The Devil’s in the Details

While most folks are familiar with last year’s Medicare Modernization Act (MMA) and its larger DME provisions, now is the time to understand the Act’s many details, for it is these details that tell us where CMS has leeway to make different implementation decisions, and where it doesn’t. Where CMS does have discretion, the industry has an opportunity to influence the agency to make the better decision.

Mandatory Accreditation

The HHS Secretary must establish and implement “quality standards” to be applied by independent accreditation organizations. DME suppliers will be required to comply with these quality standards to retain their Medicare supplier number and to provide DME to beneficiaries.

Importantly, there is no deadline for the Secretary to establish these standards. CMS has indicated that it will seek advice from the Program Oversight and Advisory Committee (POAC), which will advise CMS on its implementation of its “competitive acquisition” program (see below).

Once CMS establishes the quality standards, which will likely be published in the Federal Register as well as on CMS’ Web site, the Secretary has one year to designate and approve one or more independent accrediting organizations, such as the Joint Commission on Accreditation of Healthcare Organizations (JCAHO), the Community Health Accreditation Program (CHAP) and/or the Accreditation Commission for Health Care (ACHC). Organizations that provide DME, prosthetics and prosthetic devices, orthotics, medical supplies and parenteral and enteral nutrition will be required to comply with the quality standards.

Competitive Acquisition

We call it “competitive bidding.” Congress calls it “competitive acquisition.” CMS is required under the statute to establish competitive acquisition programs in the nation’s 10 largest metropolitan statistical areas in 2007 — New York-Northern New Jersey, Los Angeles, Chicago, Washington-Baltimore, San Francisco-Oakland-San Jose, Philadelphia-Wilmington, Boston, Detroit, Dallas and Houston — and in 80 of the largest MSAs in 2009.

Competitive acquisition applies to all DME, including items used in infusion and drugs and supplies used in conjunction with DME, enteral nutrition and supplies and off-the-shelf orthotics. Congress excluded inhalation drugs used with DME, Class III devices and parenteral nutrition and supplies from competitive acquisition.

Under the law, the first items CMS will include will be the “highest-cost” and “highest-volume” items, or those the Secretary determines have the “largest savings potential.” CMS included most of the highest-cost and highest-volume items, including home oxygen, beds, enteral nutrition and wheelchairs, in its previous demonstration projects. Recently, the General Accountability Office (GAO) recommended that in addition to items that were included in the Polk County, Fla., and San Antonio, Texas, area demonstrations, CMS also include power wheelchairs and lancet test strips in the competitive acquisition programs.

Of note, Congress gave the Secretary authority to exempt (1) rural areas or low-population-density areas unless there is a significant national market through mail order for the item or service; and (2) items and services not likely to result in significant savings. The law defines none of these terms.

A number of statutory provisions were apparently included at the request of CMS, based upon its experience with the demonstration projects. For example, Congress specified that in the case of oxygen, suppliers providing services before the competitive acquisition program would be able to continue to provide oxygen to their beneficiaries after the competitive bidding program is implemented (at the bid rate).

The law requires the Secretary to award multiple winners, but the Secretary may limit the number of winners to the number needed to meet projected demand. This is how CMS limited the number of suppliers in the two demonstration projects.

The law requires mandatory assignment (limiting beneficiary out-of-pocket payments to 20 percent of the allowable), but Congress also stated that this does not preclude the use of an advanced beneficiary notice (ABN) with respect to the provision of a competitively priced item or service.

In the case of mergers and acquisitions, the law allows that a successor entity can become the contractor, if the successor entity assumes the contract along with any liabilities that may have occurred.

Congress, in an apparent nod to the Small Business Administration’s concerns about the impact on small business, included a brief provision on “small suppliers” protection. Notably, the term “small supplier” is not defined. The law simply states that the Secretary shall take “appropriate steps to ensure that small suppliers have an opportunity to be considered for participation in the program.”

We must ensure that CMS appropriately defines “small supplier” consistent with the industry’s definition of the term. The industry also has an opportunity to lobby CMS about what might be “appropriate steps” to ensure small suppliers’ participation.

Due Process

Perhaps the most dangerous statutory provision is the one that virtually eliminates all due process from the competitive bidding program. The law states that there is no administrative or judicial review of the establishment of the payment amounts, the awarding of contracts, the designation of competitive acquisition areas, the phased-in implementation, the selection of items and services to be included or the bidding structure and number of contractors selected. This provision should be top on the industry’s list of “provisions to repeal” — short of repeal of the entire competitive bidding package.

By law, the Secretary has established a committee to advise on competitive bidding implementation; establishment of financial standards; establishment of requirements for data collection; the development of proposals for efficient interaction among manufacturers, providers of services, suppliers and individuals; and the establishment of quality standards.

At press time, the committee was scheduled to hold its first meeting on Oct. 6, and will cease to exist on Dec. 31, 2009. But the provisions of the Federal Advisory Committee Act will not apply to this committee, meaning there is no requirement that CMS adhere to any of the “sunshine”-like requirements that apply to most federal advisory committees.

What’s left out of the statutory mandate? The big answer to that question is the structure of the competitive bidding program itself. The law gives complete discretion to CMS to determine the overall program structure — how it will accept, organize and award bids. Is there an opportunity to make competitive bidding less distasteful through a different structure than what CMS has already experienced in the demonstration projects?

A specialist in health care legislation, regulations and government relations, Cara C. Bachenheimer is vice president, government relations, for Invacare Corp., Elyria, Ohio. Bachenheimer previously worked at the law firm of Epstein, Becker & Green in Washington, D.C., and at the American Association for Homecare and the Health Industry Distributors Association. You can reach her by phone at 440/329-6226 or by e-mail at [email protected].