DME providers bracing for competitive bidding

July 10, 2006

Home care providers should be prepared to make changes in the way they do business now that the Centers for Medicare & Medicaid Services has published a proposed regulation that would implement competitive bidding programs for certain covered items of durable medical equipment, prosthetics, orthotics, and supplies (DMEPOS). The proposed rule appeared in the May 1 Federal Register.

Home care providers should be prepared to make changes in the way they do business now that the Centers for Medicare & Medicaid Services has published a proposed regulation that would implement competitive bidding programs for certain covered items of durable medical equipment, prosthetics, orthotics, and supplies (DMEPOS). The proposed rule appeared in the May 1 Federal Register.

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.

Competition under the program would be phased in beginning in 2007 in 10 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 territories and regions 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 proposed that the Chicago, Los Angeles, and New York City MSAs would be excluded from competitive bidding in 2007.

Commenting on the proposed rule, Michael Reinemer, VP of communications and policy for the American Association for Homecare (AAHomecare), told Drug Topics that the home care industry is concerned that the competitive bidding program may have a negative impact on patients' health.

The National Association of Chain Drug Stores also expressed concern about the impact of the program on patients' health. A recent study available from NACDS, conducted by Health Policy R&D, found that Medicare beneficiaries with diabetes may be adversely affected if blood glucose monitors and related testing supplies are included in the competitive bidding program.

Mary Ann Wagner, NACDS senior VP, pharmacy, policy, and regulatory affairs, said these findings should raise some red flags for Medicare administrators. "CMS needs to be aware that competitive bidding for blood glucose meters and related supplies under Medicare Part B could potentially do more harm than good for beneficiaries by denying access to their community pharmacist," she said.

AAHomecare is also concerned about the effect that the competitive bidding program may have on small providers. "The program is designed to push providers out of the market if they don't meet the bid price," said Reinemer.

Pointing out that there is still uncertainty as to which MSAs CMS will launch the program in, Reinemer said, "It will be a complicated program to implement anywhere. The larger cities make the task even more complex."

Although CMS has not fully specified the items that will be subject to competitive bidding, Reinemer said, "We still expect it will be the ones that have high usage or are associated with higher costs, such as medical oxygen therapy and equipment and power wheelchairs, especially the customized ones that have a lot of features."

Worried about the fate of small providers, Reinemer said, AAHomecare supports the Hobson-Tanner Bill (H.R. 3559), which would exempt smaller, rural areas with populations under 500,000. It would also allow all qualified providers that are small businesses and that submit bids below the current allowable to participate at the selected award price.

Reinemer said AAHomecare is urging CMS to put quality standards in place and to identify the accrediting bodies that will oversee these standards before the program begins.