A Closer Look at Competitive Bidding
By Walter Gorski

In April, the long-awaited proposed rule outlining many details of the Medicare competitive bidding program and its new mandatory accreditation requirements was published by Medicare.

While most of us have a general understanding of the program from reading this column or the detailed AOPA summary on AOPA’s Web site, Medicare’s proposal puts some “meat on the bones” that will allow us to better understand and plan how to adapt to this new environment.

Where will it begin?

According to the proposed rule, the competitive bidding program would be phased in over the course of several years, establishing competitive bidding in 2007 in 10 of the largest metropolitan statistical areas. (See sidebar, “Top 25 MSAs Based on Medicare Data for 2003.”)

A metropolitan statistical area (MSA) is an area comprised of a core city and its economically and geographically dependent suburbs. An additional 80 MSAs would be added in 2009, with further expansion coming in subsequent years.

It is important to note that an MSA can be a fairly large area in geographic terms. For example, the Detroit MSA encompasses a large part of southeastern Michigan. So, while you may not think you reside within an MSA selected for competitive bidding, it will be important to check whether or not you do.

Competitive bidding areas will be chosen based on their potential for savings, using a formula that ranks MSAs on a combination of their average Medicare charges per beneficiary and the number of suppliers per beneficiary.

The three largest urban areas (New York, Los Angeles and Chicago) will not be included in the initial rollout of the program but are expected to be included in 2009. CMS proposes to include at least one area from each DMAC region in 2007, with no more than two competitive bid locations from any one state.

What will be competitively bid?

Unfortunately, the proposed rule does not specifically identify which items and services will be subject to competitive bidding. It does, however, provide a definition of what will be considered an off-the-shelf (OTS) orthosis, which could be subject to competitive bidding.

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 also indicates that items with the highest potential for savings or high or rapidly increasing allowed charges will be targeted.

Items to be included in the program will be bundled together with other similar products and services to create product categories for bidding purposes.

For the first phase of the program, Medicare proposes to identify the top 20 DMEPOS product categories (for example, some product categories are wheelchairs, hospital beds and lower-limb orthoses) in terms of total Medicare spending for inclusion in the program. It is unclear if off-the-shelf orthoses will meet this criterion for the initial round of competitive bidding.

AOPA and other members of the Orthotic & Prosthetic Alliance (ABC, the Academy and NAAOP) will be working diligently with Medicare officials to determine what orthotic devices meet the legislatively established definition of OTS and press for their exclusion from competitive bidding based on the limited amount of savings that will be achieved through a competitive bidding system.

What happens next?

Once the competitive bidding program takes effect, Medicare will pay only for competitively bid items if the supplier has submitted a bid and been selected as a contract supplier for those items.

Suppliers who failed to win a contract, or who chose not to submit a bid, will not be paid by Medicare or be allowed to bill Medicare patients for competitively bid items.

Suppliers who want to provide an item that is part of a product category selected for competitive bidding will be required to submit bids for each item in that category. Bids will be evaluated based on both the prices submitted and the ability of the supplier to meet the supply needs in the MSA.

The law requires that at least two suppliers be selected for each competitive bidding area, with special attention given to small businesses.

Physicians and other providers who bill the DMACs for DMEPOS items and services will be subject to competitive bidding requirements; doctors providing competitively bid items to Medicare patients will have to either submit bids and be selected to supply those items or use a contract supplier to furnish them.

Mandatory accreditation and quality standards

Whether or not an O&P facility makes the business decision to participate in competitive bidding, Congress is requiring that all suppliers of DMEPOS be accredited. This requirement will be phased in over time, first starting in those areas subject to competitive bidding.

The proposed rule includes a grace period for suppliers in competitively bid areas who are unable to complete the accreditation process prior to submitting a bid. Contracts awarded to suppliers who do not complete accreditation by the end of the grace period will be terminated.

Suppliers who have already been accredited by an approved accreditation organization will be grandfathered in, provided that the accreditation organization is one of those selected by CMS. Grandfathered organizations will not need to seek re-accreditation until regularly scheduled to do so.

The accreditation organizations designated by CMS will be responsible for administering the new quality standards, which were expected to be published in June. Based on the draft standards published last year, the standards will take into account the supplier’s responsiveness to beneficiary needs, business integrity, quality of care and performance management, among other things.

Any suppliers wishing to submit bids under the competitive bidding program will be required to be in compliance with the standards before they are awarded a contract.

Timeline

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 an effort to estimate potential savings, costs of implementation and determine supplier impact as required by law.

Under CMS’ assumptions, the first round of competitive bidding could begin as soon as the fall of 2006. CMS would then evaluate bids in 2007 and establish reimbursement rates for competitively bid items in October 2007.

AOPA takes action

In June, AOPA provided comments to CMS on the proposed rule as part of the newly formed Orthotic & Prosthetic Alliance.

Our comments addressed two concerns for O&P businesses. First, we want to ensure that CMS selects appropriate OTS devices subject to competitive bidding, thereby allowing small businesses to compete on a level playing field with other providers and suppliers. Second, we want the details of the program to be implemented properly so patient care is not disrupted.

AOPA will highlight various aspects of competitive bidding in future “Reimbursement Page” columns. Also, at the AOPA National Assembly, AOPA staff experts will tell you what you need to know in order to survive in the competitive bidding marketplace.

To learn more about Medicare competitive bidding, call AOPA’s Walter Gorski at (571) 431-0809 or review the detailed competitive bidding summary found on AOPA’s Web site at www.AOPAnet.org.

Walter Gorski is the director of legislative and regulatory affairs for the American Orthotic & Prosthetic Association (AOPA). Through government relations efforts, AOPA works to influence policies affecting the future of the O&P profession. Questions? Call (571) 431-0809 or visit www.AOPAnet.org.