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| May 2, 2006 | SPECIAL EDITION |
| Breaking News for O&P Professionals | |
| AOPA Summary: Medicare Competitive Bidding Proposal | |
On April 24, the Centers for Medicare and Medicaid Services (CMS) issued a Notice of Proposed Rulemaking (NPRM) outlining the details of the Medicare competitive bidding program. When implemented, this program will set reimbursement rates for certain items of durable medical equipment (DME) and off-the-shelf (OTS) orthoses based on a competitive bidding process. Reimbursement rates established under competitive bidding must be lower than what would have been paid under established Medicare DMEPOS fee schedule amounts. Items that are competitively bid could only be provided by winning bidders.
The NPRM also details CMS' process for implementing new quality standards and the application process for organizations that would accredit all DMEPOS suppliers. Quality standards are expected to be finalized by the end of spring 2006. Compliance with the new quality standards and accreditation requirements would be a mandatory condition of payment, as well as required for participation in the competitive bidding program. CMS-approved accrediting organizations would enforce the new quality standards first in competitive bidding areas. Accrediting organizations would enforce quality standards in non-competitive bidding areas on a phased-in basis.
CMS is requesting public comment on the proposed rule by June 30, 2006. After comments are reviewed, CMS will issue a final rule. AOPA will be commenting on the proposed rule as part of the Orthotic and Prosthetic Alliance.
Questions about the Medicare competitive bidding program?
Call AOPA expert Walter Gorski at (571) 431-0809 or Virginia Torsch at (571) 431-0812.
Use this menu to view summaries of key NPRM provisions:
Recognition of the O&P Profession
Areas Subject to Competitive Bidding
Selection of Devices
Bidding
Evaluating Bids
Payment Rules
Determining Payment Amounts
Contractor(s)
Long-term Patients (Grandfathering)
Networking
Accreditation
Quality Standards
Timeline
Other Details
View the Entire CMS Proposed Rule
| Recognition of the O&P Profession | |
The proposed rule provides a definition of what constitutes an off-the-shelf orthotic device. While the NPRM does not identify which devices would fall into this classification, and thus, be candidates for competitive bidding, it would consider any orthotic device that requires:
- minimal self-adjustment for appropriate use; and
- does not require expertise in trimming, bending, molding, assembling, or customizing to fit the individual to be an off-the-shelf orthotic device.
Self-adjustment is defined as adjustments that can be made by the beneficiary, caretaker for the beneficiary or supplier of the device that can be performed without the assistance of a certified orthotist (that is, an individual certified by either the American Board for Certification in Orthotics and Prosthetics, (ABC) or the Board for Orthotist/Prosthetist Certification (BOC)). By contrast, CMS would consider any adjustments that can only be made by a certified orthotist to be adjustments that require an expertise in trimming, bending, molding, assembling or customizing to fit to the individual. CMS has requested public comment on methodologies to be used to determine selection of OTS orthotic devices.
| Areas Subject to Competitive Bidding | |
Medicare would establish competitive bidding in 10 of the largest metropolitan statistical areas (MSAs) in 2007; 80 of the largest MSAs in 2009; and additional areas after 2009. Medicare proposes to exclude from the initial round of competitive bidding in 2007 the MSAs that include the cities of New York, Chicago and Los Angeles. These areas would be added in 2009. Medicare could also exempt rural areas and areas with low population density within urban areas.
CMS plans to include at least one MSA in every DMAC region so that each DMAC becomes familiar with competitive bidding.
Based on this proposed methodology and currently available data, CMS has identified the following 25 areas that could be selected as competitive bidding sites (AOPA note: the following MSAs may change based on the data and final methodology used to determine competitive bidding areas.)
Top 25 MSAs Based on Medicare Data for 2003 (in descending order)
| 1. Miami | 14. Virginia Beach | 2. Houston | 15. St. Louis | 3. Dallas | 16. San Francisco | 4. Riverside, CA | 17. Cincinnati | 5. San Antonio | 18. Cleveland | 6. Los Angeles** | 19. Detroit | 7. Charlotte, NC | 20. Baltimore | 8. Orlando | 21. Philadelphia | 9. San Juan | 22. Washington, D.C. | 10. Atlanta | 23. Chicago** | 11. Tampa | 24. New York** | 12. Kansas City | 25. Boston | 13. Pittsburgh |
| Selection of Devices |
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Items subject to competitive bidding would include durable medical equipment (excluding class III devices), other equipment and supplies (enteral nutrition, equipment and supplies) and off-the-shelf orthoses. Specific items and services subject to competitive bidding are not identified in the proposed rule.
Off-the-shelf orthoses are defined as orthotic devices "which require minimal self-adjustment for appropriate use and do not require expertise in trimming, bending, molding, assembling or customizing to fit to the individual."
CMS will target those items that include the highest costs and highest volume or those items that it deems to have the greatest potential for savings. Items with high allowed charges or rapidly increasing allowed charges would be CMS' highest priority in selecting items for competitive bidding. CMS proposes to identify the top 20 product categories in terms of total Medicare spending from which the items or groups of items for inclusion in the bidding process would be selected for the first phase of the program.
The bid items may vary by competitive bidding areas.
CMS has not yet identified the specific items subject to competitive bidding but indicates that it will conduct bidding for items that are grouped into product categories. Suppliers would be required to submit a separate bid for each item in a product category but would not be required to bid on all categories. Each product category would be comprised of individual HCPCS codes.
Items that would be subject to bidding would be described in "request for bids" (RFBs).
| Bidding |
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CMS would require that suppliers could only be paid for those competitively bid items for which they had won the bid. If a supplier did not win the bid on that item, or did not participate in the competitive bidding program, Medicare would not pay for the bid item. In this case, the supplier would not be allowed to bill the patient, even though Medicare refused to pay.
Physicians who are also DMEPOS suppliers must also submit bids and be awarded contracts in order to furnish items included in the competitive bidding program for the areas in which they provide medical services. Physicians who do not become contract suppliers must use a contract supplier to furnish competitively bid items to their Medicare patients.
Finally, suppliers that are located outside of a competitive bidding MSA would be permitted to submit bids so that they would have an opportunity to participate in the competitive bidding program for that area.
| Evaluating Bids |
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The NPRM sets forth a proposed methodology to evaluate submitted bids to determine a payment amount for competitively bid items. This methodology would assign weights to each bid and would be based on the submitted price along with the supplier's ability to serve Medicare beneficiaries in the area. The sum of each of the supplier's weighted bids for every item in a product category would become the supplier's "composite bid" for that product category.
Composite bids would then be ranked from lowest to highest. CMS would select a "pivotal bid," which would be the point where the expected combined capacity of the bidders is sufficient to meet the expected demands of beneficiaries for items in a product category. All bidders whose composite bid is equal to or less than the "pivotal bid" would be selected as winning bidders. CMS must select at least two bidders in each product category in each competitive bidding area.
| Payment Rules |
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A single payment amount would be established through the competitive bidding process for each item in each competitive bidding area based on the bids submitted and accepted for that item. Medicare would pay 80 percent of the payment amount less any unmet Part B deductible.
If a supplier initially bids at a lower level than what CMS chooses as the final allowable for an item, the supplier will be paid the higher final allowable and will be permitted to rebate the difference between the two amounts to the patient. Suppliers could not publicize rebate opportunities but CMS could.
Medicare proposes that the length of a competitive bidding contract would not exceed three years. The contract period for different product categories in an area could be different.
Medicare also proposes to apply an annual inflation update to payment rates established under the competitive bidding program. The inflation update would be equal to the Consumer Price Index—Urban (CPI-U) for the 12-month period ending with June of the preceding calendar year. This update methodology is the same as the method currently used to update Medicare O&P fee schedule payment amounts.
Finally, Medicare proposes that after January 1, 2009, reimbursement rates established in previous rounds of competitive bidding could be applied in non-competitively bid areas.
| Determining Payment Amounts |
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CMS will determine a single payment amount for each item in each competitive bidding area, based on the bids submitted for that item. Two principles will be applied by CMS when calculating this single payment amount:
- Bid amounts from all winning bidders for an item in a competitive bidding area will be used to set the single payment amount for that item.
- CMS must pay less for each individual item than it would have otherwise paid for that item under the Medicare fee schedule.
CMS evaluated several approaches to setting this payment amount and is proposing to use the median of the supplier bids that are at or below the pivotal bid for each individual item within each product category. If there is an even number of winning bids for an item, CMS will average the two bid prices in the middle of the array of bids.
CMS is also inviting comments on several other more complicated methodologies for setting reimbursement rates. CMS will evaluate all comments received before deciding on an approach to setting the single payment amount.
| Contractor(s) |
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CMS has proposed to contract with one or more competitive bidding implementation contractors (CBICs) to expedite the implementation of the Medicare Competitive Bidding Program. The CBICs would work with the four existing DMACs to enact the program.
Under the proposal, the four DMACs would continue with their current functions, including processing claims, addressing complaints, and providing outreach and education to beneficiaries and suppliers in their respective regions. The CBICs would provide guidance for the DMACs and conduct functions necessary to implement the program such as preparing requests for bids (RFBs), evaluating bids, selecting qualified suppliers, and setting payment amounts for competitive bidding areas.
| Long-term Patients (Grandfathering) |
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A Medicare beneficiary residing in a competitively bid area who requires a competitively bid off-the-shelf orthotic device must receive that device from a contract supplier. Thus, Medicare patients who have an established relationship with an orthotist or prosthetist will not be able to receive competitively bid OTS orthotic devices unless the supplier was selected as a contract supplier. There will be no "grandfathering" for orthotic devices.
| Networking |
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The proposed rule permits suppliers to develop contractual networks to collectively bid to furnish items included in a product category subject to competitive bidding. However, there are a number of requirements that CMS would impose, not the least of which is that the network must not be anti-competitive. In this regard, a network could not exceed 20 percent of market share of competitively bid items.
| Accreditation |
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The proposed rule states that contracts to supply OTS orthoses under the competitive bidding program will only be awarded to suppliers who receive accreditation from an entity to be selected by CMS. CMS intends to phase in the requirement, such that accreditation will eventually be required for all DMEPOS suppliers intending to submit claims to Medicare, not just those who intend to participate in the competitive bidding program.
A grace period may be granted for suppliers who have not had sufficient time to meet the standards and obtain accreditation before submitting a bid. This grace period will be determined by the accrediting organizations' ability to complete the accrediting process within each competitive bidding area. If a supplier does not obtain accreditation by the end of this grace period, CMS will suspend or terminate the contract.
Suppliers that have received accreditation prior to CMS' designation of approved accreditation organizations will be grandfathered, if the accreditation was granted by an organization designated by CMS. Grandfathered suppliers will not need to be re-accredited until their next regularly scheduled accreditation.
| Quality Standards |
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All DMEPOS suppliers will have to comply with new quality standards in order to remain enrolled as Medicare suppliers. The proposed rule does not establish these standards; they will be addressed through separate program instructions. The standards will be applied prospectively and will be published on the CMS Web site. Publication is expected in June; however, an implementation date has not yet been set.
Suppliers who participate in the competitive bidding program will have to meet quality standards before being awarded a contract under the competitive bidding program.
The quality standards will be applied by independent accreditation organization(s) designated by CMS. The quality standards will address suppliers' accountability, business integrity, provision of quality products to beneficiaries and performance management requirements to ensure the development and implementation of policies, procedures and products so that suppliers can maintain compliance with the regulatory requirements.
The standards will include language from current CMS standards and industry best practice standards for:
- Administration
- Financial management
- Human resource management
- Beneficiary services
- Performance management
- Environment and safety
- Beneficiary rights/ethics
- Information management
The quality standards are intended to measure the effect of suppliers' services on beneficiaries and will include requirements for monitoring beneficiary satisfaction with products and suppliers' responses to beneficiary complaints. Finally, the quality standards will include product specific requirements that will focus on a consumer-directed model of service delivery for suppliers to improve beneficiary access to information about DMEPOS.
The standards are being developed with contractor support. Input is being solicited from industry suppliers, national associations and beneficiaries.
| Timeline |
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CMS has included a general timeline for implementation of the competitive bidding program in the proposed rule. This timeline is subject to change and was put forth in the proposed rule to estimate potential savings, costs of implementation and supplier impact.
Under CMS assumptions, it estimates that the first round of competitive bidding will take place in the fall of 2006, bids will be evaluated in 2007 and reimbursement rates for competitively bid items will take effect in October 2007.
| Other Details |
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- Only winning bidders can repair or replace items subject to competitive bidding and a contract provider cannot refuse to repair or replace such items.
- Mergers or purchases of entities that have been selected as contract suppliers do not automatically guarantee continued winning contract status.
- The NPRM outlines a methodology to calculate fee schedule payments for new technology. This issue will be addressed in a subsequent update to be issued by AOPA.
View the entire CMS proposed rule. If you have questions about the Medicare competitive bidding program, please call AOPA's Walter Gorski at (571) 431-0809 or Virginia Torsch at (571) 431-0812.