Preparing for the Expansion
of Competitive Bidding
Program to Rural America
in 2016
(It Affects All HMEs)
My contact information…
• Mark Higley, Vice President - Regulatory Affairs
mark.higley@vgm.com
O: 888.224.1631
C: 319.504.9515
Please download this entire program
(PPT converted to PDF):
http://www.vgm.com/files/EmailPDF/FSS/
WebinarFSS-Sessions2016.pdf
…this presentation, and all supporting files
are available at vgmncbservices.com
• Preparing for the Expansion of
Competitive Bidding Program to
Rural America in 2016
“The Affordable Care Act amended the Medicare
Modernization Act statute to mandate use of
information from the DMEPOS competitive bidding
program to adjust the fee schedule amounts for DME in
areas where competitive bidding programs are not
implemented by no later than January 1, 2016.”
Introduction…
• On October 31st, 2014, the Centers for Medicare & Medicaid
Services (CMS) released a “final rule” (CMS-1614-F) which
affects all durable medical equipment suppliers in the United
States.
• The Rule establishes a new reimbursement methodology
that makes national price adjustments to payments for
Durable Medical Equipment, Prosthetics, Orthotics, and
Supplies (DMEPOS) items currently paid under Medicare fee
schedules.
• This affects all HCPCS codes currently included in the Round
1 and Round 2 geographic competitive bidding areas.
• Reimbursement for these items will be reduced to an
amount based on the current competitive bid “single
payment amounts”.
• Today I will explain the various “regions” within the
United States that CMS has created with each region
having its own unique “regional single payment amounts”.
• On November 23, CMS released the new reimbursements
that will be effective January 1, 2016. I will offer shortly
a link to a calculator which estimates the July 1, 2016
payments for these items.
• IMPORTANT NOTE: The provisions in S. 2312, introduced
by Sens. John Thune, R-S.D., and Heidi Heitkamp, D-N.D.,
on Nov. 19, include increases to these regional single
payment amounts. We will discuss the details (and
likelihood of passage) at the end of this presentation.
• For the competitive bid DME items, the final rule phases
in, over 6 months, a new reimbursement rate for noncompetitive bidding areas (CBAs).
• On January 1, 2016, the reimbursement rate for these
claims (with dates of service from January 1, 2016
through June 30, 2016) will be based on 50 percent of the
un-adjusted (current) fee schedule amount and 50
percent of the adjusted (reduced) fee schedule amount
which will be based on the regional competitive bidding
rates. These rates were officially released November 23
• Starting on July 1, 2016, reimbursement rate will be 100%
of the adjusted fee schedule amount which will be based
on regional competitive bidding rates.
• As noted, industry stakeholders, including VGM,
AAHomecare and the state associations were
successful in their campaign to introduce legislation in
an attempt to delay and mitigate the implementation
on January 1, 2016 of this Rule.
• We argued that the application of payment rates, set
by a “competition”, to non-CBAs is flawed and will
disrupt Medicare beneficiaries’ access to the DME
items they need.
• In CBAs, suppliers accept contracts for DME items at a
lower rate because there will be a reduced number of
suppliers that can operate in that bid area.
• Suppliers try to make up for the drastic payment cuts
through increased volume of beneficiaries served.
• As a result of CMS’ final rule, suppliers - such as those
in this Webinar today- in non-competitive bid areas
will receive the same drastic payment cuts set in
CBAs, without exclusive contracts or increase in
volume of business.
• The industry also has data that indicates providing
DME items in rural areas have a higher cost than in
urban areas. (This was addressed in the legislation.)
• Today I will clarify the background, final rule detail
and the implementation of the program.
• And, as noted, all of you will receive the actual new
“regional single payment amounts” applicable
January 1, 2016, via an electronic link.
• While the industry will not give up on its fight against
competitive bidding, DME operators must be aware
to the likely continuance of the program and prepare
accordingly.
• Once more, the Affordable Care Act amended the
Medicare Modernization Act statute to mandate use of
information from the DMEPOS competitive bidding
program to adjust the fee schedule amounts for DME in
areas where competitive bidding programs are not
implemented by no later than January 1, 2016.
• CMS estimates that by applying bid rates throughout the
entire United States it would save over $7 billion over FY
2016 through 2020.
Summary…
• Beginning January 1, 2016, CMS will implement the Patient
Protection and Affordable Care Act’s directive to adjust payments
nationwide based on DMEPOS Competitive Bidding Program
(“CBP”) pricing, starting with fourteen categories of DMEPOS
items.
• Unlike prior CBP rounds, which offered suppliers exclusive
contracts in large metropolitan areas in exchange for reduced
reimbursement, under the 2016 DMEPOS fee schedule CBP
updates, the reduced rates will apply to suppliers nationwide,
without exclusive market share.
• The CBP currently is employed in 109 CBAs in 43 states, plus a
national mail order program for all states and territories.
• The average savings from the latest CBP rounds show significant
reductions from then-existing DMEPOS fee schedule amounts: The
Round 1 CBP Rebid, initiated in 2011, achieved a 32 percent average
reduction; Round 2, initiated in 2013, achieved a 45 percent average
reduction; and the Round 1 Recompete, also initiated in 2013,
achieved a 37 percent reduction.
• As I noted previously, CMS is required to recompete contracts at least
once every three years, and has now initiated a recompete for Round
2. For the items included in these CBP rounds, the lower payments
amounts established by competitive bidding will be used beginning
in 2016 to set nationwide payment amounts that apply outside the
geographic areas of the CBAs.
• Under the Final Rule, CMS stated it attempted to “accounts
for regional variations in costs”, establishing Regional Single
Payment Amounts (“RSPAs”) calculated for each of eight
regions.
• CMS calculates the RSPA for each region using the
unweighted average of the SPAs for a DMEPOS item from
all CBAs that are fully or partially located in that region,
regardless of population.
• CMS also states that the unweighted average avoids giving
“undue weight” to SPAs in more heavily populated areas.
CMS then uses the average of each RSPA, weighted by the
number of states in that region, to calculate a national
average RSPA.
Let’s look at this more closely…
• Once more… CMS will adjust fee schedule amounts for states in
different regions of the country based on previous competitive
bidding round pricing in these “regions”.
• The regional prices would be limited by a national ceiling (110% of
the average of regional prices) and floor (90% of the average of
regional prices).
• There were originally three possible “Regions” in the proposed rule
(see next).
• CMS determines a regional price for each state equal
to the average of the single payment amount for an
item or service from the CBAs that are fully or partially
located in the same region where the state is located.
• CMS determines a national average price equal to the
average of the regional prices.
• Adjust fee schedules annually using CPI-U
• Revise the SPA each time there is a new round of
bidding.
• BUT…to be clear, the current RSPAs for January 1, 2016
have already been determined using Round 2 (e.g.,
Atlanta) and Round 1 recompete (e.g., Pittsburgh) single
payment amounts. These are available for review now.
• And, CMS’ has reported that the Round 2 recompete
SPAs will be included to calculate the “second half”
RSPAs (effective July 1, 2016); we can only estimate
these amounts, and they are included in the electronic
calculator for you review.
• “Although we believe that the costs of furnishing items and
services in rural areas are different than the costs of
furnishing items and services in urban areas, there is no
evidence to support a statement that the difference in
costs is significant.
• However, in order to proceed cautiously on this matter in
the interest of ensuring access to covered DMEPOS items
and services, we are proposing to phase in the price
adjustments, as explained below, so that we can monitor
the impact of the adjustments as they are gradually
phased in.”
• What this means: Again…one half the reductions take
effect January 1, 2016; the remainder on July 1, 2016.
Released November 23 (Go to vgmncbservices.com)
Summary of Rural Areas…
• A rural area has been defined as a postal zip code that has more
than 50 percent of its geographic area outside of a metropolitan
area (MSA) or a zip code that has a low population density area
that was excluded from a competitive bidding area.
• The payment amount will be 110 percent of the average of the
SPAs of all the areas where CBPs are implemented.
• This only applies to the 48 contiguous states.
Example: Illinois and vicinity (NOT Official!).
http://www.ers.usda.gov/datafiles/Rural_Definitions/StateLevel_Maps/IL.pdf
On October 5, CMS released the actual rural zip codes that
will get a 10% adjustment to new bidding-derived fees
According to the USPS, there are nearly 43,000 zip codes
in the US. For purposes of the bidding program, they
break down as follows:
• Round 1 zip codes – 3,714 (approx. 8.6% of total US zip
codes)
• Round 2 zip codes – 13,902 (32.3%)
• Regional zip codes –– 9,099 (20.9%) – subject to new
bidding-derived rates (“RSPAs”) generated on a regional
basis
• Rural zip codes – 16,285 (37.8%) – subject to the above
mentioned bidding-derived rates, plus a 10% positive
adjustment to these rates.
• Put another way, about 64% of areas outside of a CBA will
be considered “rural”.
• You can access ALL the rural ZIPS (by state in numerical
order) at vgmncbservices.com, or directly here:
http://www.vgm.com/files/EmailPDF/FSS/DMERuralZIP.pdf
• We have also created a file for the
“regional, or non-rural ZIPs, as well.
• Back to my “map”…areas in a shaded red metropolitan
area but not included in any CBA are paid at the RSPA.
• In this example, Illinois is included in the Great Lakes
region.
• Using the averages of the E1390 oxygen single payment
amounts in the of all CBAs in this region, the
reimbursement would be $135.41 on January 1, 2016,
and then (estimated) $90.71 on July 1, 2016.
• The yellow rural areas (see Excel file for exact ZIPs), however,
will be reimbursed at the adjusted fee schedule amounts
based on 110 percent of the national average RSPA.
• Thus, the RSPA in rural areas for E1390 is $141.74 on January
1, 2016 and (estimated) $103.38 on July 1, 2016.
Examples of New Payment Rates for January 1…
Can we see (now) the estimated RSPAs for
July 1, 2016?
• Yes! The Regulatory Council created a document which
includes the high utilization codes. Go to:
http://www.vgmncbservices.com/Documents/FinalRuleCBExpansionAnalysis_Update
0715.pdf
And we have developed a
“calculator” for ALL bid codes
• This is the URL:
http://www.vgm.com/files/EmailPDF/RSPA-ALLREGIONS.xlsx
• Click on it from any device and save.
• Let’s take a look!
You can select your area…
What about the non-contiguous areas?
• Fee schedule amounts for areas outside the
contiguous United States (i.e., noncontiguous areas
such as Alaska, Hawaii, and Puerto Rico) are
adjusted so that they are equal to the higher of the
average of the (single payment) competitive
bidding payment amounts for CBAs in areas outside
the contiguous United States (currently only
applicable Honolulu, Hawaii) or the national ceiling
amount.
What about “Round 1” only codes?
• CMS dubs these as “ For Items Included in 10 or Fewer
CBAs” (Round 1 had only 9 metro areas)
• The fee schedule amounts for these items are adjusted
so that they are equal to 110 percent of the average of
the SPAs for the “10 or fewer CBAs” (9 metro areas of
Round 1)
• This applies to all areas (i.e., non-contiguous and
contiguous)
• Dubbed the “C110 methodology”, where “C” = current
SPAs
• 38 HCPCS codes affected
What about codes no longer bid?
• 110% of SPAs from previous bid programs, updated
by the CPI
• Dubbed “R110 methodology” which means “R” =
“retired”
• There are 112 HCPCS codes affected
Also from the Rule (and this issue is especially
troubling)…)
(Source:)
Frequently Asked Questions on Durable Medical Equipment, Prosthetics,
Orthotics, and Supplies (DMEPOS) 2015 Medicare Payment Final Rules
(CMS-1614-F)
Adjusting DMEPOS Payment Amounts Using Competitive Bidding
Information– 42 CFR 414.210(g)
• 2Q. When CMS uses competitive bidding information to adjust the
DMEPOS fee schedule amounts in accordance with the methodologies
established under this rule, would the bid limits for competitions
under the competitive bidding program(s) that begin after the
adjusted fee schedule amounts are implemented be based on the
adjusted fee schedule amounts?
• 2A.Yes. This issue is discussed in the November 6, 2014,
Federal Register at 79 FR 66232.
• The payment amounts that would be adjusted in
accordance with sections 1834(a)(1)(F)(ii) and (iii) of the
Act for DME, section 1834(h)(2)(H)(ii) of the Act for
orthotics, and section 1842(s)(2)(B) of the Act for enteral
nutrients, supplies, and equipment shall be used to limit
bids submitted under future competitions and DMEPOS
competitive bidding programs (CBPs) in accordance with
regulations at § 414.414(f).
• Section 1847(b)(2)(A)(iii) of the Act prohibits the awarding of contracts
under a CBP unless total payments made to contract suppliers in the
competitive bidding area (CBA) are expected to be less than the payment
amounts that would otherwise be made. In order to assure savings under
a CBP, the fee schedule amount that would otherwise be paid is used to
limit the amount a supplier may submit as their bid for furnishing the
item in the CBA.
• The payment amounts that would be adjusted in accordance with
sections 1834(a)(1)(F)(ii) and (iii) of the Act for DME, section
1834(h)(2)(H)(ii) of the Act for orthotics, and section 1842(s)(2)(B) of the
Act for enteral nutrients, supplies, and equipment would be the payment
amounts that would otherwise be made if payments for the items and
services were not made through implementation of a CBP.
• Therefore, the adjusted fee schedule amounts
would become the new bid limits.
Can we fight this??
• Yes, and a potential legislative remedy exists.
• First of all, here is our basic argument…
• Although CMS recognized the geographic variation in
costs and adopted a formula for higher
reimbursement for rural areas, the Final Rule makes
no adjustment to account for the fact that suppliers
will no longer have the advantage of an exclusive
contract and increased market share to accompany
those prices.
• Under the prior CBP rounds, CMS only awarded
contracts to the lowest bona fide bids needed to
meet projected beneficiary demand; if a supplier’s bid
for an item was not accepted for a specific CBA, the
supplier generally could not receive Medicare
reimbursement for those items provided to
beneficiaries within the CBA.
• This system promised an increased market share for
those suppliers whose bids were accepted, allowing
them to survive on thinner margins by increasing
volume.
• The Final Rule maintains the pricing established
through prior CBP rounds, but by expanding
nationwide and not limiting the suppliers authorized to
receive reimbursement, no supplier will receive the
anticipated market share and volume increase on
which those prices were premised.
• Additionally, CMS has not presented data
demonstrating that its adjustment for rural and frontier
states is sufficient to support the increased costs of
doing business in those areas.
• In the Proposed Rule, CMS noted that previous
legislation had required studies of the costs of
furnishing DME in different geographic regions. After
review of the 1996 study of DME supplier product and
service costs, CMS concluded that the general
consensus among those that participated in the study
was that there was “no conclusive evidence that urban
and rural costs differed significantly or that the costs of
furnishing DME items and services were higher in
urban areas versus rural areas or vice versa.”
• The absence of conclusive evidence supporting
significant cost differences is not the same as the
presence of conclusive evidence that cost differences
do not exist, however. Ultimately, therefore, the
reduced pricing has the potential to reduce
beneficiary access to DMEPOS in rural and frontier
areas.
• CMS’ final rule also limits the bid ceiling for future
rounds of competitive bidding to payment rates set by
previous rounds of bidding. Currently, bid limits are
set by the fee schedule, which allows for adjustments
for inflation. CMS has indicated that it plans to
continue competitive bidding for DME items far into
the future.
• Decreasing the bid ceiling limit over many years, while
medical inflation continues to rise, will set artificially
low rates, which will hamper competition.
• Ever decreasing bid limits will make it impossible to
set market prices through an auction process, without
negatively impacting beneficiary care.
• Congress required CMS to save money compared to
the (unadjusted) fee schedules, because taken to its
logical conclusion, CMS’ plan would eventually result
in suppliers paying the government to provide items
and services.
DMEPOS Rule Relief Legislative Specifications:
The DME Access and Stabilization Act (S. 2312)
includes provisions that: • Apply a 30% positive adjustment to rural single payment
amounts (SPA) (calculated on a national basis) for
suppliers in non-bid, “rural” areas as defined by CMS;
• Apply a 20% positive adjustment to regional single
payment amount (RSPA) for suppliers in all other non-bid
areas;
• Provide a two year phase-in period for bidding-derived
pricing for non-bid areas;
• Set the ceiling for future bidding rounds of the
competitive bidding program at the unadjusted fee
schedule rates in effect on Jan 1, 2015, instead of
CMS’ proposal to set a bid ceiling at the previous bid
amount rates; and
• Instruct CMS to revisit pricing adjustments for nonbid areas that takes into account travel distance,
clearing price and other associated costs furnishing
this equipment for prices that will be in effect on Jan
1, 2019.
The “pay for”…
• Effective Jan 1, 2020, new Medicaid allowable caps
will be applied to the Federal portion of
reimbursement that mirror the Medicare rates
effective Jan 1, 2016.
• Competitive Bidding Areas will be the Competitive
Bidding Single Price Amount (SPA), rural areas will
be the rural single payment amounts (SPA)
(calculated on a national basis) and all other
regions will be the regional single payment amount
(RSPA).
• Stakeholders had to compromise on a number of
provisions to get the bill introduced as budget
neutral, the only way they say it will move by the end
of this year.
• Originally, they had sought a 30% increase across the
board in non-bid areas and a four-year phase-in
period.
• The new provision adjusting Medicaid reimbursement
to reflect the new pricing was also added as a “pay
for.”
Our champions…
• Contact (and thank) Senators John Thune (R-SD)
[pictured] and Heidi Heitkamp (D-ND) for their
leadership in spearheading this important
legislation that will protect access to essential HME
products for seniors, as well as individuals with
significant disabilities and chronic conditions, who
reside in rural communities around the country.
• We urge HME providers, manufacturers and other
stakeholders in the industry to express their
support for this legislation to their Senators as soon
as possible.
• Additional co-sponsors at introduction included Sens
Pat Roberts (R-Kan), Angus King (I-Maine), and Mike
Crapo (R-Idaho).
• Following a congressional recess for Thanksgiving,
stakeholders expect an identical bill, with the addition
of a market-pricing demonstration project, to be
introduced in the House of Representatives in early
December. Then the plan is to attach both bills to an
omnibus bill that must pass Congress by Dec. 10 to
prevent a government shut down.
• On the likelihood of all of these dominoes falling into place,
AAHomecare’s Tom Ryan said, “Absolutely, this has been part
of the discussion all along. Everyone is aware of the timeline.
Getting a bill out of the Senate is not easy and it’s finally
been accomplished. But our work has just begun.”
• “The reality is there are two options,” said Cara
Bachenheimer, senior vice president of government relations
for Invacare. “Continuing with life as it is now, which is CMS’s
plan, or embracing this package deal. In balance, is the
package deal better or worse than today? I think most would
say it’s better than today.”
• Ryan agreed: “The numbers are much better than what we’re
facing if this does not become law.”
My Contact Information:
• Mark Higley, Vice President - Regulatory Affairs
mark.higley@vgm.com O: 888.224.1631 C: 319.504.9515