Medical Device Daily Washington Editor

Medicare Advantage (MA) programs were the talk of the town in Washington when first proposed in the late 1990s — positively so — but they do not always find a warm welcome on Capitol Hill.

Rep. Pete Stark (D-California), the chairman of the House Ways and Means Committee’s health subcommittee has gone on record as saying that he would like to cut funding for Medicare managed care plans (Medical Device Daily , April 27, 2007), and the current bill for the Children’s Health Insurance Program (CHIP), coming out of the Senate Finance Committee funds a dramatic expansion of CHIP, partly by cutting MA funding.

Making matters worse for MA plans is an announcement made by CMS last week that it has cancelled the contract of a south Florida provider for problems with plan service.

On July 26, the Centers for Medicare and Medicaid Services reported that it had terminated its contract with America’s Health Choice (AHC; Vero Beach, Florida) because “AHC failed to make services available to the extent that it posed an imminent and serious to the health of AHC enrollees.” According to CMS, the provider had an MA enrollment of roughly 12,000.

Steve Hahn, spokesperson for CMS, told Medical Device Daily that the problems at AHC made it difficult for patients to make appointments with providers and also induced an unspecified number of medication errors. Hahn said that CMS was in possession of no information indicating that any fatalities resulted from the medication errors.

The CMS statement said that the enrollees will be folded into a preferred provider service offered by United Healthcare (Minnetonka, Minnesota), but beneficiaries who are enrolled in AHC’s Part D prescription drug benefit are not affected as that contract is still in force.

Until Sept. 27, former AHC enrollees who receive services from outside Secure Horizon’s network will pay only the in-network co-pay, and any beneficiaries who are in treatment for serious acute illnesses will get those treatments for the in-network co-pays for up to 90 days. Until the end of the year, anyone receiving chemotherapy or radiation therapy will also have to pay only the in-network co-pay.

AHC and American’s Health Insurance Plans (AHIP; Washington), an insurance industry trade group, did not respond to calls for comment.

HHS forces surety bond for DMEPOS

The Department of Health & Human Services has unveiled a new rule that requires companies that do business as suppliers of durable medical equipment and prosthetics, orthotics and supplies (DMEPOS) to post a surety bond with CMS of $65,000 in order to continue doing business with the agency. According to the HHS statement, the rule will “ensure that Medicare can recover erroneous payments up to $65,000 that result from fraudulent or abusive supplier billing practices.”

Fraudulent billings have been a constant for the Medicare program, which relies on thousands of contractors that are difficult to supervise, due in part to their sheer numbers. Earlier in July, HHS reported a joint effort with the Department of Justice (DOJ) to rein in fraudulent billings in Florida and California as a follow-up to a pilot project conducted by the National Supplier Clearinghouse of Columbia, South Carolina (Medical Device Daily , July 5, 2007). As a result of that effort, more than 600 DMEPOS suppliers lost their licenses, and the agency reported savings to Medicare of $317 million, a huge amount considering that the project cost CMS only $3 million.

Herb Kuhn, acting CMS deputy administrator, said in an agency statement that the surety bonds “will not only limit Medicare’s risk to fraudulent billing, but will also help to ensure that only legitimate DMEPOS suppliers are enrolled in the program.”

The rule puts into play a requirement of the Balanced Budget Act of 1997, which initially set the surety bond amount at $50,000. However, the agency factored in inflation, calculated via the Consumer Price Index, to arrive at the current figure. According to a Q&A document also published by HHS, the average cost of the bond will be 3% of the face value, which for $65,000 comes out to $1,950. The Q&A document also notes that CMS tried to put a surety bond requirement in place in 1998 that would represent 15% of the total annual billings for each supplier, but “CMS withdrew the regulation after independent providers in Oklahoma filed a lawsuit to stop it due to their inability to obtain such a bond from insurers.”

DMEPOS bidding open additional 60 days

CMS also reported last week that it will hold open the window for competitive bidding for DMEPOS contracts for another 60 days, intended to “allow suppliers additional time to consider their bid submissions in the 10 bidding areas.”

CMS’s Kuhn said that the agency wants to “make sure DMEPOS suppliers in the bidding areas had all the available information to them to make informed, yet competitive bids.”

The agency initially released the bidding rule in April (MDD, April 4, 2007), and the press release issued by CMS at the time projected annual savings to Medicare on the order of $1 billion a year once the program is in force across the country in 2010.

In 2008 the bidding program will cover 10 of the highest-volume items in the DMEPOS inventory in 10 of the largest Metropolitan Statistical Areas (MSAs) excluding the New York, Los Angeles and Chicago MSAs, which the agency said it will avoid in the first year due to logistical concerns.

The program is a requirement of the Medicare prescription drug law.