MEDICARE PROPOSES COMPETITIVE ACQUISITION PROGRAM FOR CERTAIN DURABLE MEDICAL EQUIPMENT, PROSTHETICS, ORTHOTICS, & SUPPLIES
The Centers for Medicare & Medicaid Services (CMS) today issued a proposed rule to improve Medicare’s payments for certain durable medical equipment, prosthetics, orthotics, and supplies (DMEPOS) through a new competitive acquisition program. This proposal would reduce beneficiary out-of-pocket expenses and save the Medicare program money while ensuring beneficiary access to quality DMEPOS items and services.
“We intend to implement these DME competitive reforms to get savings for beneficiaries and taxpayers, while maintaining and improving quality,” said CMS Administrator Mark B. McClellan, M.D., Ph.D. “This is another way in which Medicare is now using competition to bring lower-cost, up-to-date care to our beneficiaries.”
The new competitive acquisition program, which is required by the Medicare Modernization Act of 2003 (MMA), would replace the current DMEPOS fee schedule payment amounts for selected items in select areas. CMS has discretion under the law to first phase in DMEPOS items for bidding based on high cost and volume or largest savings potential. Suppliers in a competitive bidding area would submit bids for selected items, and CMS would use these bids to establish Medicare payment amounts for these items. Under the proposed rule, the Medicare payment amounts would be the median of the winning suppliers’ bids for selected items. Suppliers whose bids are lower than the Medicare payment amounts set under the competitive bidding program could offer a rebate to beneficiaries, lowering their costs for acquiring the DME items they need. Within five years of implementing the competitive bidding programs, savings to taxpayers are expected to exceed over $1 billion annually.
Competition under the program would be phased in beginning in 2007 in 10 of the largest metropolitan statistical areas (MSAs), in 80 of the largest MSAs in 2009, and in other areas after 2009. Areas that may be exempt from competitive acquisition of DMEPOS include rural areas and areas with low population density within urban areas that are not competitive, unless there is a significant national market through mail order for a particular item or service. CMS proposes that for 2007, the New York City, New York; Los Angeles, California; and Chicago, Illinois MSAs would be excluded from competitive bidding.
This proposed rule also details CMS’ process for implementing new quality standards and the application process for organizations that would accredit all DMEPOS suppliers, including those who would participate in the DMEPOS competitive bidding program. CMS will establish the quality standards through program instructions. The standards will be applied prospectively and will be published on the CMS website this spring.
All suppliers must be accredited by an approved accreditation organization to ensure they meet applicable quality standards. Failure to meet those standards can result in the revocation or suspension of billing privileges and the inability to participate in the competitive bidding program.
In developing this proposal, CMS relied on experiences gained during DMEPOS competitive bidding demonstrations conducted from 1999 through 2002. CMS also considered advice from the Program Advisory and Oversight Committee (PAOC) established by the MMA to provide advice on the competitive acquisition program and related issues. The PAOC members were appointed by the Secretary of Health and Human Services and represent a broad mix of relevant industry, consumer, and government partners.
The recently-enacted Deficit Reduction Act of 2005 (DRA) changed the way Medicare pays for oxygen equipment and certain rented DMEPOS items. This proposed rule is consistent with the DRA changes, which will be fully implemented in future rulemaking.
In addition to the DMEPOS competitive acquisition program, the proposed rule includes a new fee schedule for home dialysis supplies and equipment that are still paid on a reasonable charge basis, clarification of our policy on the scope of the statutory eyeglass coverage exclusion, and implementation of a revised methodology for calculating fee schedule amounts for new DMEPOS items.
The proposed rule will be published in the May 1 Federal Register. Comments will be accepted until June 30, and a final rule will be issued later this year.
The proposed rule can be viewed at: http://www.cms.hhs.gov/CompetitiveAcqforDMEPOS/downloads/cms1270p_dme.pdf