Competitive Bidding

Congress Must Stop Drastic Cuts to DME Items in Rural & Non-Bid Areas

Background

110 of the largest, most densely populated MSAs in the country currently participate as Competitively Bid Areas (CBAs) in the Competitive Bidding Program (CBP) for DMEPOS (Durable Medical Equipment, Prosthetics, Orthotics, and Supplies). These CBAs are home to 58% of all Medicare beneficiaries in the nation.

Under the CBP, durable medical equipment (DME) suppliers, often called home medical equipment (HME) suppliers, compete for a limited number of contracts to serve Medicare beneficiaries residing in these CBAs through an auction program that awards contracts to those with the lowest bid amounts, resulting in a drastic reduction in competition for suppliers and opportunity to increase market share. Nearly 75% of bids submitted to care for the entire Medicare population in these respective CBAs were not contracted, leaving a small fraction of suppliers to meet the needs of this large group of beneficiaries.
On October 31st, 2014, the Centers for Medicare & Medicaid Services (CMS) released the final rule on “Medicare Program: End-Stage Renal Disease Prospective Payment System, Quality Incentive Program, and Durable Medical Equipment, Prosthetics, Orthotics, and Supplies”, which established the methodology for making national price adjustments to the fee-for-service payments of specified HME, enteral nutrition, & related services paid under fee schedules.

On January 1, 2016, CMS began the first phase of a two part reimbursement adjustment that applies pricing derived from these highly populated CBAs to all areas of the country without exception for rural America. Bid areas like Atlanta and Los Angeles set prices for rural and non-urban areas in spite of non-bid areas not having the opportunity to submit pricing to account for unique costs of accessing and caring for beneficiaries in these areas. On July 1, 2016, the prices were fully phased in, slashing Medicare reimbursement by over 50% on average.

How CMS is Implementing Pricing Nationwide

For qualified HME items, the final rule phased in a new reimbursement rate for non-CBAs over 6 months that began January 1, 2016. CMS divided up the continuous 48 states into eight distinct regions. An unweighted average of all of the Single Price Amounts (SPAs) from high population CBAs within each region were used to determine the Regional Single Price Amount (RSPA) for each affected product.

Claims with dates of service from January 1, 2016 through June 30, 2016 were based on 50 percent of the un-adjusted fee schedule amount and 50 percent of the RSPA adjusted fee schedule. On July 1, 2016, reimbursement rates became 100% of the RSPA adjusted fee schedule amount based on pricing from new Round Two ReCompete bid area prices effective July 1. The following are examples of these drastic cuts, by HCPCS code:

K0003 (standard wheelchair), MidEast region
2015 rate: $93.40 - Jan. 2016 rate: $65.64 (-30%) - July 2016 rate: $30.85 (-67%)

E0601 (CPAP), Rocky Mountain region
2015 rate: - $101.03 - Jan. 2016 rate: $73.33 (-27%) - July 2016 rate: $39.74 (-61%)

K0823 (standard PMD) New England  region
2015 rate: $577.42 - Jan. 2016 rate: $427.33 (-26%) - July 2016 rate: $256.22 (-56%)

E1390 (O2 concentrator), Far West region
2015 rate: $180.92 - Jan. 2016 rate: $135.82 (-25% - July 2016 rate: $74.4 (-59%)

E2402 (NPWT Pump) Great Lakes
2015 rate: $1,642.09 - Jan. 2016 rate: $1,221.13 (-26%) - July 2016 rate: $653.13 (-60%)

E0143 (walker with wheels), SouthEast region
2015 rate: $107.19 - Jan. 2016 rate: $80.01 (-25%) - July 2016 rate: $48.46 (-55%)

The RSPAs are still bound to a national average that cannot vary more than 10% above or below the combined, unweighted average of all RSPAs in the country. As such, any area with a RSPA that is greater than 110% of the national average will be adjusted downward. Further, even the most remote, rural areas will be bound to the national ceiling or 10% above the RSPA at CMS’ discretion even though costs may far exceed that of the high-population CBAs of which the prices were derived.

The Risk to Rural America

The first phase of implementing these new payment rates, set by applying CMS’ flawed competitive bidding process to non-CBAs, took effect January 1, 2016. Six months is not enough time to monitor disruption in Medicare beneficiaries’ access to the HME items they need. Implementing the second phase on July 1, 2016 only exacerbated complications and beneficiary harm.  See selected stories on how the bidding program is affecting providers and patients nationwide.

  • Rural America has unique attributes that have distinct costs that differ from their urban counterparts. The HME Industry has convincing data that indicates providing DME items in rural areas have higher costs in order to access, care for, and support non-urban and rural beneficiaries, which are not accounted for in the RSPAs, such as:
    • Employee time, fuel costs, and mileage to drive to the beneficiary’s residence
    • Widely ranging geological and road characteristics that could require specialty vehicles, including 4-wheel drive, ATVs, tractors, snowmobiles, ferry coordination, and more
    • Sparsely populated areas that don’t offer the same routing efficiencies as dense urban areas
  • Suppliers in non-CBAs do not have economies of scale to offset the drastic payment cuts. In CBAs, suppliers try to offset the significant payment cuts through increased volume of beneficiaries while supplementing payments with serving markets outside the CBA. However, under this forthcoming mandate to expand the program nationally, suppliers in non-CBAs will receive the same drastic payment cuts set in CBAs, without exclusive contracts and increase in volume of business or the ability to compensate with higher rates outside of the CBA.
  • Without adequate funding, many suppliers are forced to stop taking assignment, leaving beneficiaries to shoulder expenses up front out of pocket. This is creating a two-tier system for Medicare beneficiaries; those who can afford to personally gap-fill and compensate for the severe underfunding by Medicare of essential HME, supplies, and services, and those who go without. Further jeopardizing beneficiary access to care, trusted HME companies across rural and non-bid America now report making significant changes to their business model as result of Medicare reimbursement falling below suppliers’ costs, such as changing delivery and service policies, reducing product offerings, closing branch locations, and/or shuttering their businesses entirely.

Past Congressional Action

Both the House and Senate recognized the serious risk and detrimental impact these radical reimbursement changes could have in rural communities, and each passed separate versions of the Patient Access to Durable Medical Equipment Act of 2016 (HR 5210 and S 2736 respectively). However, the chambers failed to reconcile the bills to send a single package to the White House before adjourning for the conventions and August Recess on July 15, 2016, leaving the July 1 rates intact.

Our Ask:

AAHomecare strongly urges the House and Senate to reach an agreement on legislation to provide relief for homecare patients and suppliers in non-Competitive Bidding Areas when Congress reconvenes in for the Lame Duck session and send it to the President for his signature.

Additional Resources:

Rural/Non-bid Area Relief Legislation Issue Brief

Organizations Supporting Rural Relief Legislation HME Industry Coalition Letter endorsing S. 2736 and H.R. 5210 ITEM Coalition Letter endorsing H.R. 5210 National Federation of Independent Business Letter Endorsing S. 2736 National Federation of Independent Business Letter Endorsing H.R. 5210

Regional Charts Detailing Rate Reduction by HCPCS Competitive Bidding Zip Code Analysis CB Regional and Rural Comparison PLAINS CB Regional and Rural Comparison SOUTHWEST CB Regional and Rural Comparison ROCKY MTN CB Regional and Rural Comparison MIDEAST CB Regional and Rural Comparison FAR WEST CB Regional and Rural Comparison SOUTHEAST CB Regional and Rural Comparison NEW ENGLAND CB Regional and Rural Comparison GREAT LAKES

Medicare Spending Chart

Evaluating CMS’ Outcomes Data Analysis For Competitive Bidding

CBA, Rural, and Regional Area Maps by State

Read more about the background of the program in The History of the Competitive Bidding Program.

Take action, and spread the word with our easy-to-use grassroots tools:

We need Congressional offices to be hearing from their constituents on this issue. Numbers matter. Calls and emails educate policymakers, apply pressure, and swing key legislators to our side.

  • HME suppliers, manufacturers and other stateholders in our industry should go to action.aahomecare.org to send a message.  You can also find contact information to call your Members of Congress in our Congressional directory.

Forward action.aahomecare.org to everyone you work with and explain that our friends and colleagues businesses and livelihood are on the line - no one is immune from the impacts of these cuts. Ask them to visit the site and send an email to Congress telling them to stop the cuts.

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