1. GAMES February 11, 2015 Washington Update CARA BACHENHEIMER, INVACARE CORPORATION 1

2. On Capitol Hill  President’s Budget Proposal Feb 2, 2015  Medicaid rates based on bid rates $4.3B  Face-to-face fix?  Doc fix/SGR expires March 31, 2015  Binding Bids Bills  H.R. 284 & S. 148 (last year’s HR 4920 & S. 2975)  Reps. Tiberi (R-OH) and Larson (D-CT)  Sens. Portman (R-OH) and Cardin (D-MD)  Would require bidders to secure a bid bond prior to submitting bid  Financial vetting!  Other Bid Program Fixes In the Works  Market Pricing Program Demo  Transparency & due process issues 2

3.  Round 1 Re-Compete  9 MSAs  January 1, 2014 – December 31, 2016  Round 2  91 MSAs = 106 CBAs  July 1, 2013- June 30, 2016  Round 2 Re-Compete  July 1, 2016 – December 31, 2018  Contracts will be 2.5 years, not 3 years  Non-Bid Areas – January 1, 2016  Fee schedule rates will be reduced NCB Schedule 3

4. Round 2 Recompete Schedule  Dec 18, 2014 – Registration began  Jan 22, 2015 – 63-day bid window opened  Feb 17, 2015 – Registration closes  Feb 23, 2015 – Covered document review date for bidders to submit financial documents  March 25, 2015 – Bid window closes  July 1, 2016 – Dec 31, 2019  Contract periods will be 2.5 years, not 3 years  Same Geographic Areas, but  90 MSAs due to OMB changes  No bid area will cross state lines→ 117 bid areas  NMO Diabetic supplies to cover all territories 4

5. Product Categories Round 1 RecompeteRound 2Round 2 Recompete Respiratory (oxygen, CPAP, RADS, nebulizers) OxygenRespiratory (oxygen, CPAP, RADs) Standard Mobility (walkers, standard power and manual, scooters & accessories) Standard wheelchairs (power & manual), scooters & accessories Standard Mobility (walkers, standard power and manual, scooters & accessories) General HME (beds, Groups 1 and 2 support surfaces, TENS, commode chairs, patient lifts, seat lifts) Beds and accessoriesGeneral HME (beds, Groups 1 and 2 support surfaces, commode chairs, patient lifts, seat lifts) Enteral NPWT External Infusion PumpsSupport surfaces – Group 2TENS CPAP & RADs Walkers Nebulizers 5

6. CMS Rulemaking Process 1. Application of Bid Rate Information in Non-Bid Areas, and 2. Changes to Bid Program  February 26, 2014  Advance Notice of Proposed Rule  July 11, 2014  Proposed Rule  November 6, 2014  Final Rule  January 1, 2015  Effective Date of New Rules 6

7. Non-Bid Areas – January 1, 2016  Rule establishes methodology CMS will use to reduce rates in non-bid areas, based upon current Round 1 and Round 2 bid rates  CMS divides country into 8 regions  Establish Regional SPAs = average of current Round 1 and Round 2 bid areas SPAs in that region  National ceiling and floor to constrain RSPAs  Ceiling will be 110% and floor will be 90% of average of (state) weighted RSPAs 7

8. Non-Bid Areas – January 1, 2016 8

9.  Phase-In of new RSPA rates  January 1, 2016: rates will be blend of 50% of “old” rate and 50% new RSPA  Starting July 1, 2016: 100% RSPAs  “Rural” areas paid at national ceiling of 110% 9

10. Non-Bid Areas – January 1, 2016  “Rural” = a geographic area represented by a zip code if at least 50% of the total geographic area of the area included in the zip code is estimated to be outside any MSA. A rural area also includes a geographic area represented by a zip code that is a low population density area excluded from a CBA  CMS has not yet identified these areas by zip code, but expect very few 10

11. RSPAs January 1, 2016 & July 1, 2016 CodeCurrent2016 Ceiling R1 NER2 MER3 GLR4 PLR5 SER6 SWR7 RMR8 FW E1390 1-1-16 7-1 -16 178.24 103.38 139.63 101.02 134.21 90.18 134.48 90.71 136.63 95.02 136.57 94.89 136.40 94.56 134.88 91.52 134.72 91.20 E139251.6346.9043.1042.3841.7443.4041.9141.8344.0243.41 E0260 (Bed) 132.3978.3375.6468.7769.2773.6870.8169.4470.2070.57 K073851.6346.9043.1042.3841.7443.4041.9141.8344.0243.41 K000158.2529.2026.8024.8825.3726.2827.7626.4626.8026.68 K0823 K0003 568.89 97.98 315.13 45.03 279.55 40.78 276.66 37.89 280.73 39.58 282.36 40.73 299.65 42.86 280.98 40.06 288.92 41.38 288.94 42.39 11

12. Non-Bid Areas – January 1, 2016  Payment for “low volume” and items in no more than 10 CBAs paid at 110% of RSPAs  Items where only available SPA is from a CBP no longer in effect, paid at 110% of previous SPAs  Accessories included in one or more PCs, paid at weighted average of the SPAs for the item in each bid area  Accessories used with CRT will no longer be paid at higher fee schedule!  “Unbalanced Bidding”  Lower SPAs of “lower” item to SPA of “higher” item (e.g., Group 1 vs Group 2 PMDs) 12

13. Bundling Phase-In  Phase-in of new bundling payment method  In place of current capped rental and purchase payment rules  First phase: up to 12 new bid areas  80 possible MSAs, population of at least 250,000  Next phase: via rulemaking!  Starting with power wheelchairs and CPAP  Proposed Manual WC, beds, oxygen, enteral, RADs too 13

14. Bundling Phase-In  Payment will be on continuous monthly rental basis  No ownership transfer  Bids and SPA will be for monthly rental of equipment, maintenance and servicing, replacement of supplies and accessories 14

15.  Phased-In – starts in up to 12 NEW bid areas  Many Questions! ( e.g., When?)  How many items will be bundled together?  Could be one bundled code for all standard base power chairs, accessories, batteries, etc.  Could keep base codes separate, and bundle in for each base everything else  CMS will provide “advance notice” of details 15 New Bundling Payment Method

16. NCB New Rules  Phase-In of New Repair Rule  In up to 12 (new) CBAs, under current rental rules, bidders will factor into bids costs of repair and maintenance services after ownership transfers, until medical need ends, 5 years, or beneficiary moves outside CBA - during contract period  Limited to items you originally furnished  Not responsible for repairing items someone else provided  Doesn’t address most of the problem 16

17. Audits – Air Act  Audit Improvement and Reform Act (AIR)  H.R. 5083 introduced by Representatives Renee Ellmers (R-NC) and John Barrow (D-GA) on 7/11/14  Designed to increase transparency, education and outreach and reward DMEPOS providers with low error rates on audited claims  Will apply to all MACs, RACs and other contractors performing audits on DMEPOS providers  www.FixMedicareAudits.org  Copy of legislation, issue brief and how to support the bill 17

18. Audits – Air Act  Restore clinical inference and judgment when evaluating audits. Will significantly reduce error rates  Require reporting of error rates on audited claims after adjustment for those audited claims that have been overturned on appeal  Require audit contractors to establish an education and outreach program to help providers better understand the regulations and how to document medical necessity for Medicare patients. Funding for these programs will come from 25% of recoupments  Allow HHS to ensure that all suppliers are audited at least once every two years and those with low error rates can be excused from some or all audits during that two year period. DMEPOS suppliers with a 15% or below audited clams error rate will be subject to only 1 claim audit a year 18

19. Audits – Air Act  Require Medicare Contractor transparency and reporting  Limit documentation review periods to 3 years for all Medicare audits  For reoccurring claims, the Secretary shall toll the timely claim filing limits so DMEPOS suppliers are not prohibited from taking an audited claim through the entire appeals process on the basis that the timely claim filing limits have expired 19

20. PMD Prior Authorization Demo  Current program began September 1, 2012  3 year program – Ends August 31, 2015  Began in 7 states (CA, FL, IL, MI, NC, NY, TX)  47% of PMD claims  Monthly expenditure decrease of $20M to $9M in non-demo states, vs $12M to $4M in demo states  Oct 1, 2014, 12 more states: AZ, GA, IN, KY, LA, MD, MO, NJ, OH, PA, TN, WA 20

21. PMD Prior Authorization Demo  “Reduce improper payments for PMDs”  Reduce the “pay and chase” method  Process to allow suppliers to know if Medicare coverage criteria are met for the PMD before delivery  Review of beneficiary’s medical condition and documentation to determine if existing coverage guidelines are met  http://www.cms.gov/Research-Statistics-Data- and-Systems/Monitoring-Programs/Medicare- FFS-Compliance-Programs/Medical- Review/PADemo.html 21

22. PMD Prior Authorization Demo  All power operated vehicles (K0800–K0802; K0812)  All standard power wheelchairs (K0813–K0829)  All Group II complex rehab power wheelchairs (K0835–K0843)  All Group III complex rehab power wheelchairs without power options (K0848–K0855)  Group III complex rehab chairs with power options (K0856–K0864) are excluded  All pediatric power wheelchairs (K0890–K0891)  Miscellaneous power wheelchairs (K0898) 22

23. PMD Prior Authorization Demo  PA is required for all power wheelchairs  Non-compliance results in 25% payment reduction and automatic pre-payment review  PA is not required for claims submitted with GA, GY or EY modifiers (not medically necessary or non-covered)  Required documentation  F2F examination  Seven-element order  Detailed product description  Relevant and necessary clinical information 23

24. PMD Prior Authorization Demo  Medical Review reviews and issues decision  Affirmative decision  (14-digit unique tracking number – UTN)  Non-affirmative decision  Rejection  Decisions are sent to the supplier, patient and physician  Initial requests  Post mark notification within 10 business days from initial request  Resubmitted requests  Post mark notification within 20 business days from request  No limit on number of resubmissions 24

25. Face-to-Face Exam for DME  Final rule in November 16, 2012 Federal Register.  Requires a physician or other practitioner “face-to- face” exam prior to ordering certain DME.  Originally effective for new orders July 1, 2013  CMS delayed enforcement until October 1, 2013  Delayed again until sometime in 2014 (09/09/13)  WOPD requirement enforced beginning on January 1, 2014  Doctor, PA, NP, or CNS – LEGISLATIVE CHANGE?  Doctor must document and communicate to the DME supplier that the Doctor, PA, NP or CNS did a F2F.  F2F must occur within 6 months prior to the order. 25

26. Face-to-Face Exam for DME  F2F must include a needs assessment, evaluation and/or treat the beneficiary for the medical condition that supports the need for the DME ordered  F2F must be documented in the medical record  CMS “discourages” the use of templates  Physician must sign  Or co-sign the medical record when done by a NP, PA, or CNS  A signed order does not satisfy this requirement  Other signature requirements (legibility) apply 26

27. Face-to-Face for DME  For items that do not require a written order prior to delivery, suppliers are allowed to dispense DME to the beneficiary based upon a verbal order  BUT the supplier must have the written order before submitting claim  For items that do require written order prior to delivery, supplier must have the written order, with face-to-face documentation, prior to delivery and when submitting claim 27

28. Face-to-Face for DME  Supplier must maintain the written order and supporting documentation and make available to CMS upon request for 7 years  Beneficiaries discharged from the hospital do not require a separate F2F encounter, as long as the physician or treating practitioner who performed the F2F in the hospital issues the DME order within 6 months after the date of discharge 28

29. Face-to-Face for DME  Minimum elements for the order:  Beneficiary's name  Item of DME ordered  Prescribing practitioner NPI  Signature of the prescribing practitioner  The date of the order  Removed beneficiary diagnosis and usage instructions 29

30. Face-to-Face for DME E0185E0297E0464E0656E0748E0969E1008E1237 E0188E0300E0470E0657E0749E0971E1010E1238 E0189E0301E0471E0660E0760E0973E1014E1296 E0194E0302E0472E0665E0762E0974E1015E1297 E0197E0303E0480E0666E0764E0978E1020E1298 E0198E0304E0482E0667E0765E0980E1028E1310 E0199E0424E0483E0668E0782E0981E1029E2502 E0250E0431E0484E0669E0783E0982E1030E2506 E0251E0433E0570E0671E0784E0983E1031E2508 E0255E0434E0575E0672E0786E0984E1035E2510 E0256E0439E0580E0673E0840E0985E1036E2227 E0260E0441E0585E0675E0849E0986E1037K0001 E0261E0442E0601E0692E0850E0990E1038K0002 E0265E0443E0607E0693E0855E0992E1039K0003 E0266E0444E0627E0694E0856E0994E1161K0004 E0290E0450E0628E0720E0958E0995E1227K0005 E0291E0457E0629E0730E0959E1002E1228K0006 E0292E0459E0636E0731E0960E1003E1232K0007 E0293E0460E0650E0740E0961E1004E1233K0009 E0294E0461E0651E0744E0966E1005E1234K0606 E0295E0462E0652E0745E0967E1006E1235K0730 E0296E0463E0655E0747E0968E1007E1236 30

31. Resources & Information dmecompetitivebid.com Invacare’s Washington Updates & Policy & Funding Sections on the Web www.invacare.com (click on Invacare Homecare) cbachenheimer@invacare.com 31

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