NPRM on Medicare Competitive Bidding Published in Federal Register

VGM offers "quick reference" to proposed rule

As virtually all HM providers are now aware, CMS has published its proposed rule to phase in the competitive acquisition program for durable medical equipment, prosthetics, orthotics and supplies (DMEPOS) under Medicare Part B.

Per the request of its members, VGM has compiled a "quick reference" guide to the proposed rules. Please access the guide here.

The guide includes a summary of provisions per each section of the NPRM, and includes examples, detail and additional clarification to many issues.

However, the NPRM (over 200 pages) did not identify exactly which items will be subject to bid, nor name the exact MSAs where competitive bidding will begin in 2007. It did include a formula suggesting the selection process, which includes the total population in an area, total Medicare DME spending in the area, per beneficiary spending and the number of suppliers per beneficiary.

The rule specifically excludes the top three MSAs (New York, Los Angeles and Chicago) to allow the agency more time to gain experience with the program.

Other MSA selection criteria within the proposal:

* MSAs that cross DMERC regions will not be included
* Requires at least one competitive bidding area in each DMERC region. CMS will select the highest scoring MSA in each DMERC.
* No more than two MSAs per state
* CMS may exclude from competitive bidding a rural area or an area with low population density

Based on CMS` proposed formula, the top MSAs (using 2003 data) would include, in order:

Riverside, CA
Charlotte NC
San Juan, Puerto Rico
San Antonio
Tampa, FL
Kansas City, MO
Virginia Beach, VA
St. Louis
San Francisco
Washington, D.C.

Important Note: The actual cities will be selected using 2005 data. This data is not yet published. Please review the guide for additional information

CMS is seeking comments on a number of key elements of the program. These include:

* the proposed methodology for selecting the 10 MSAs for 2007
* alternatives to defining competitive bidding areas
* the proposed methodologies for determining whether an area within an urban area that has a low population density is not competitive
* standards for exempting particular rural areas from competitive bidding
* methodologies for setting the single payment amount
* the proposed approach for calculating market demand and estimating supplier capacity
* the best method of weighting individual items within a product category to determine the composite bid
* financial standards evaluation criteria and required documentation
* additional options to ensure that small suppliers have opportunities to be considered for participation in the program
* a process to determine items and/or HCPCS codes for identifying off-the-shelf orthotics subject to competitive bidding
* the proposed rebate process outlined and how to handle those cases in which the rebates would exceed the co-payment amount.

Comments will be accepted until June 30, 2006, and a final rule will be published later this year.

HME providers who wish VGM to compile, edit and forward comments to CMS, please email or fax your comments to: Mark Higley, VP – Development, at or 319-235-9774

Background & Summary (Source: CMS)

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 (CBA) 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.

When competitive bidding is implemented, beneficiaries who live in a CBA will be permitted to obtain DMEPOS only from contracted suppliers. Beneficiaries whose permanent residence is outside a CBA but visit a CBA also will be required to obtain their DMEPOS from contracted suppliers because of CMS policy to direct new business only to contracted suppliers.

The CAP will be phased in over several years. CMS proposed to implement the program in 10 of the largest metropolitan areas in 2007, 80 more cities in 2009, and others after 2009.

Special rules for particular categories of DMEPOS. Oxygen supplies must be paid at a monthly rate with an add-on for portable equipment. Rental items that do not require substantial maintenance and servicing usually are inexpensive, with payment limited to the approximate purchase price. The proposed rule provides for "grandfathering" in suppliers of certain rented DME items and oxygen supplies with whom arrangements existed before the start of the competitive bidding program.

Patient-owned items subject to competitive bidding may be repaired or replaced only by a winning contract supplier in a CBA. The contract supplier cannot refuse to repair or replace these items.

The major features of the CAP include:

* establishment of quality standards to be required of DMEPOS providers and suppliers according to the particular items each provides or supplies;
* establishment of a program advisory and oversight committee to advise the Secretary on the quality standards, financial standards, data collection, best practices and other aspects of the program;
* designation of national accreditation organizations with deeming authority to evaluate and confirm compliance with the standards;
* a requirement that bidders be accredited either by the applicable state agency or by an accreditation organization with deeming authority;
* designation of CBAs which will be served by the contracted DMEPOS providers and suppliers;
* establishment of prices for items by state or CBA;
increased oversight to prevent and detect fraud and abuse; and
* clarification and enforcement of the exclusion of low vision aids such as magnifiers from Medicare coverage under the exclusion of eyeglasses.

Please access the documents as follows:

CMS press release: Press Release

The four-page "backgrounder" document: Backgrounder

The Proposed Rule (203 pages): Proposed Rule