July 15, 2008, should be remembered as the industry's watershed day. It is the day Congress voted in favor of the Medicare bill that delays the competitive
by Cara C. Bachenheimer, Esq.
Tuesday, July 1, 2008

July 15, 2008, should be remembered as the industry's watershed day. It is the day Congress voted in favor of the Medicare bill that delays the competitive bidding program for certain DME.

Although President Bush vetoed the bill (H.R. 6331), late in the day on that Tuesday, both the House and Senate voted to override the president's veto. Now this bill is law.

The new law, called the Medicare Improvements for Patients and Providers Act, will delay the bid program by 18 to 24 months, exempt high-end rehab items from the bid program and pay for the delay with a 9.5 percent reimbursement cut on items included in round one of the bid program.

A 9.5 percent cut (effective January 2009) is certainly a price to pay, but it was necessary under Congress' current “pay-go” rules, which require all legislation that costs money to be funded. But it's far less of a price than the 26 percent average cut that CMS could have applied across the country starting in January 2009.

Remember, the original statute gave CMS the authority to apply bid rates to non-bid areas starting in 2009, and I expect CMS had every intention of doing so. The new law delays this authority until round two is complete, putting off the authority for at least three years.

Importantly, the Medicare package also includes a provision that repeals the mandate for title transfer of oxygen equipment that was originally part of the Deficit Reduction Act. The law does not include any other DME provisions, such as any additional cut to oxygen or elimination of the purchase option for standard power wheelchairs.

Following are details of the law's provisions:

Competitive Bid Program Delay

  • Exemption for High-End Rehab Power Wheelchairs and Related Accessories

    Delays rounds one and two of the bid program by 18-14 months.

  • Offset to Pay for Delay

    Terminates contracts awarded under round one and restarts the contracting process in those areas in 2009.

  • The round two contracting process will begin in 2011.

  • CMS cannot apply bid rates in non-bid areas until round two is completed.

  • Excludes complex rehabilitation wheelchairs, and related accessories when furnished with such wheelchairs, from competitive bidding.

  • In January 2009, the product categories included in round one will be reduced by 9.5 percent nationwide. This policy does not affect diabetic supplies furnished by retail suppliers because they were not covered by the bidding program.

  • Items that had been subject to the reduction will receive a 2 percent payment increase in 2014, except in any area where a competitive bidding contract is in effect or CMS has otherwise adjusted payment rates.

  • Items that are not in a bid area will receive the full CPI update in 2010, 2011, 2012 and 2013. In 2014, these items will receive the CPI update plus 2 percent.

Bidding Process Improvements

  • Requires CMS to notify bidders about paperwork discrepancies and give suppliers the opportunity to correct within a reasonable time frame.

  • Provides CMS the authority to subdivide MSAs with more than eight million people.

  • Exempts rural areas and MSAs with a population of less than 250,000 from competitive bidding for at least five years.

  • Requires that suppliers who bid on diabetic testing supplies offer brands that cover at least 50 percent of the market by volume (does not apply to round one).

  • Before using its authority to adjust prices in non-bid areas, CMS must issue a regulation and consider how prices set through competitive bidding compare to costs for such items in non-bid areas.

  • Requires HHS' Office of Inspector General to verify the calculations used to determine the pivotal bid amount and winning bid amounts.

Quality Measures

  • Requires all suppliers to be accredited by Oct. 1, 2009. Ensures that all suppliers, whether they are billing Medicare directly or are a subcontractor to another supplier, be subject to accreditation.

  • Requires contracting suppliers to disclose all subcontracting relationships to CMS.

  • Excludes physicians and other practitioners from DMEPOS accreditation requirements until CMS develops provider-specific standards. Allows CMS to waive physician accreditation if the agency determines they are subject to other mandatory quality requirements.

  • Establishes a separate ombudsman within CMS to handle supplier and beneficiary issues related to competitive bidding.

Other Changes

  • Excludes negative pressure wound therapy from round one and requires CMS to evaluate how these items are coded and paid.

  • Excludes Puerto Rico from round one re-bidding. (CMS did not receive enough valid bids in original round one bidding for CMS to award any contracts.)

  • Allows physicians and other treating practitioners to supply “off-the-shelf orthotics” to their patients without being awarded a competitive bidding contract.

  • Allows hospitals in bidding areas to supply the same DMEPOS items that physicians and other practitioners will be able to supply (those that are considered an integral part of professional services) without being awarded competitive bidding contracts for those items.

  • Ensures that podiatrists and other similar practitioners can prescribe DMEPOS items by using a broader definition of “physician” in the Social Security Act. (This relates to a drafting error in the Medicare Modernization Act, which mandates competitive bidding, that pointed to the wrong definition of “physician” in the Social Security Act when requiring a face-to-face examination in order to prescribe DMEPOS items.)

  • Delays a mandated Government Accountability Office report to coincide with the delay of round one, and expands the scope of the report.

  • Provides CMS implementation funding of $120 million.