CMS Issues Proposed Competitive Bidding Rule

The Centers for Medicare & Medicaid Services (CMS) issued a proposed rule April 24 aimed at improving Medicare's payments for certain durable medical equipment, prosthetics, orthotics, and supplies (DMEPOS) through a new competitive acquisition program.

The American Orthotic & Prosthetic Association (AOPA) said it is pleased that CMS "has crafted a narrow definition of the off-the-shelf (OTS) orthoses that could be subject to a competitive bidding program." The proposed rule was published in the May 1 Federal Register. Comments will be accepted until June 30, and a final rule will be issued later this year, CMS said. AOPA will be commenting on the proposed rule as part of the Orthotic and Prosthetic Alliance recently established among four major O&P organizations.

AOPA explained that under the definition included in the proposal, OTS devices will be limited to those that "require minimal self-adjustment for appropriate use and do not require expertise in trimming, bending, molding, assembling, or customizing to fit the individual." CMS goes on to propose that "minimal self-adjustment" would mean adjustments that a beneficiary, caregiver, or supplier can perform without the assistance of a certified orthotist, AOPA pointed out. A certified orthotist is defined by CMS as someone certified by either the American Board for Certification in Orthotics and Prosthetics Inc. (ABC) or the Board for Orthotist/Prosthetist Certification (BOC).

"The approach recommended by CMS is a giant leap toward improving the quality of care available to Medicare beneficiaries who require orthotic and prosthetic services and will reduce opportunities for fraud and abuse by unscrupulous Medicare providers," said AOPA president Walter R. Racette, CPO. "It also further differentiates O&P from durable medical equipment and recognizes that the provision of comprehensive O&P care requires a level of clinical knowledge and expertise unique to a certified practitioner. AOPA has been a long-time proponent of each of these positions."

"It is clear that this proposal will be strongly challenged by other interests, yet AOPA and its partners in the Orthotic and Prosthetic Alliance will work diligently to see that the proposal remains intact in the final regulation that will be issued by Medicare later this year," added AOPA Executive Director Tyler Wilson.

AOPA commented, "Had such an approach been in place sooner, it is possible that some of the most egregious examples of fraud relating to O&P, including the 2004 Florida case in which 21,000 prostheses were paid for by Medicare at a cost of more than $120 million of taxpayer dollars, could have been prevented. (Editor's note: For more information on this fraud case, visit www.oandp.com/edge/issues/articles/NEWS_2005-05-11_01.asp)

AOPA stated, "With the publication of the NPRM, AOPA sees the longtime efforts of the association and the other members of the Orthotic and Prosthetic Alliance coming to fruition."

The new competitive acquisition program is required by the Medicare Modernization Act of 2003 (MMA) and would replace the current DMEPOS fee schedule payment amounts for selected items in select areas, CMS explained.

CMS has discretion under the law to first phase in DMEPOS items for bidding based on high cost and volume or largest savings potential. Suppliers in a competitive bidding area would submit bids for selected items, and CMS would use these bids to establish Medicare payment amounts for these items. Under the proposed rule, the Medicare payment amounts would be the median of the winning suppliers' bids for selected items. Suppliers whose bids are lower than the Medicare payment amounts set under the competitive bidding program could offer a rebate to beneficiaries, lowering their costs for acquiring the DME items they need. Within five years of implementing the competitive bidding programs, savings to taxpayers are expected to exceed more than $1 billion annually, CMS said.

Competition under the program would be phased in beginning in 2007 in ten of the largest metropolitan statistical areas (MSAs), in 80 of the largest MSAs in 2009, and in other areas after 2009. Areas that may be exempt from competitive acquisition of DMEPOS include rural areas and areas with low population density within urban areas that are not competitive, unless there is a significant national market through mail order for a particular item or service. CMS proposes that for 2007, the New York City, New York; Los Angeles, California; and Chicago, Illinois MSAs would be excluded from competitive bidding.

Proposal Includes Implementing New Quality Standards

This proposed rule also details CMS' process for implementing new quality standards and the application process for organizations that would accredit all DMEPOS suppliers, including those who would participate in the DMEPOS competitive bidding program. CMS will establish the quality standards through program instructions. The standards will be applied prospectively and will be published on the CMS website this spring.

All suppliers must be accredited by an approved accreditation organization to ensure they meet applicable quality standards. Failure to meet those standards can result in the revocation or suspension of billing privileges and the inability to participate in the competitive bidding program, CMS noted.

In developing this proposal, CMS said it relied on experiences gained during DMEPOS competitive bidding demonstrations conducted from 1999 through 2002. CMS also considered advice from the Program Advisory and Oversight Committee (PAOC) established by the MMA to provide advice on the competitive acquisition program and related issues. The PAOC members were appointed by the Secretary of Health and Human Services and represent a broad mix of relevant industry, consumer, and government partners.

The recently enacted Deficit Reduction Act of 2005 (DRA) changed the way Medicare pays for oxygen equipment and certain rented DMEPOS items. This proposed rule is consistent with the DRA changes, which will be fully implemented in future rulemaking, CMS explained.

In addition to the DMEPOS competitive acquisition program, the proposed rule includes a new fee schedule for home dialysis supplies and equipment that are still paid on a reasonable charge basis, clarification of CMS policy on the scope of the statutory eyeglass coverage exclusion, and implementation of a revised methodology for calculating fee schedule amounts for new DMEPOS items.

The proposed rule can be viewed at: www.cms.hhs.gov/CompetitiveAcqforDMEPOS/downloads/cms1270p_dme.pdf