BALTIMORE--Years of conjecture and mounting anxiety about the final rule for national competitive bidding ended last week when the Centers for Medicare and Medicaid Services unveiled the document--only to lead to new industry concerns.

Mandated by the Medicare Modernization Act of 2003, the project will replace the current Medicare fee schedule for some DME with a single-payment amount. Leslie V. Norwalk, CMS acting administrator, said that when fully implemented in 2010, the program would save taxpayers $1 billion annually.

"Given the need to tackle the continued and unsustainable growth in health care costs, this new program represents yet another way to use the competitive marketplace to bring the best possible and most efficient care to Medicare beneficiaries," Norwalk said, speaking at a late afternoon press briefing on Monday.

She said the call for bids would be issued at the end of this month with a bid window of 60 days for providers in the 10 metropolitan statistical areas where competitive bidding will roll out. The project will expand to 70 more of the country's largest MSAs--including New York, Los Angeles and Chicago--in 2009, after which CMS will include additional areas and items, Norwalk said.

Set to appear in tomorrow's Federal Register, the long-awaited rule has already generated shock and surprise among industry stakeholders. Some pointed to litigation and/or legislation as possible shelters from the rule's stipulations.

"This has got to give us a tremendous amount of ammunition for the Tanner-Hobson bill because there is not a lot of good that will come out of it," said Cara Bachenheimer, vice president of government relations at Elyria, Ohio-based Invacare.

She referred to H.R.1845, the Medicare Durable Medical Equipment Access Act of 2007, introduced last month by U.S. Rep. John Tanner, D-Tenn. The bill, cosponsored by Reps. David Hobson, R-Ohio, and Mike Ross, D-Ark. (the only HME owner in Congress), would ensure accessibility for beneficiaries and soften some of competitive bidding's effects. (See HomeCare Monday, April 2.)

American Association for Homecare President Tyler Wilson said the association "will aggressively enlist cosponsors" for the proposed legislation. "This bill would fix some of the larger flaws in the competitive bidding program," he said.

Meanwhile, Jim Walsh, general counsel for Waterloo, Iowa-based VGM, said Last Chance for Patient Choice, an advocacy organization backed by the buying group, plans to file lawsuits in Texas and Ohio challenging the implementation of NCB.

Last Chance will argue that the MMA creates a "second class" of Medicare beneficiaries because it requires CMS to select a group of low-cost providers to serve beneficiaries in the competitive bidding areas. (See HomeCare Monday, Sept. 18, 2006.)

"It doesn't take a genius to realize that if you're a Medicare beneficiary in a bid area, you are not going to get the same level of care or the same quality as someone in a non-bid area," Walsh said. "You are forcing a Medicare beneficiary to get a lesser standard of care that nobody who is not under Medicare has to put up with."

While stakeholders commented on additional areas of concern, notably the few weeks providers were given to prepare for bidding, most said the 401-page final rule simply left them with lots of questions--and little time in which to get them answered.

Following are several key provisions of the final rule and initial reaction from across the industry.

Initial Cities
The first round of competitive bidding will take place in the following 10 MSAs:

1. Charlotte-Gastonia-Concord, N.C.-S.C.
2. Cincinnati-Middletown, Ohio-Ky.-Ind.
3. Cleveland-Elyria-Mentor, Ohio
4. Dallas-Fort Worth-Arlington, Texas
5. Kansas City, Mo.-Kan.
6. Miami-Fort Lauderdale-Miami Beach, Fla.
7. Riverside-San Bernardino-Ontario, Calif.
8. Orlando-Kissimmee, Fla.
9. Pittsburgh, Pa.
10. San Juan-Caguas-Guaynabo, Puerto Rico

"I was amazed Houston wasn't one [of the MSAs]," said Mary Ellen Conway, president of Capital Healthcare Group, Bethesda, Md. That city was, after all, the epicenter of Medicare's notorious power wheelchair anti-fraud project, Operation Wheeler Dealer, and many in the industry had expected it to make the list.

Noting that it will make a crucial difference to providers as they decide whether or not they can service the entire MSA--a requirement of the final rule--Conway said there could be some confusion as to exactly what locales fall into those areas. "I think some guys in the outlying areas are going to be surprised," she said.

Dave McCausland, senior vice president of planning and government affairs for The Roho Group, Belleville, Ill., also expressed disappointment that CMS would require a provider to cover the entire competitive bidding area.

"Based on the size of the supplier and the size of the CBA, this could really hurt small, specialty providers," he said.

Product Categories
While specific items to be included were not identified in the final rule--those will come with the request for bids later this month, according to CMS--the agency did reveal the following product categories that will be up for bid in the 10 MSAs:

1. Oxygen supplies and equipment
2. Standard power wheelchairs, scooters, and related accessories
3. Complex rehabilitative power wheelchairs and related accessories
4. Mail-order diabetic supplies
5. Enteral nutrients, equipment, and supplies
6. Continuous positive airway pressure (CPAP) devices, respiratory assist devices and related supplies and accessories
7. Hospital beds and related accessories
8. Negative pressure wound therapy (NPWT) pumps and related supplies and accessories
9.Walkers and related accessories
10. Support surfaces (Group 2 and 3 mattresses and overlays to be bid only in the Miami and San Juan areas)

Advocates said a big disappointment here is the inclusion of the hard-hit complex rehab sector, which many had hoped would be a carve-out.

"We were shocked and dismayed," said Sharon Hildebrandt, executive director of the National Coalition for Assistive Rehab Technology, which had lobbied strenuously against the inclusion. "We had talked to CMS, and not only us but clinicians and consumers had testified ... that complex rehab would not work as a competitive bidding item."

CMS' decision is "confusing and disappointing," added NCART President Rita Hostak, vice president of government relations at Sunrise Medical, Longmont, Colo. "From consumer groups through suppliers and manufacturers, there has been a lot of time and effort invested in educating CMS and policymakers on the intricacies of rehab, she said, noting that "officials at CMS appeared to acknowledge the real difference between rehab and DME/HME."

Hildebrandt said she is now concerned about the ability of rehab providers to bid. A recent NCART study revealed that the "average margins of rehab companies are 1 to 2 percent," she said. "With those low margins, I don't see how they are going to be able to bid because they will have to bid under the [current] fee schedule." (See HomeCare Monday, Jan. 8.)

And what would happen if no rehab provider bid?

"If nobody bids, then CMS won't be able to go forward with competitive bidding in those MSAs," said Seth Johnson, vice president of government affairs for Exeter, Pa.-based Pride Mobility Products.

Under the final rule, CMS must be able to show a "significant savings" in order to pursue competitive bidding, but Johnson questioned this in the mobility categories, pointing out that through recent reimbursement cuts and the CPI freeze (which has been in effect for three years and will continue for at least two more), CMS has already achieved a 30-percent reduction on the equipment.

"How much more do they think they are going to save?" he asked.

Eric Sokol, executive director of the Power Mobility Coalition, also believes that PMD providers are being unfairly targeted.

"The time frame is very difficult for PMD suppliers who have weathered three years of reform, changes in HCPCS codes, changes in the fee schedule and now are tested again to change their business model and determine what is a competitive bidding price," he said. "There are no automatic updates for inflation. This is not a positive. In the bidding price, they are going to have to take that into account because they are going to be stuck with it for the next three years [the time limit CMS has put on the bid contracts]."

Hildebrandt said NCART will be seeking "a legislative carve-out," hoping to stem the effects of complex rehab's inclusion in the bid. She expects a bill to that effect to be introduced sometime this month, and added that NCART will host a May Washington fly-in "to get rehab companies on the Hill and see if legislators will be more reasonable because CMS just isn't listening to us."

Regarding other products on the target list, Bachenheimer said "there are a lot of categories that clearly don't have the margins for significant reductions."

Timeline and Bidding Process
Another big surprise in the final rule was the timetable for implementing competitive bidding. Here is CMS' current timeline for the first round:

Late April 2007--Bidding begins and lasts for 60 days
Summer through Fall 2007--CMS and its contractors review bids
December 2007--Announcement of winning bids
April 2008--Single payment amounts go into effect in the first 10 MSAs