been a lot of time and effort invested in educating CMS and policymakers on the intricacies of rehab,” she said, noting that “officials at CMS appeared to acknowledge the real difference between rehab and DME/HME.”

Hildebrandt said she is now concerned about the ability of rehab providers to bid. A recent NCART study revealed that the “average margins of rehab companies are 1 to 2 percent,” she said. “With those low margins, I don’t see how they are going to be able to bid because they will have to bid under the [current] fee schedule.”

Under the final rule, CMS must be able to show a “significant savings” in order to pursue competitive bidding.

But Seth Johnson, vice president of government affairs for Exeter, Pa.-based Pride Mobility, questioned this in the mobility categories, pointing out that through recent reimbursement cuts and the CPI freeze, which has been in effect for three years and will continue for at least two more, CMS has already achieved a 30-percent reduction on the equipment. “How much more do they think they are going to save?” he asked.

Eric Sokol, executive director of the Power Mobility Coalition, also said he thinks PMD providers are being unfairly targeted.

“The time frame is very difficult for PMD suppliers who have weathered three years of reform, changes in HCPCS codes, changes in the fee schedule and now are tested again to change their business model and determine what is a competitive bidding price,” he said.

“There are no automatic updates for inflation. This is not a positive. In the bidding price, they are going to have to take that into account because they are going to be stuck with it for the next three years.”

Hildebrandt said NCART will be seeking “a legislative carve-out,” hoping to stem the effects of complex rehab’s inclusion in the bid.

She expected a bill to that effect to be introduced shortly, adding that NCART had scheduled a Washington fly-in this month “to get rehab companies on the Hill and see if legislators will be more reasonable, because CMS just isn’t listening to us.”

Winning a Bid

Under the final rule, contracts will be awarded to a “sufficient number” of suppliers in each area “to ensure access and service to high-quality DMEPOS items,” although no supplier’s capacity can meet more than 20 percent of the total beneficiary need within the CBA.

The winning bids will then be used to establish a single Medicare payment for each item.

To bid, however, providers must give CMS capacity estimates of the number of units for each item included in the product category they think they could furnish under the program, which some said — given the information currently available to calculate such a figure — “would be a guesstimate at best.”

Nevertheless, according to CMS, based on the results of its earlier bid demonstration projects in Polk County, Fla., and San Antonio, Texas, “at least 60 percent of bidding suppliers will be selected as winners in at least one product category.”

But VGM’s Walsh said there’s a flip side. “One of the things people … don’t recognize is that there are going to be losers in this bidding process,” he said.

“There’s an alarming chance that a well-run, well-meaning business will not be allowed to serve beneficiaries in one of these MSAs.”

It should also be noted that CMS has estimated once NCB is fully implemented, there will be only about half as many DMEPOS suppliers doing business with Medicare as there are currently.

Bidding Networks

The final rule allows the formation of bidding networks, but only for smaller providers, now defined as those with $3.5 million or less in gross receipts as opposed to the Small Business Administration’s $6.5 million parameter for small businesses.

CMS has, however, capped the number of providers that can be included in each network at 20, an admitted problem for several recently formed networks that already have in excess of 20 members. (For more, see “To Network or Not” on page 38.)

“Networks have much more limited applicability now to the industry,” said Bachenheimer.

John Gallagher, vice president, government relations, for VGM, agreed, noting that some of the benefits of network bidding outlined in CMS’ proposed rule disappeared in the final version.

“They require each provider within the network to cover all products in a product category and the whole MSA,” Gallagher said. “But the whole idea of getting into a network was that you couldn’t cover the whole MSA and you couldn’t provide some of the products in the product category.”

Small Providers

Responding to concerns about smaller companies’ inability to vie with large national or regional providers for contracts, CMS did put some safeguards into place.

The agency — which received more than 2,100 comments on its draft rule — not only lowered the revenue amount for its definition of “small supplier” but also set a target of 30 percent of the contracts to be awarded to small suppliers in each product category.

If there are not enough small companies with winning bids to meet that target, according to CMS, “then contracts will be offered to small suppliers that submitted bids higher than but close to the winning bids.

“The small suppliers will have the option to accept the single-payment amounts based on the winning bids until the 30 percent goal is met or there are no additional small suppliers.”

That’s one of the few bright spots in the final rule, several sources said.

However, Jeffrey Baird, chairman of the Health Care Group at Brown & Fortunato, PC, Amarillo, Texas, said the target is low. “In my mind, this should be at least 50 percent, if not higher,” he said.

In what some see as another possible boon to small providers, CMS said it will allow suppliers to subcontract.

“This is good for those in the large MSAs,” according to Wallace Weeks of Weeks Group, Melbourne, Fla.

“One of the benefits is that they can cover [bidding] areas with subcontractors. A terrible inefficiency can be overcome. They still have to cover the entire MSA, but they don’t have to take on the big money-loser across the MSA — a subcontractor can do it.”

The rule also includes a “grandfather” provision that could enable beneficiaries to continue renting certain equipment from their existing providers, if the provider also chooses to continue renting the item.

For oxygen providers, the final rule allows a minimum of 10 months of payment to a contract provider who takes over oxygen service to a beneficiary who had been receiving services from a noncontract provider.

Similarly, if a beneficiary who is renting capped rental equipment switches from a noncontract provider to one that has won a contract, the new contract provider will receive 13 months of rental payments.

Despite such provisions, some said they fear for small providers.

“I think the deck is stacked against them,” said Sokol of the PMC. “They don’t have the volume purchasing power or the staff.”

Roho’s McCausland was even gloomier. “Bottom line, I see this as a train wreck that we all know is going to happen … but we can’t stop it.

“Here’s hoping that we can get something through the new Congress before it’s too late.”