Medical Device Daily Washington Editor

A cynic's guide to the federal government might include the unattributed remark that "the bureaucracy is expanding to meet the needs of an expanded bureaucracy."

Whether or not this can be fairly said of the Centers for Medicare & Medicaid Services, industries that make their money from Medicare typically argue that CMS should be more generous, if not more expansive.

The long-term-care hospital (LTCH) industry had occasion to revisit that perspective with a May 2 announcement on the CMS website that the agency had finalized its prospective payment system (PPS) for LTCHs.

Kerry Weems, acting CMS administrator, in a statement said that the fee schedule "provides incentives to LTCHs to continue to provide compassionate, efficient care" while "helping to preserve the solvency of the Medicare Hospital Trust fund for future generations."

According to CMS, the new guidelines will "increase the standard federal rate by 2.7% from the 2008 rate established by Congress" in last year's Medicare, Medicaid and SCHIP Extension Act, which set a standard rate of slightly more than $39,000 per patient per stay.

Based on that set point, CMS expects to pay LTCHs, on average, $39,114.36, "compared with the $39,076.28 projected standard Federal rate in the proposed rule," which was published earlier this year. This would come to roughly $4.47 billion, "an increase of approximately $110 million over estimated payments" in 2008.

The final figure is arrived at by deducting 0.9% from the payment amount to account for changes in coding practices from a market basket increase of 3.6%.

CMS also inserted an administrative tweak to the payment schedule, extending it to 15 months rather than the usual 12. This change will align the fee schedule for LTCHs with the federal fiscal year as well as with some of the agency's other payment years.

According to the final rule, CMS did receive one comment on the 15-month market basket estimate for 2009 to the effect that the rule "does not include an inflationary update factor."

The agency's response was essentially that because the calculation is based in part on "the 5-quarter moving average index level for July 1, 2008, through September 30, 2009," the payment schedule captures "inflationary pressures for these three months."

GAO: DMEPOS suppliers needs oversight

The competitive bidding program for durable medical equipment, prosthetics and orthotics suppliers (DMEPOS) has generated controversy (Medical Device Daily, March 24). However, a recent Government Accountability Office report indicates that while some oversight is called for, the program nonetheless may end up saving Uncle Sam a large amount of cash.

The May 6 GAO report notes that the bidding program was mandated in the Balanced Budget Act of 1997 and that Medicare payments for this line of products for the year ending March 31, 2007, totaled roughly $10 billion.

The report, signed by Kathleen King, GAO's director for healthcare projects, indicates that as much as 10% of DMEPOS payments made last year were inappropriate, which, if trimmed, would cut the tab by more than $1 billion annually.

Even in Washington, that's a lot of money.

While the agency pegs its savings from the pilot projects at 26% compared to fee schedules, GAO said that competitive bidding "provides incentives that could affect access to services, and lower quality of items and services provided to beneficiaries."

Consequently, the report recommends "that CMS monitor beneficiary satisfaction with the program," a proposal agreed to by CMS.

In a May 6 statement submitted to the health subcommittee of the House Ways and Means Committee, the Advanced Medical Technology Association (AdvaMed; Washington) said its members are "extremely concerned that the new DMEPOS competitive acquisition program ... could compromise quality of care or beneficiary access to DMEPOS products, especially more sophisticated or innovative products that in no way resemble the kind of commodities that might be more amenable to a competitive acquisition process."

Though a new proposal, the competitive bidding program it uses employs an existing coding system used to describe DMEPOS, and AdvaMed said that this coding protocol has "a tendency to use a single code to describe a wide range of products, could impede beneficiary access or reduce the quality of care" in that a supplier could "end up offering beneficiaries only one brand of product or only a product at the lower end of the range of available technologies."

The statement also objected to reports that many existing suppliers "were denied, apparently for technical or even erroneous reasons, without a formal opportunity to appeal CMS's determination."

AdvaMed is recommending that Congress require CMS "to allow for public comment on the categories and codes proposed for all future phases of the DMEPOS competitive acquisition program and mandate that the agency "more clearly state its decision criteria for evaluating bids and the weights assigned to different factors, such as a supplier's financial viability, its ability to serve a particular geographic area, its current capacity, its current and proposed product offerings, and its experience in serving Medicare beneficiaries."

The association also recommends "that small and rural [metropolitan statistical areas] be exempted from this program."