The Medicare Prescription Drug Conference Committee's first accomplishment this summer was agreeing on a package of Medicare regulatory and contracting
by Cara C. Bachenheimer, Esq.

The Medicare Prescription Drug Conference Committee's first
accomplishment this summer was agreeing on a package of Medicare
regulatory and contracting reform provisions known as the
“Medicare Contracting and Regulatory Reform Act.” A
mixed bag for the HME industry, the regulatory reform provisions
enjoy widespread bipartisan support in both the House of
Representatives and the Senate.

Following is a summary of the provisions most relevant to HME

Contractor Reform: In a significant departure from the
government's historical process for contracting with entities to
process Medicare claims, for the first time the agreement would
create a bidding process for Medicare contractors that would take
place every five years. In addition, companies other than insurance
companies would be able to compete for these contracts.

Regulatory Reform: Among the regulatory reform
provisions, the agreement would prohibit the introduction of new
material in final rules without an opportunity for public comment;
would prohibit retroactive application of new regulations and
policies; would require a waiting period of 30 days after the
announcement of a substantive change before it becomes effective;
and would prohibit sanctions if a provider follows erroneous
guidance from the government and its agents.

Claims Review: The conference committee package would
provide for a number of positive developments, including
establishing standards for random prepayment reviews. Providers
would have up to three years to repay overpayments. Medicare could
not recover overpayments during an appeal until after an evaluation
by an independent party. And, Medicare could not extrapolate to a
larger number of claims overpayments based on a small number of
claims, unless there is a sustained or high level of payment

In other provisions in the package, Medicare contractors would
be required to notify providers in writing of post-payment audits,
and a full review and explanation of all audits would be made
available to providers except where fraud is suspected.

In addition, the Department of Health and Human Services would
be required to create a standard method for probe sampling, and HHS
would have to develop a process to allow providers to correct minor
errors or omissions in submitted claims without having to initiate
an appeal.

Appeals Reform: One change that would have potentially
significant effects on HME providers is a provision that would
transfer the Medicare administrative law judges, or ALJs, from the
Social Security Administration to HHS by Oct. 1, 2005. The
Secretary of HHS would ensure the independence of the ALJs by
placing them in a separate administrative office that does not
report either to CMS or to any other HHS officer.

Other Changes: The agreement would provide $25 million in
fiscal years 2005 and 2006 and future funding for increased
provider and supplier education under the Medicare Integrity
Program. Medicare contractors also would be required to respond to
provider and beneficiary inquiries within 45 business days, and
providers would not be held liable for program overpayments if they
resulted from written guidance issued by CMS.

Finally, HHS would be required to establish a Medicare Provider
Ombuds-man office to assist providers, and provider prepayment
reviews would be restricted. While, at press time, the House and
Senate conferees generally agreed upon the regulatory reform
package, one large and unresolved issue that remained was whether
to provide funding for the regulatory reform provisions. The Senate
regulatory section provides for $1 billion in funding, while the
House measure essentially leaves the funding issue to the
appropriations process. Senate Finance Committee Chairman Charles
Grassley, R-Iowa, and House Ways and Means Committee Chairman Bill
Thomas, R-Calif., have said they are committed to resolving the
issue later in the conference.

A specialist in health care legislation, regulations and
government relations, Cara C. Bachenheimer is an attorney with the
law firm of Epstein, Becker & Green in Washington, D.C. You can
reach her by phone at 202/861-1825 or e-mail at