In addition to changing rates in non-bid locations, CMS plans to lower certain rates based on regional calculations, all under the guise of streamlining the bid program
by Cara C. Bachenheimer
January 23, 2015

A collective gasp was audible across the country when the Centers for Medicare and Medicaid Services (CMS) posted its final rule on Oct. 31, 2014, detailing how it would lower rates in non-bid areas based on the single payment amounts in the current Round 1 and Round 2 bid areas. CMS declined to provide any "bump up" or other meaningful recognition of the higher costs of delivering HME items and services outside major metropolitan regions.

The final regulation, "Medicare Program; End-Stage Renal Disease Prospective Payment System, Quality Incentive Program, and DMEPOS," (79 Fed. Reg. 66120, Nov. 6, 2014), establishes the framework within which CMS will operate to calculate new reduced rates in non-bid areas starting Jan. 1, 2016. Under the rule, CMS is dividing the U.S. into eight regions: New England, Mideast, Great Lakes, Plains, Southeast, Southwest, Rocky Mountain and the Far West. In each of these regions, CMS will establish regional single payment amounts (RSPAs) based on the average of single payment amounts (SPAs) in the Round 1 recompete and Round 2 bid areas in the same region. RSPAs will be limited by a ceiling of 110 percent of the average and a floor at 90 percent of the weighted (by number of states) average of the RSPAs.

On Jan. 1, 2016, CMS will begin to phase in the new rural rates, the full rate reductions will take effect on July 1, 2016.

The regional rates from Jan. 1 through June 30, 2016 will be based on 50 percent of the old and 50 percent of the new rates, and 100 percent of the new rates will be in effect July 1, 2016. In addition to this regional rate calculation, CMS plans to adjust rates for certain items in non-bid areas using different calculations, under the guise of streamlining the bid program.

For items that are included in no more than 10 bid programs, CMS will take 110 percent of the unweighted average of the SPAs from those few bid areas to calculate the rates nationwide.

For items that were included in a bid program that is no longer in effect, CMS will use the "old" SPAs and update them by the consumer price index (CPI).

For accessories that are used with different types of base equipment and that are included in more than one product category, CMS will use the weighted average of the SPA for the HCPCS code.

In a truly creative move, where CMS's bid program design has resulted in "lesser" items in a product category having a higher SPA than an items with higher functionality (e.g., Group 1 vs. Group 2 standard power wheelchairs), CMS will lower the SPA for the "lesser" (e.g., Group 1) item to the SPA for the item with higher functionality. This rate reduction method will apply to standard power wheelchairs and enteral infusion pumps. CMS calls this phenomenon "unbalanced bidding"—a situation caused by its own bid system that incentivizes more aggressive bids on higher-utilized items and more realistic bids on less utilized items.

Non-bid areas defined as "rural" will have rates at the 110 percent ceiling. CMS is defining rural as an area represented by a postal zip code if at least 50 percent of the total geographic area of the zone included in the zip code is estimated to be outside any metropolitan statistical area (MSA). A rural area also includes a geographic region represented by a zip code that is a low-population-density area excluded by CMS from a competitive bidding area.

While the CMS regulations provide us information to be able to calculate (with a reasonable amount of certainty) the rates that will go into effect on Jan. 1 and then July 1, 2016, there remain a host of unanswered yet critical questions. AAHomecare and NCART have presented CMS with a series of questions, but when and how CMS will answer those questions is unknown at this time.

Following are the key questions emanating from CMS's final rule:

  • When will CMS publish the RSPAs, rural rates and the interim (January 1-June 30, 2016) rates?
  • Will the RSPAs be based on the current Round 2 SPAs or Round 2 Recompete SPAs (to be bid this Winter)?
  • When will CMS publish zip codes that meet CMS's definition of "rural"?
  • How will rural rates be identified on the state fee schedules? Will a modifier be used?
  • How will providers identify rural areas on claims (Will there be a rural rate modifier? Will the DMEMAC systems automatically determine reimbursement based on the beneficiary's zip code?)
  • What items will be designated as "low volume" that will be paid at 110 percent of the average SPAs ? When will CMS issue this information? What is CMS's definition of "low volume"?
  • What items are included in the regulation's provision that some items from a bid program that are no longer in effect will be paid at 110 percent of previous SPAs?
  • When will CMS confirm/identify items that are accessories included in one or more product categories that will be paid at the weighted average of the SPAs for the item in each bid area?
  • When will CMS identify what items are included in its "unbalanced bidding" provision?
  • How will complex rehab technology accessories be reimbursed which have not been included in a bid program but are assigned to a HCPCS code which has been included in a bid program and are for use with Group 3 or above power wheelchairs?

Stay tuned as we learn more details.