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Reforming the Competitive Bidding Program


In 2003, the Medicare Modernization Act authorized the Centers for Medicare & Medicaid Services (CMS) to develop a program for home medical equipment (HME) to find market-based prices to replace the current fee-for-service prices.  CMS implemented the DMEPOS Competitive Bidding Program in 2008, which was halted a mere two weeks later by Congress due to program design and execution problems.  With a few cosmetic changes to the auction program, CMS began rolling it out once more in 9 metro areas in 2011 and added 91 additional areas in 2013.  

The American Association for Homecare has long advocated for meaningful reforms to the Centers for Medicare and Medicaid’s (CMS’) DMEPOS Competitive Bidding program to improve its functionality and sustainability.  The current flawed design has caused enormous disruptions to Medicare beneficiaries who require home medical equipment, services, and supplies and for the supplier companies who serve them.

The Competitive Bidding program has drawn widespread criticism from numerous patient advocacy groups, and 244 of our country’s most highly regarded economists and auction experts wrote a joint letter to President Obama stating that the program is plagued with “bureaucratic inertia”.  The year prior, 167 of them wrote a letter to then-Chairman Pete Stark (Health Subcommittee, Ways & Means) asserting that “the program over time may degenerate into a ‘race to the bottom’ in which suppliers become increasingly unreliable, product and service quality deteriorates, and supply shortages become common.” 

Many of these problems have come to fruition, and numerous reports point to patient access issues and massive supplier closures, creating an anemic network to meet the growing population’s needs.  Exacerbating the situation, pricing derived from the faulty Competitive Bidding Program is now impacting reimbursement for Medicare beneficiaries across non-bid and rural America as well as for other payors like Medicaid and TRICARE whose rates are tied to Medicare.  Additional information on this can be found here.

Reform Efforts

Through effective lobbying and educational efforts by AAHomecare membership and other industry stakeholders, Congress passed legislation in 2015 (P.L. 114-10) that prohibits speculative bidders from participating in Competitive Bidding by requiring binding bids and state licensure.  After working with the Administration, CMS announced in June 2016 that it would rescind the policy that limits the bid ceiling for future rounds of Competitive Bidding to the current Single Payment Amounts, preserving the bid ceiling rate at the 2015 fee-for-service rate.

However, AAHomecare remains committed to furthering reform efforts.  In 2017, AAHomecare submitted a letter to Health and Human Services outlining six reform proposals, rationale for each reform, and where the Administration has the regulatory authority to make the changes.  The proposed changes include:

  • Use market clearing price to determine the Single Payment Amount (SPA) for any item included in Competitive Bidding
  • Use historical claims data to determine supplier capacity
  • Increase transparency of the Competitive Bidding program
  • Reform Competitive Bidding product categories
  • Apply uniform payment rules for transitioning DMEPOS Competitive Bidding beneficiaries
  • Remove CMS’ authority to move forward with Continuous Positive Pressure Airway (CPAP) and Standard Power Mobility Devices (PMD) bundled payments 

Additionally, AAHomecare has supported the Market Pricing Program (MPP), an alternative auction system that establishes market-based prices around the country.  MPP has economist' and auction experts' support as well as the stakeholder community.  The program is consistent with Congress’ original intent of creating a program that is based on competition and market prices while maintaining beneficiary access to quality items and services.  Both the HME Industry and numerous consumer groups supported past legislation for MPP. 

In August 2018, CMS released the ESRD/DMEPOS Proposed Rule which included several reforms for the Competitive Bidding Program. In addition to extending relief to rural and non-contiguous areas impacted by the program, it proposed temporarily suspending the bid program to make meaningful improvements. The House and Senate sent letters to the Administration urging critically needed relief.

On November 1, 2018, CMS released the ESRD/DMEPOS Final Rule which finalized what had been proposed, including:

•    Temporary halt of the CBP as of 1/1/19—any willing supplier may supply equipment in CBAs under the 12/31/18 SPA plus the CPI inflation increase until the program begins again
•    Raise the Single Payment Amount to the maximum winning bid—changing the payment policy from the median price to the clearing price (highest bid amount of contracts offered to meet projected beneficiary demand)
•    Implement lead item bidding—methodology that requires suppliers to submit a bid on one item in a product category
•    Refine product categories—subdividing several product categories, which is to be determined through sub-regulatory guidance
•    Modifying oxygen reimbursement—splitting portable O2 into two separate classes (gas and liquid), increasing the portable liquid O2 rate to the OGPE rate, and adding a new class for portable liquid contents exceeding 4 LPM, all of which will be budget neutral by offsetting to all O2 contents and equipment

CMS also proposes adding ventilators to the CBP per MedPAC’s 2018 Report to Congress.  AAHomecare joins clinical and consumer stakeholders in weighing in with the Administration about the addition of this product category for the CBP.

The Final Rule is a tangible acknowledgement from CMS and HHS that the bidding program is need of reform—a welcome change from their longstanding insistence that the program was not causing undue hardship for providers and patients alike.  However, the failure to fully address reimbursement rates for suppliers in the gap period before the next round of bidding is unacceptable, and there are concerns about how the program changes for lead item bidding and refined product categories will be implemented.  AAHomecare is engaging the Administration and Capitol Hill to address these issues and explore opportunities for reform through sub-regulatory guidance and legislation in the Lame Duck session and the 116th Congress.  

Additionally, AAHomecare and other leading HME stakeholder organizations are developing an online educational resource on the next round of bidding to help the HME community navigate changes in the program. 


•    AAHomecare Letter to HHS Secretary Price ‘17 
•    Letter from 167 Economists to Chairman Stark ’10 
•    Letter from 244 Economists to President Obama ’11 
•    Dobson DaVanzo Patient Access Impact Report Executive Summary
•    AAHomecare Summary of OIG CB Licensure Violations Report ’16
•    UC Health Comments on CB Issues ’16 
•    Moran Company CB Evaluation Report ’16 
•    Letter from 31 Patient Advocacy Groups Supporting MPP ’12 
•    Market Pricing Program Section-by-Section Summary 
•    Congressional Letter to OIG Regarding Lack of CB Transparency ’14 
•    National Minority Quality Forum Report Assessing CB Impact on Diabetic Beneficiaries ’15 
•    American Association for Diabetes Educators Study on CB Impact ’16
•    True Cost of HME Study
•    ESRD/DMEPOS Final Rule