Medical Device Daily Washington Editor
The competitive bidding final rule published this past Monday by the Centers for Medicare & Medicaid Services is designed to drive down Medicare costs for durable medical equipment (DME), off-the-shelf orthotic items and supplies, and as the agency announced, the program will roll out in 10 standard metropolitan statistical areas next year (Medical Device Daily, April 4).
Despite employing the acronym of DMEPOS (for durable medical equipment, prosthetics, orthotics and supplies), the regulation does not call for competitive bidding for prosthetics, and it calls for no competitive bidding for orthotics other than off-the-shelf items.
Among the Metropolitan Statistical Areas (MSAs) that will host the first 101 sites are the Charlotte-Gastonia-Concord area running between North and South Carolina; Miami-Fort Lauderdale-Miami Beach on Florida's Atlantic coast; and Dallas-Fort Worth-Arlington, Texas. The MSA composed of San Juan-Caguas-Guaynabo, Puerto Rico is the only site not located in the U.S. "lower 48."
Ellen Griffith, a public affairs specialist at CMS, told Medical Device Daily that "the reason [CMS] left Los Angeles, Chicago and New York out of the initial 10 MSAs is that they were significantly larger and would have created a problem with the start-up" in terms of logistics, but that CMS "hopes to get them in next year."
The accompanying press release notes that the competitive bidding program is mandated by 2003's Medicare Modernization Act and that CMS intends to ensure that contracts "will be awarded to a sufficient number of winning bidders in each" competitive bidding area.
The agency also sought to assure beneficiaries that "this program will reduce out-of-pocket expenses while ensuring that they receive high quality items and services."
CMS co-administrator Leslie Norwalk said in an agency statement that the program will save the taxpayer $1 billion per year after 2010, when the program will be in full force.
Norwalk also described the program as "another way to use the competitive marketplace to bring the best possible and most efficient care to Medicare beneficiaries."
The rule calls for small companies to make up 30% of the participating organizations, a move designed in part to help ensure that rural beneficiaries would not lose out.
The threshold for smaller companies is set at $3.5 million in annual revenues, but the agency will go out of its way to bring small firms into the fold only if they do not total 30% of the total winning bids. However, those suppliers will have to accept rates set by the companies that come in with winning bids, but the agency will allow small companies to team up in networks without fear of prosecution that might suggest price-fixing or an anti-competitive ploy and small suppliers will not have to submit bids for all product categories.
Also, healthcare professionals are exempt from the requirements so long as the items are "furnished as part of their professional services." Among the grandfathering exemptions is one that allows beneficiaries to keep their rental equipment providers, even if that supplier does not post a winning bid with CMS.
CMS's projected savings total is based in part on a pilot project conducted in Polk County, Florida, and San Antonio, Texas, between 1999 and 2003. According to the agency's figures, the two rounds of bidding for oxygen equipment and supplies in the Florida site generated savings of 17% and 20%, bringing the total expenditure down to roughly $1.5 million. The original cost figure was not listed. The single round in San Antonio drove down costs for the same product category by 19%, to just less than $2.1 million.
On the other side of the ledger at CMS are operating costs that will run to "approximately $1 million in immediate fixed costs for contractor start-up and system changes" as well as routine staffing and maintenance costs, which were not listed in the announcement.
However, CMS said it expects to hire about 1,600 new employees to run the program.
The final rule has failed to elicit much comment, perhaps because it is considered an accomplished fact or that no one wants to go on record as bucking the CMS.
For instance, Bob Cohen, director of media relations at the National Association of Home Care & Hospice (Washington), declined to comment for the record.
At press time, Kathy Dodson, senior director of governmental affairs at the American Orthotic and Prosthetic Association (Alexandria, Virginia), did not return calls for comment, as was the case for representatives of the Medical Device Manufacturers Association (Washington).
Stephen Ubl, president/CEO of the Advanced Medical Technology Association (AdvaMed; Washington), said in a prepared statement that any competitive bidding program "must ensure that all Medicare patients have access to the best available treatment for their conditions," adding that he is "concerned that the final rule may not pass this fundamental test."
The association raised questions about the effect of the rule on smaller companies, and Ubl indicated that AdvaMed had offered CMS "extensive comments representing the views of industry . . . and we are pleased that a number of our suggestions were adopted, but we remain concerned about some of the provisions and about the overall impact of the program."
The AdvaMed statement said that the association is "still analyzing the details of the rule and will closely monitor these issues in the coming weeks and months."