This evening, the Centers for Medicare and Medicaid Services (CMS) released the CY 2019 proposed payment rule for Durable Medical Equipment Prosthetics, Orthotics, and Supplies (DMEPOS) and for the End-Stage Renal Disease (ESRD) program. The rule contains changes to the DMEPOS competitive bidding program and proposals for DME fee schedule payments where competitive bidding is not in effect In addition, it contains a payment update for the ESRD Prospective Payment System, changes to the ESRD quality program, and an expansion of the ESRD Transitional Drug Add-on Payment Adjustment (TDAPA). These changes are addressed in a separate blog post, here.

Revamped DME Bidding Methodology to Raise Prices on Some Items, Significantly Lower Others

Certain items of DME are subject to CMS’ Competitive Bidding Program (CBP), which sets prices based on the median of supplier bids for all items in a given DME category. In the FY 2016 ESRD/DME Final Rule, CMS outlined an alternative competitive bidding methodology, “lead item bidding,” where bidders submit bids on the most-common (by paid units of service) product in a category and reimbursement is defined based on the ratio of previous fee schedules (specifically FY 2015) for these items. CMS proposes to shift to mandatory lead item bidding in future competitions (i.e. those taking effect after January 1, 2019) in order to simplify the bidding process and avoid “price inversions,” where more complex items of DME are actually priced lower than more complex items.

CMS also proposes to set SPAs based on the maximum winning bid for the lead item, in an effort to ensure access and long-term sustainability of the CBP. CMS expects the increased reimbursement resulting from this change to be partially offset by (significant) decreases in SPAs for non-lead items, with an overall increase to Medicare payments of $10 million from 2019-2023 and $3 million to beneficiaries over the same time period.

CMS also solicits feedback as to whether certain large competitive bidding areas (CBAs) should be split into more manageable service areas.

CMS Anticipates a Gap in Competitive Bidding, Proposes Interim Pricing

Existing competitive bidding contracts will end on December 31, 2018 and CMS has not yet announced a replacement competition. Consequently, CMS is anticipating a gap in the CBP beginning January 1, 2019. Until a new CBP can be completed, CMS proposes to allow all suppliers to supply currently-competitively-bid DME to Medicare beneficiaries via three temporary payment methodologies:

For current CBAs:

• Proposed fee schedule is to adjust amounts for items/services furnished in former CBAs based on the single payment amounts (SPAs) in effect in the CBA on the last day before the CBP contract ends, and increased by the projected percentage change in the Consumer Price Index (CPI) for all Urban Consumers (CPI-U) for the 12-month period after the contract period ends.
  • If the gap in CBP lasts longer than 12 months, fee schedule amounts will increase once every 12 months based on projected percentage change.
  • Proposed fee schedule for non-mail order diabetic testing supplies will remain at the current SPA rates until new rates are established in the national mail order program.
• For non- CBAs that are not rural areas and are in contiguous U.S from January 1, 2019 through December 31, 2020:
  • Proposed fee schedule is 100 percent of the current adjusted payment amounts.
  • CMS requests specific comments on whether the 50/50 blended rates should apply to these areas instead.
• Another methodology for items/services furnished from January 1, 2019 through December 31, 2020 in areas that are currently non- CBAs and are either rural areas or non-contiguous areas.
  • Proposed fee schedule is a blend of 50 percent of the adjusted payment amounts and 50 percent of the unadjusted fee schedule amounts.

CMS is seeking comments on these proposed fee schedule methodologies.

CMS Releases Findings on Comparison of Competitive Bidding Areas and Non- Competitive Bidding Areas  

 The 21st Century Cures Act mandates that CMS solicit and take into account stakeholder input in making adjustments to the fee schedule amount for items furnished on or after January 1, 2019, based on information from the CBP. CMS previously collected stakeholder comments until April 2017 and performed analysis of these claims, the findings of which are included in this proposed rule. Generally, stakeholders (mostly suppliers) are concerned that adjusted fee schedule amounts are not sufficient to cover supplier costs for furnishing items and services in non-CBAs due to a decline in the number of suppliers in these areas, the greater cost of travel distances and serving rural areas in comparison to suppliers in CBAs, and lower average volume of services furnished by suppliers serving non-CBAs. CMS generally disagreed with these concerns and cited their own findings, for which they are soliciting comments.

Changes to Oxygen and Ventilator Payment Methodology

In this rule, CMS proposes to separate the payment classes for portable gaseous oxygen equipment and portable liquid oxygen equipment, and to increase the add-on amount for portable liquid oxygen equipment so that it is equal to current add-on amounts for OGPE. Additionally, CMS proposes to add a separate class for certain portable liquid oxygen contents. This proposal is estimated to be budget neutral. Finally, CMS proposes applying a budget neutrality offset to all oxygen, equipment classes, and HCPCS codes beginning January 1, 2019.

CMS proposes to implement a new payment method for multi-function ventilators effective on or after January 1, 2019. The monthly rental fee schedule amounts would include current amounts for ventilators plus additional payment for the average cost of the ventilator’s additional functions. The proposal is estimated to cost $15 million in Medicare benefit payments from January 2019-September 2023 but will have no impact to Medicare beneficiary cost sharing.

Requests for Information: Data Sources for Gap-Filling New DMEPOS Items

CMS believes that the current gap-filling process can lead to significantly inaccurate payment for new DMEPOS technology items and services.  Consequently, they are soliciting ideas about sources of data and/or other methods that would help establish more accurate pricing for new DEMPOS items paid off the fee schedule.