PROSTHETICS, ORTHOTICS, AND SUPPLIES
Program Background
The Medicare durable medical equipment, prosthetics, orthotics, and supplies (DMEPOS) competitive bidding program was mandated by the Medicare Prescription Drug, Improvement and Modernization Act of 2003 (“Medicare Modernization Act” or “MMA”). The new program’s objectives include:
- Assuring beneficiary access to quality DMEPOS;
- Reducing the amount Medicare pays for DMEPOS items;
- Reducing financial burden on beneficiaries by reducing the coinsurance they pay for DMEPOS items; and
- Contracting with suppliers who meet quality and financial standards.
It is also anticipated that since suppliers must be accredited to participate, the program will help deter fraud with respect to DMEPOS suppliers.
Competitive bidding provides a way to harness the marketplace to obtain a better value for Medicare beneficiaries using DMEPOS items and services. The new program changes the way that Medicare determines the payment amounts for these items and services under Part B of the Medicare program by replacing the current DMEPOS fee schedule payment amounts for selected items in certain areas with payment amounts based on competitive bids.
The program will start in competitive bidding areas (CBAs) defined by zip codes within ten of the largest Metropolitan Statistical Areas (MSAs). The MSAs in Round 1 include Charlotte, Cincinnati, Cleveland, Dallas, Kansas City, Miami, Orlando, Pittsburgh, Riverside and San Juan. The program will expand to 70 additional MSAs in 2009 and additional areas after 2009.
The competitive bidding program will offer beneficiaries in the designated CBAs access to quality DMEPOS products and services and lower out-of-pocket costs. The program also provides special considerations for small suppliers, defined as having gross revenues of $3.5 million or less, to participate in the competitive bidding program. When fully implemented, the program is projected to save Medicare about $1 billion annually.
CMS conducted a demonstration program on the DMEPOS competitive bidding program from 1999 through 2002 in which patient impact and quality of care were assessed. The demonstration projects in Texas and Florida produced significant savings for beneficiaries and taxpayers without hindering access to DMEPOS items and services. In designing the current DMEPOS competitive bidding program, CMS built on the experiences from those demonstrations.
New Payment Rates
As a result of the competitive bidding process, the amounts that Medicare will pay for the 10 product categories included in Round 1 of the DMEPOS Competitive Bidding Program overall average 26% less than Medicare’s current fee schedule amounts.
If there were not enough qualified, accredited suppliers that submitted bids in a certain competitive bidding area to assure that beneficiaries have access to a particular DMEPOS product category, then that product category was not included in the competitive bidding program for that area.
The 10 product categories included in the program for the first 10 areas are:
- Oxygen supplies and equipment;*
- Standard power wheelchairs, scooters, and related accessories (includes wheelchair cushions);
- Complex rehabilitative power wheelchairs and related accessories (includes wheelchair cushions);*
- Mail-order diabetic supplies;
- Enteral nutrients, equipment, and supplies;*
- Continuous Positive Airway Pressure (CPAP) devices and Respiratory Assist Devices (RADs) and related supplies;
- Hospital beds and related accessories;*
- Negative pressure wound therapy devices and related supplies and accessories;* +
- Walkers and related accessories; and
- Group 2 support surfaces including mattresses and overlays (in Miami-Fort Lauderdale-Miami Beach only).
* These items are not included in Puerto Rico.
+ These items are not included in Kansas City.
The program will be successful in lowering Medicare payments as well as beneficiary out-of-pocket expenses for necessary items. A complete list of payment amounts is available at the following Web site: http://www.dmecompetitivebid.com.
Suppliers Selected
A total of 325 suppliers receiving 1,345 contracts were selected for the ten Round 1 communities. To participate in the program, suppliers were required to meet Medicare’s financial and quality standards. In addition, suppliers had to be accredited by one of CMS’ approved accrediting organizations to be eligible to receive a contract.
Suppliers had to meet certain business and product-specific service standards in order to be accredited by a CMS approved accreditation organization. For example, business standards focus on administration, financial management, human resource management, consumer services, performance management, product safety and information management. Product-specific service standards include intake, delivery and setup, training and instruction of the beneficiary and/or their caregiver and follow-up service. The accreditation process also included an unannounced survey performed on site at the supplier location. Each bidding supplier was required to provide certain basic accounting statements, tax extracts, and a credit report and score. CMS used this financial information to determine whether each supplier would be able to participate in the program and maintain viability for the duration of the contract period.
Based on bids submitted by these suppliers, beneficiaries and U.S. taxpayers will see prices, on average, 26 percent lower than they currently pay for the same items. CMS received bids from 1005 suppliers. There were just under 6,200 bids for one or more product categories in 
competitive bidding areas (CBAs)where competitive bidding is being implemented. CMS offered contracts to 23 percent of suppliers who submitted bids. These suppliers were in the winning price range and met quality and financial standards and disclosure requirements. Sixty-one percent of the bids submitted were priced higher than the winning range, and just over half of these high-priced submissions were disqualified because they failed to meet other bid requirements. The remaining 16 percent of bids would have been in the winning range had they not been disqualified. A complete list of contract supplier names is available at the following Web site: http://www.dmecompetitivebid.com/cs.
Education Efforts
Over the past six weeks, CMS has provided information about the program to State Health Insurance and Assistance Programs (SHIPs), Area Offices on Aging (AoA), beneficiary advocacy organizations like AARP and other partners, physicians, DME referral agents, suppliers, beneficiaries and their caregivers in the 10 first round communities. These efforts have educated providers and partners on how to communicate with the beneficiary about this new program and where to refer Medicare beneficiaries for information about medical equipment and supplies.
CMS will continue the education and outreach campaign in the coming weeks to beneficiaries and their caregivers through partners, physicians, DME referral agents, suppliers, the media and other information intermediaries to ensure they understand the new program and what they need to do before its implementation on July 1, 2008. A key feature is a June direct mailing to ALL beneficiaries in the 10 first round communities, which will contain an introductory letter, a brochure that outlines the new program and a list of all Medicare DMEPOS contract suppliers in their area. A beneficiary fact sheet is also available through partner groups and providers.
To help consumers find a list of Medicare contract suppliers in the 10 initial areas of the program, visit www.medicare.gov(“Medicare Spotlights” or look under “Search Tools” and select “Find Suppliers of Medical Equipment in Your Area”) or call 1-800-MEDICARE (TTY users should call 1-877-486-2048). For personalized assistance regarding the new program, consumers may also visit their local State Health Insurance and Assistance Program (SHIP) office.
Timeline of Events
March 2008 CMS announces new payment rates for Round 1 derived from competitive bidding and begins contracting process with suppliers
April to July 2008 CMS conducts beneficiary, supplier, referral agent, partner education
and outreach campaign
May 2008 CMS announces the Medicare contract suppliers for Round 1
July 1, 2008 Payment rates for Medicare contract suppliers for Round 1 go into effect
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