As required by Section 302 of the Medicare Prescription Drug, Improvement, and Modernization Act of 2003 (MMA), Medicare has published final regulations establishing the requirements for a new competitive bidding program for certain Durable Medical Equipment, Prosthetics, Orthotics, and Supplies (DMEPOS).[1]  The program is scheduled to begin on July 1, 2008.  It is an outgrowth of Congressional and agency efforts to reign in the costs of durable medical equipment and supplies, particularly items that have been identified as costly or over utilized.

The MMA requires that the competitive bidding program be phased in with high cost and high volume items, or those with the largest savings potential.  The items will be chosen based on: total Medical expenditures (allowable charges) for the item; growth in Medicare expenditures; number of suppliers of the item; savings potential; and findings, reports and studies by the Office of Inspector General (OIG) or the Government Accountability Office (GAO).

At this point, advocates and beneficiary groups are concerned about the impact of the change on access to DMEPOS.  They fear that beneficiaries will not be able to use favored and trusted suppliers with whom they have established relationships and who know their particular DMEPOS items and supplies.  Congress is planning hearings to explore the potential impact of the new process on access to supplies and services.  Hearings are likely to be scheduled during the week of May 7, 2008.

Competitive Bidding Areas

The ten (10) Metropolitan Statistical Areas (MSAs) selected by formula as Competitive Bidding Areas (CBAs) for the initial phase of the process are: (i) Charlotte-Gastonia-Concord, NC-SC; (ii) Cincinnati-Middletown, OH-KY-IN; (iii) Cleveland-Elyria-Mentor, OH; (iv) Dallas-Fort Worth-Arlington, TX; (v) Kansas City, MO-KS, (vi) Miami-Fort Lauderdale-Miami Beach, FL; (vii) Orlando-Kissimmee, FL; (viii) Pittsburgh, PA; (ix) Riverside-San Bernardino-Ontario, CA; and (x) San Juan, PR. 

After 2009, CMS will designate additional CBAs and 70 additional MSAs. Some areas may be exempt, including rural areas and areas with low population density that are not competitive, provided there is no significant national market through mail order for a particular item or service.

New Terms 

The Competitive acquisition program for DMEPOS introduces new terms, including:

• Contract Supplier - An entity that is awarded a contract by CMS to furnish items under a competitive bidding program

• Non-Contract Supplier - A supplier that is not awarded a contract by CMS to furnish items included in a competitive bidding program

• Grandfathered Supplier - A non-contract supplier that chooses to continue to furnish grandfathered items to a beneficiary in a CBA

• Referral Agents - Physicians, practitioners or providers who prescribe DMEPOS (in essence, "order" or "refer") for their patients

• Grandfathered Item - Any one of the items for which payment is made on a rental basis prior to the implementation of a competitive bidding program and for which payment is made after implementation of a competitive bidding program to a grandfathered supplier that continues to furnish the items in accordance with the rules of the competitive bidding process

• Single Payment Amount - The allowed payment for an item furnished under a competitive bidding program

Competitive Bidding Implementation Contractor

CMS has established a DMEPOS Competitive Bidding Implementation Contractor (CBIC) website, www.dmecompetitivebid.com, and has contracted with Palmetto GBA to conduct certain functions in relation to the administration of the DMEPOS Competitive Bidding Program.  The functions of the CBIC are to prepare the request for bids (RFB), perform bid evaluations, and ensure that suppliers meet all applicable financial and quality standards.  In addition, the contractor is to conduct an education program for beneficiaries, suppliers, and referral agents.  CMS also announced on May 8, 2008 that they will be establishing a website to enable beneficiaries and others to search for certified suppliers in their CBA.

In general, competitively bid items that are related and are used to treat a similar medical condition will be grouped into product categories, for example, hospital bed and accessories.  Suppliers do not have to bid on all product categories, but for those product categories for which they bid, the supplier must bid on every item in the product category.  In addition, contract suppliers will be required to furnish all items within a product category.

Initial Ten (10) Product Categories

CMS has identified the following items for its initial ten product categories:

1. Oxygen supplies and equipment

2. Standard power wheelchairs, scooters, and related accessories

3. Complex rehabilitative power wheelchair and related accessories

4. Mail-order diabetic supplies

5. Enteral nutrients, equipment, and supplies;

6. Continuous positive airway pressure (CPAP) devices, respiratory assist devices (RADs), and related accessories

7. Hospital beds and related accessories

8. Negative pressure wound therapy (NPWTP) pumps and related accessories

9. Walkers and related accessories

10. Support surfaces (group 2 and 3 mattresses and overlays)

Grandfathering Certain Contractors

As indicated above, the competitive bidding rules provide for "grandfathering" the provision of certain rental items for which payment is made on a rental basis prior to the implementation of a competitive bidding program and for which payment is made after implementation of a competitive bidding program to a grandfathered supplier that continues to furnish the items as provided under the payment regulations.  Items that may be grandfathered include:

• Certain inexpensive or routinely purchased brand-name items

• An item requiring frequent and substantial servicing

• Oxygen and oxygen equipment and other DME described in the regulations

The competitive bidding process also allows for the grandfathering of certain special physician/practitioners - nurses, physician assistants, clinical nurse specialists, and physical therapists and occupational therapists in private practice - to receive payment for certain competitively bid items furnished to their own patients as part of the professional service even though they have not submitted a bid and have not been selected as a contract supplier.  

Beneficiaries who are renting an item of DME, or oxygen and oxygen equipment, that meets the definition of a grandfathered item may elect to obtain the item from a grandfathered supplier. The rules also contain special provisions for small suppliers, including forming networks of small suppliers.

Repair and Replacement of Beneficiary-Owned Items

• Repair Only - A beneficiary who owns a competitively bid item that needs to be repaired may have the repairs performed by either a contract supplier or a non-contract supplier. Medicare will pay for reasonable and necessary labor that is not otherwise covered under a manufacturer’s or supplier’s warranty.

• Repair and Replacement - If a part needs to be replaced to make the beneficiary-owned equipment serviceable and the replacement part is also a competitively bid item for the CBA in which the beneficiary maintains a permanent residence, the part may be obtained from either a contract supplier or a non-contract supplier.  In these situations, Medicare pays the single payment amount provided under the Competitive Bidding Program for the replacement part.

• Replacement Only - Beneficiaries who are permanent residents within a CBA are required to obtain replacement of all items subject to competitive bidding from a contract supplier - including replacement of base equipment and replacement of parts or accessories for base equipment that are being replaced for reasons other than servicing of the base equipment.  Beneficiaries who are not permanent residents of a CBA, but require a replacement of a competitively bid item while visiting in a different CBA, must obtain the replacement item from a contract supplier. The supplier will be paid the fee schedule amount for the state in which the beneficiary is a permanent resident.

Mail Order Diabetic Supplies Under the Program

Medicare beneficiaries who are permanent residents in a CBA may purchase their diabetic testing supplies from a mail order contract supplier for the area in which the beneficiary is a permanent resident or from a non-contract supplier in cases where the supplies are not furnished on a mail order basis.  These supplies will be reimbursed at the single payment amount for the CBA where the beneficiary maintains a permanent residence. For diabetic supplies that are not furnished through mail order, suppliers will be paid the fee schedule amount.

Competitive Bidding and Advance Beneficiary Notice Information

In general, if a non-contract supplier in a CBA furnishes a competitively bid item to any Medicare beneficiary, Medicare will not make payment unless there is an applicable exception, regardless of whether the beneficiary maintains a permanent residence in the CBA or another area. In these circumstances, the beneficiary is not liable for payment unless the non-contract supplier in a CBA obtains an Advanced beneficiary Notice (ABN) signed by the beneficiary.

A signed ABN indicates that the beneficiary was informed in writing prior to receiving the item that there would be no Medicare coverage due to the supplier's contract status and that the beneficiary understands that he or she will be liable for all costs that the non-contract supplier may charge for the item. The Centers for Medicare & Medicaid Services (CMS) has stated on some of its training phone calls that waiver of liability provisions apply when beneficiaries are not provided an ABN.

No Administrative and Judicial Review of Process

There is no administrative or judicial review under the DMEPOS competitive bidding process for the following:  establishment of payment amounts; awarding of contracts; designation of CBAs; phase-in of the competitive bidding program; selection of items for competitive bidding; or the bidding structure and number of contract suppliers selected for a competitive bidding program.  In addition, a denied claim is not appealable if the denial is based on a determination by CMS that a competitively bid item was furnished in a CBA in a manner not authorized under the competitive bidding program.

Conclusion

Advocates and beneficiaries should be mindful of the implementation of this new process.  In particular, it will be important for beneficiaries to use suppliers who meet the competitive bidding process requirements.  Further, beneficiaries should be reminded of the requirement to use contract suppliers who are approved for the Competitive Bidding Areas (CBAs) in which they reside.  In addition, advocates and beneficiaries should read carefully each ABN issued for these beneficiaries to assure that they are using only contract suppliers.