Mark J. Higley, VP, Regulatory Affairs The “New” Competitive Bidding: Proposed Rule and Other Positive Changes Presented by: Jeffrey S. Baird, Esq. Brown & Fortunato, P.C. & Mark J. Higley, VP, Regulatory Affairs VGM Group, Inc.

Lead Item Pricing

Lead Item Pricing CMS proposes that some product categories need to be split into multiple product categories, including (i) general hospital equipment, (ii) respiratory equipment, and (iii) standard mobility equipment.  DME stakeholders agree. It is important to develop product categories that ensure commonality of products in a single “pricing group.” This is necessary to avoid skewed pricing. Grouping common products ensures that patients can receive items they need from a single supplier. Accessing products from multiple suppliers is a problem for beneficiaries.

Lead Item Pricing A product category will include the base equipment, accessories, and complimentary supporting products.  Because of varying margins, differing delivery times, and different service cost structures, some product categories should be subdivided with a unique lead item for each subcategory.  The SPA for the lead item will be used to establish SPA rates for other items in the subcategory.  The composite bid for the entire product category would be determined by summing the weighted value of each subcategory. It is important to note that not all product categories will have subcategories. 

Lead Item Pricing Standard Mobility Product Category 139 HCPCS Codes. Broad array of base equipment, accessories, and complimentary items. Recommend that mobility equipment category be divided into two product categories with corresponding subcategories: (i) manual wheelchair bases, options and accessories, and seating, and (ii) power wheelchair bases, options and accessories, and seating. 

Lead Item Pricing Standard Mobility Product Category Two product categories.... DME stakeholders recommend that walkers be removed from the mobility category and be moved to the category that includes beds. In determining expenditure totals for options, accessories and seating systems related to a specific mobility bid category, it will be necessary to determine what portion of the item’s expenditures are associated with the specific wheelchair bases included in that category.

Lead Item Pricing Standard Mobility Product Category Two product categories.... There is a need for new HCPCS Codes. DME stakeholders recommend that CMS create new HCPCS Codes to identify whether the options or accessories are used on a manual or power wheelchair. Alternatively, CMS should create a modifier to identify accessories and options used with power wheelchairs.

Lead Item Pricing Standard Mobility Product Category Two product categories.... Stakeholders suggest that CMS exclude repair items and services from competitive bidding. Doing so will ensure access to the repair items and services. This would impact 42 of the 139 mobility HCPCS codes, leaving 97 in competitive bidding Due to low SPAs for items used in repairs, there have been access issues regarding repair services. Stakeholders recommend that repairs be paid under the 2015 fee schedule. 

Maximum Winning Bid

Maximum Winning Bid DME stakeholders support CMS’s proposal to change the methodology for calculating the SPA. Under the change, the SPA for the lead item in each product category or subcategory would be based on the maximum or highest amount bid for the item by suppliers in the winning range.  Stakeholders recommend that nebulizers be removed from the competitive bidding program. 

Maximum Winning Bid CMS proposes that bids from small suppliers that are “only awarded [a] contract in order to help meet the small supplier target would not be used to determine the maximum winning bid because these contracts are awarded after the SPAs are established.” DME stakeholders disagree. The CMS proposal results in the same problem as the median pricing method. In establishing SPAs, all bids (including those from small suppliers) should be considered. Additionally, CMS should recalculate the SPAs after additional suppliers are awarded competitive bid contracts. This is consistent with the premise that no supplier be paid less than its bid.

Maximum Winning Bid Less information will be provided under the lead pricing methodology. Therefore, stakeholders recommend that measures be implemented to ensure that bidders submit bona fide bids. Bidders need to be educated that the price for the lead items must translate into sustainable prices for non-lead items in the product category.  CMS should assess all non-lead items to ensure that prices for non-lead items result in bona fide prices. 

Capacity Determination and Calculating Expected Beneficiary Demand

Capacity Determination and Calculating Expected Beneficiary Demand Instead of evaluating bids submitted for items within a product category and calculating expected beneficiary demand for items in a product category, CMS proposes to calculate expected beneficiary demand and supplier capacity based on the lead items in the product category when evaluating bids. Stakeholders recommend that the actual historical capacity of a supplier be used in evaluating supplier capacity. The historical capacity should not be adjusted by CMS.

Capacity Determination and Calculating Expected Beneficiary Demand Stakeholders recommend that CMS should not include capacity associated with inexperienced bidders, both in terms of product category and geography. It is recommended that CMS use historical utilization of items making up at least 120% of total expenditures for lead items. This will provide better assurance of beneficiary access.

Subdividing Larger CBAs

Subdividing Larger CBAs In the proposed rule, CMS is asking for comments on splitting some of the large CBAs into smaller CBAs. Some CBAs are more appropriate than others to subdivide. Each CBA is unique. In deciding whether or not to subdivide a CBA, CMS should consult with local DME suppliers.

Additional Recommendations

Additional Recommendations A permanent Auction Expert and Auction Monitor should be appointed. There should be permanent stakeholder input (DME suppliers, manufacturers, physicians, beneficiaries, etc.).  There should be uniform payment rules for transitioning competitive bid beneficiaries. Different rules apply for contract suppliers that accept beneficiaries from other contract suppliers...as opposed to accepting beneficiaries from non-contract suppliers. Stakeholders recommend that contract suppliers that accept beneficiaries (who change suppliers) receive additional rental payments, regardless of whether the beneficiary is switching from a contract or non-contract supplier.

Additional Recommendations There needs to be an improvement in transparency. CMS should articulate the standards and criteria used to select winning bidders. Stakeholders recommend that bidders have a state Medicaid provider number. This will ensure that the winning bidders can take care of dual eligible beneficiaries. This also shows that the bidder meets state licensure requirements.  CMS’s authority to move forward with CPAP and standard power mobility devices bundled payments should be removed.  CMS proposes to require a supplier to forfeit its bid bond if the supplier’s bid for the lead item is at or below the median of all bids in the product category and the supplier does not accept the competitive bid contract. Stakeholders support this proposal. Setting the point at the median rather than the maximum bid amount will target “low ball bidders.”

Payments in Former CBAs During Gap Period

Payments in Former CBAs During Gap Period Competitive bidding will not be in force for approximately 24 months beginning 1/1/19. This approximate 24 month period will be known as the “gap period.” During the gap period, stakeholders urge CMS to increase payment levels in former CBAs beyond the SPA + inflation increase.  “Any willing supplier” will prevail during the gap period. This will result in a large number of suppliers serving beneficiaries. As such, the fundamental tenet of competitive bidding - fewer suppliers resulting in increased volume - will not exist. As such, it is suggested that payment levels be set at the SPA plus CPI-U increases from 2013 to 2018.

Payments in Former CBAs During Gap Period CMS proposes to pay for mail-order diabetic supplies at the SPA plus the inflation increase for the preceding 12 months...with an additional increase at the end of each 12 months thereafter.  CMS proposes to pay for non-mail order at the current SPA. Stakeholders disagree. Stakeholders recommend an inflation adjustment for non-mail order diabetic supplies. 

Rural/Non-Contiguous Areas

Rural/Non-Contiguous Areas CMS proposes to extend the 50-50 blended rates in rural/non-contiguous areas. Stakeholders agree.

Non-Rural/Non-CBA

Non-Rural/Non-CBA CMS asks if it should extend the same 50-50 blended rates to non-CBAs that do not meet the definition of “rural” or “non-contiguous.” Industry stakeholders say “yes.” Extending the 50-50 blended rates to all non-CBAs is consistent with Congressional intent. For example, in the 21st Century Cures Act, the retrospective payment relief was for all non-CBAs. That is, the retrospective payment relief was for all non-CBAs (i.e., not limited to rural/non-contiguous). 

Non-Rural/Non-CBA CMS admits that the median price does not establish financially sustainable rates in the CBAs. Therefore, it makes no sense to use the median price in non-rural/non-contiguous areas. There are many supplier closures in non-CBAs. The problem is the same in (i) rural areas, (ii) non-contiguous areas, and (iii) remaining non-CBAs. 

Non-Rural/Non-CBA HR 4229 has 155 House co-sponsors. This provides payment relief to DME suppliers in all non-CBAs, not just those in rural and non-contiguous areas.  In a letter to CMS from the West Virginia Congressional delegation, the delegation pointed out that West Virginia lost 38% of its DME suppliers over the last two years. The letter says that the CMS definition of “rural” is unrealistic. According to the letter, the CMS definition of “rural” should mirror rural classifications for rural clinics and critical access hospitals.  Access issues go way beyond “rural” and “non-contiguous.”

2016 Regulatory Changes

2016 Regulatory Changes Back in 2016, CMS published three regulatory changes that remain a positive for the DME industry. Bid Bond - A bidding supplier must obtain a $50,000 bid surety bond for each CBA in which the supplier is submitting a bid. The bidder must submit proof of the bond by the deadline for the bid submission.

2016 Regulatory Changes If (i) the bidding supplier is offered a contract for any product category in a CBA, (ii) the bidding entity’s composite bid is at or below the median composite bid rate for all bidding entities included in the calculation of the SPA, and (iii) the bidding supplier does not accept the contract offered, the supplier’s bid bond for the applicable CBA will be forfeited and CMS will collect on the bid bond. If the forfeiture conditions are not met, the bond liability will be returned to the bidding entity. Bidding suppliers that provide a falsified bid bond will be prohibited from participation in the competitive bid program for the current and next round of bidding. Bidding suppliers that provide a falsified bid surety bond will also be referred to the Office of Inspector General and Department of Justice.

2016 Regulatory Changes Positive regulatory changes.... Expansion of Appeal Rights - The appeals process is expanded for suppliers that have been sent a notice of a breach of contract stating that CMS intends to take one or more actions as a result of the supplier’s alleged breach of the competitive bid contract.  Establishing Bid Limits - Prior regulations required that suppliers submit bids that are lower than the amount that would otherwise apply...in other words, bids that are lower than the fee schedule amount.  Beginning in 2016, the fee schedule amounts were adjusted based on information from, and prices set through, the competitive bidding program. CMS indicated in a previous rule that the adjusted fee schedule amounts would become the bid limits for future competition.

2016 Regulatory Changes Positive regularity changes... Establishing Bid Limits.... In response to concerns that suppliers would not be able to bid below the adjusted fee schedule amounts as those amounts continue to decline, CMS revised its prior rule to set the bid limit for future competitions at the fee schedule amounts that would apply if the competitive bidding program had not been implemented and that existed before making adjustments to the fee schedule amounts using information from the competitive bidding program.

Mark J. Higley, VP, Regulatory Affairs THE END Jeffrey S. Baird, Esq. Brown & Fortunato, P.C. jbaird@bf-law.com 806-345-6320 Mark J. Higley, VP, Regulatory Affairs VGM Group, Inc. mark.higley@vgm.com 888-224-1631

The “New” Competitive Bidding: Proposed Rule and Other Positive Changes Medtrade – 10/15/18 2DN2205.PPT