On July 11, 2018, CMS released its annual proposed rule (the Rule) for End-Stage Renal Disease (ESRD). Six key provisions related to durable medical equipment, however, consumed much of the 112-page document:
Here’s what you need to know about each of the proposals.
Reforming Competitive Bid
The Rule includes three major proposals related to competitive bid reform: maximum winning bids, lead item pricing and bid surety bond modifications.
MAXIMUM WINNING BIDS
CMS proposes to use maximum bids instead of median bids to set future single payment amounts (SPA). This is a significant change to the program and the most positive suggested by CMS. Industry stakeholders have advocated for this change since the beginning.
MiraVista analysis: We maintain this is a good move to promote stability in the program. Suppliers should not be paid less than their best price.
LEAD ITEM PRICING
CMS wants suppliers to submit bids using a new concept called lead item pricing. Introduced for targeted products in the 2016 ESRD rule, CMS aims to deploy lead item pricing across all competitively bid items.
Suppliers submit a single bid for one significant, or lead, HCPCS in a product category. CMS will select lead HCPCS based on allowed charges (revenue) as opposed to allowed services (units). Subordinate items will be paid as a percentage of their relative value to the lead item on the 2015 fee schedule.
The following illustrates the calculated price for subordinate items:
- Reforming Competitive Bid.
- Paying Transitional Rates During Gaps in Competitions.
- Reinvigorating Liquid Oxygen Through New Payment Classes for Oxygen.
- Paying for a New Multifunction Ventilator.
- Adding the Northern Mariana Islands to National Mail Order competitions.
- Breaking Up Nine Really Big CBAs for Future Competitions.
Here’s what you need to know about each of the proposals.
Reforming Competitive Bid
The Rule includes three major proposals related to competitive bid reform: maximum winning bids, lead item pricing and bid surety bond modifications.
MAXIMUM WINNING BIDS
CMS proposes to use maximum bids instead of median bids to set future single payment amounts (SPA). This is a significant change to the program and the most positive suggested by CMS. Industry stakeholders have advocated for this change since the beginning.
MiraVista analysis: We maintain this is a good move to promote stability in the program. Suppliers should not be paid less than their best price.
LEAD ITEM PRICING
CMS wants suppliers to submit bids using a new concept called lead item pricing. Introduced for targeted products in the 2016 ESRD rule, CMS aims to deploy lead item pricing across all competitively bid items.
Suppliers submit a single bid for one significant, or lead, HCPCS in a product category. CMS will select lead HCPCS based on allowed charges (revenue) as opposed to allowed services (units). Subordinate items will be paid as a percentage of their relative value to the lead item on the 2015 fee schedule.
The following illustrates the calculated price for subordinate items:
- The lead item is a Group 2 power wheelchair. The 2015 allowable for this item was $578.51. The winning (pivotal maximum) bid, the highest bid awarded contracts under the new methodology, is $433.88.
- The battery used for the lead item is a subordinate item. The 2015 allowable for the battery was $107.25.
- The battery’s single payment amount (SPA) is the ratio of the battery’s 2015 allowable to the lead item’s allowable multiplied by the lead item’s SPA.
Previously, CMS used a composite bid method where suppliers submitted individual bid prices on all items and accessories. CMS assigned a weight to each item, multiplied the weight by the submitted bid amount, then summed the totals together to arrive at a single composite bid. CMS hopes that lead item pricing will prevent instances of price inversions, a common quirk of the prior composite bid method. A price inversion occurs when a product with more features is less expensive than a product with more features (e.g. when a walker with wheels is less expensive than a walker without wheels).
MiraVista Analysis: Lead item pricing should simplify the bidding process. Instead of submitting 100+ bids for each HCPCS in a product category, bidders will submit one bid price. CMS must group similar products and accessories together into smaller, relevant groups for this proposal to work. MiraVista would like CMS to publicly post and solicit comments on product groupings before they begin the bid process. CMS needs to be transparent on how the lead item will impact reimbursement for subordinate items in the group.
BID SURETY BOND MODIFICATIONS
CMS proposes to update the competitive bid surety bond forfeiture language introduced in the 2016 ESRD Rule to reflect the new lead item pricing terminology. Suppliers must have a surety bond for each competitive bid area where they submit bids. The Secretary will establish the surety amount between $50,000 and $100,000.
Here is the weird part.
If CMS offers a contract to a supplier, and the supplier’s lead item bid is at or below the median bid for all other suppliers in that category, the supplier will forfeit the surety bond if they refuse the contract.
Let’s put a pin in that and come back to it …
If CMS offers contracts to small suppliers beyond the pivotal maximum bid to satisfy a self-imposed 30% participation rule, these small suppliers will not forfeit surety bonds if they refuse the contract offer. As a similar protection to the Medicare program, CMS will not raise the single payment amount using any bids beyond the pivotal bid.
MiraVista analysis: We agree CMS needs to update the language to reflect lead item pricing. With the change to maximum bid for SPA rates, however, we believe retaining the median bid forfeiture criteria does not make sense. When CMS used the median bid to set rates, this language made sense. Suppliers should not have to accept contract rates below their “best price,” and if CMS meets or exceeds their best price, MiraVista believes the supplier should have to accept the contract or forfeit the bond. If CMS migrates to maximum bid, however, under this language CMS cannot collect on sureties for any bids in the top half of the pack … even when CMS exceeds those suppliers’ best lead item price.
Paying Transitional Rates During Gaps in Competitions
CMS proposes three tiers of payment for services after January 1, 2019, based on where services are rendered:
COMPETITIVE BID AREAS
CMS wants to use current SPAs with an annual increase for inflation until a new round of bidding can be deployed.
RURAL/NON-CONTIGUOUS AREAS
CMS proposes to extend the 50/50 blended rates for two years between January 1, 2019, and December 31, 2020. This extends the temporary provision contained in the recent CMS Interim Final Rule which engaged the 50/50 blended rates for the seven months ending December 31, 2018.
NON-RURAL/URBAN/CONTIGUOUS AREAS
While the Rule proposes to maintain the 100% adjusted rates, CMS explicitly requests feedback on the application of 50/50 blended to urban areas.
The above proposal will cost Medicare $1.05 billion and increase beneficiary cost-sharing responsibility by $260 million. The federal portion of the cost share will be $45 million; the Medicaid portion of the cost share will be $30 million.
MiraVista Analysis: We do not support using single payment amounts in CBAs. With the return of any willing provider to the CBA areas, CMS cannot offer suppliers the volume or exclusivity that makes the SPA feasible. Furthermore, a new competition provides contracted suppliers an opportunity to vet new pricing and potentially higher rates. Absent enforceable contracts in the CBAs, MiraVista believes CMS should follow existing fee schedules for urban areas. Medicare will still enjoy the savings from adjusted pricing. For some items, the SPAs will be higher than the urban fee schedules, and in others they will be lower. Urban schedules were created based on averages of the single payment amounts in similar geographical areas. Also, if CMS fixes the CBA transitional rates at SPAs, then if they decide to expand a blended rate to urban areas, the competed areas would not be eligible for increases. MiraVista is excited to see the extension for the blended rates in rural and non-contiguous areas and would like to see expansion of this policy to urban areas as well. CMS has offered other alternative blending rates that merit further discussion.
Reinvigorating Liquid Oxygen Through New Payment Classes for Oxygen
CMS wants to create three new payment classes for oxygen. Since the agency created the new payment class for oxygen generating portable equipment (OGPE), utilization of portable concentrators and home-fill systems doubled. Meanwhile, beneficiary utilization of portable gas systems declined slightly and utilization of liquid systems dropped dramatically, accounting for only 2 percent of all portable utilization.
CMS believes the current system disincentivizes suppliers from providing liquid oxygen. As a result, CMS proposes to realign oxygen payment classes and provide a new add-on payment for liquid oxygen that is equivalent to the OGPE add-on rate. The three new payment classes are:
The following chart compares the five current payment classes to the seven newly-proposed classes:
MiraVista Analysis: Lead item pricing should simplify the bidding process. Instead of submitting 100+ bids for each HCPCS in a product category, bidders will submit one bid price. CMS must group similar products and accessories together into smaller, relevant groups for this proposal to work. MiraVista would like CMS to publicly post and solicit comments on product groupings before they begin the bid process. CMS needs to be transparent on how the lead item will impact reimbursement for subordinate items in the group.
BID SURETY BOND MODIFICATIONS
CMS proposes to update the competitive bid surety bond forfeiture language introduced in the 2016 ESRD Rule to reflect the new lead item pricing terminology. Suppliers must have a surety bond for each competitive bid area where they submit bids. The Secretary will establish the surety amount between $50,000 and $100,000.
Here is the weird part.
If CMS offers a contract to a supplier, and the supplier’s lead item bid is at or below the median bid for all other suppliers in that category, the supplier will forfeit the surety bond if they refuse the contract.
Let’s put a pin in that and come back to it …
If CMS offers contracts to small suppliers beyond the pivotal maximum bid to satisfy a self-imposed 30% participation rule, these small suppliers will not forfeit surety bonds if they refuse the contract offer. As a similar protection to the Medicare program, CMS will not raise the single payment amount using any bids beyond the pivotal bid.
MiraVista analysis: We agree CMS needs to update the language to reflect lead item pricing. With the change to maximum bid for SPA rates, however, we believe retaining the median bid forfeiture criteria does not make sense. When CMS used the median bid to set rates, this language made sense. Suppliers should not have to accept contract rates below their “best price,” and if CMS meets or exceeds their best price, MiraVista believes the supplier should have to accept the contract or forfeit the bond. If CMS migrates to maximum bid, however, under this language CMS cannot collect on sureties for any bids in the top half of the pack … even when CMS exceeds those suppliers’ best lead item price.
Paying Transitional Rates During Gaps in Competitions
CMS proposes three tiers of payment for services after January 1, 2019, based on where services are rendered:
- Competitive bid areas.
- Rural/non-contiguous areas.
- Non-rural/urban/non-CBAs.
COMPETITIVE BID AREAS
CMS wants to use current SPAs with an annual increase for inflation until a new round of bidding can be deployed.
RURAL/NON-CONTIGUOUS AREAS
CMS proposes to extend the 50/50 blended rates for two years between January 1, 2019, and December 31, 2020. This extends the temporary provision contained in the recent CMS Interim Final Rule which engaged the 50/50 blended rates for the seven months ending December 31, 2018.
NON-RURAL/URBAN/CONTIGUOUS AREAS
While the Rule proposes to maintain the 100% adjusted rates, CMS explicitly requests feedback on the application of 50/50 blended to urban areas.
The above proposal will cost Medicare $1.05 billion and increase beneficiary cost-sharing responsibility by $260 million. The federal portion of the cost share will be $45 million; the Medicaid portion of the cost share will be $30 million.
MiraVista Analysis: We do not support using single payment amounts in CBAs. With the return of any willing provider to the CBA areas, CMS cannot offer suppliers the volume or exclusivity that makes the SPA feasible. Furthermore, a new competition provides contracted suppliers an opportunity to vet new pricing and potentially higher rates. Absent enforceable contracts in the CBAs, MiraVista believes CMS should follow existing fee schedules for urban areas. Medicare will still enjoy the savings from adjusted pricing. For some items, the SPAs will be higher than the urban fee schedules, and in others they will be lower. Urban schedules were created based on averages of the single payment amounts in similar geographical areas. Also, if CMS fixes the CBA transitional rates at SPAs, then if they decide to expand a blended rate to urban areas, the competed areas would not be eligible for increases. MiraVista is excited to see the extension for the blended rates in rural and non-contiguous areas and would like to see expansion of this policy to urban areas as well. CMS has offered other alternative blending rates that merit further discussion.
Reinvigorating Liquid Oxygen Through New Payment Classes for Oxygen
CMS wants to create three new payment classes for oxygen. Since the agency created the new payment class for oxygen generating portable equipment (OGPE), utilization of portable concentrators and home-fill systems doubled. Meanwhile, beneficiary utilization of portable gas systems declined slightly and utilization of liquid systems dropped dramatically, accounting for only 2 percent of all portable utilization.
CMS believes the current system disincentivizes suppliers from providing liquid oxygen. As a result, CMS proposes to realign oxygen payment classes and provide a new add-on payment for liquid oxygen that is equivalent to the OGPE add-on rate. The three new payment classes are:
- Portable gaseous oxygen equipment,
- Portable liquid oxygen equipment (which includes an add-on payment equal to OGPE), and
- High-flow portable liquid oxygen contents (which permits suppliers to bill 1.5 times the allowable for contents).
The following chart compares the five current payment classes to the seven newly-proposed classes:
CMS maintains that budget neutrality offsets are required despite competitive bid derived savings. As a result of maintaining the “double-dip” cuts, this proposal is expected to be budget neutral.
MiraVista analysis: Under this proposal high-flow oxygen equipment and contents receive a higher reimbursement to offset expenses tied to high-risk beneficiaries. We agree that additional compensation is necessary to protect beneficiary access to liquid oxygen. Many beneficiaries have lung conditions that require the purity and unrestricted liter flows offered by liquid oxygen. MiraVista also supports the industry’s efforts to reverse the CMS position on double-dip cuts. Budget neutrality protections should not apply to competitively bid adjusted fee schedules.
Paying for a New Multifunction Ventilator
In April 2017, Ventec Life Systems received FDA approval for a new device called the VOCSN Unified Respiratory System. This 18-pound device combines five respiratory therapies: ventilation, oxygen, cough assist, suction pump and nebulizer (VOCSN). According to the DME PDAC, the device is currently coded E0465 or E0466, and the additional components (oxygen, cough, suction and nebulizer) are coded A9900 (miscellaneous DME supply, accessory or service component of another HCPCS code).
CMS did not have any guidance on setting payment rates for a device like this, nor did they have guidance on which function should determine the payment category for a multifunction unit. Because the FDA classified the device as a ventilator, however, CMS proposes to keep the product in the frequent and substantially serviced (continuous rental) category. With regards to reimbursement, CMS believes payment should not be set at a collective rate because certain functions may not be medically necessary. Instead, CMS suggests increasing the ventilator fee schedule amounts by the average cost of the additional features. The table below demonstrates the proposed payment method:
MiraVista analysis: Under this proposal high-flow oxygen equipment and contents receive a higher reimbursement to offset expenses tied to high-risk beneficiaries. We agree that additional compensation is necessary to protect beneficiary access to liquid oxygen. Many beneficiaries have lung conditions that require the purity and unrestricted liter flows offered by liquid oxygen. MiraVista also supports the industry’s efforts to reverse the CMS position on double-dip cuts. Budget neutrality protections should not apply to competitively bid adjusted fee schedules.
Paying for a New Multifunction Ventilator
In April 2017, Ventec Life Systems received FDA approval for a new device called the VOCSN Unified Respiratory System. This 18-pound device combines five respiratory therapies: ventilation, oxygen, cough assist, suction pump and nebulizer (VOCSN). According to the DME PDAC, the device is currently coded E0465 or E0466, and the additional components (oxygen, cough, suction and nebulizer) are coded A9900 (miscellaneous DME supply, accessory or service component of another HCPCS code).
CMS did not have any guidance on setting payment rates for a device like this, nor did they have guidance on which function should determine the payment category for a multifunction unit. Because the FDA classified the device as a ventilator, however, CMS proposes to keep the product in the frequent and substantially serviced (continuous rental) category. With regards to reimbursement, CMS believes payment should not be set at a collective rate because certain functions may not be medically necessary. Instead, CMS suggests increasing the ventilator fee schedule amounts by the average cost of the additional features. The table below demonstrates the proposed payment method:
When a beneficiary receives a multifunction ventilator and only meets the coverage criteria for the ventilator and no other device, payment should be made for the ventilator only... no add-on rate. If the beneficiary meets the criteria for one or more of the additional functions, regardless of how many features, CMS would reimburse a bundled add-on payment using the average rental fee for the other four components. When a beneficiary has a multifunction unit, Medicare will deny payment if a supplier bills for any of the other four components, contents, supplies or accessories.
The frequent and substantially serviced (continuous rental) payment classification precludes separate payment of all supplies. CMS stated this methodology is unique to this item and does not apply to other multifunction items.
CMS expects this benefit to cost the Medicare program approximately $15 million for the period between January 1, 2019, and September 30, 2023.
The frequent and substantially serviced (continuous rental) payment classification precludes separate payment of all supplies. CMS stated this methodology is unique to this item and does not apply to other multifunction items.
CMS expects this benefit to cost the Medicare program approximately $15 million for the period between January 1, 2019, and September 30, 2023.
MiraVista analysis: MiraVista supports the CMS proposal. The bundled approach to supplies like suction canisters, nebulizer kits and other items should simplify the billing process for suppliers.
The manufacturer designed the multifunctional unit to address customer portability and independence needs. With an estimated acquisition cost of $22,000, suppliers should evaluate durability and other factors to ensure the investment makes sense over a 5-year useful lifetime.
Adding the Northern Mariana Islands to National Mail Order Competitions
The national mail order program for diabetic testing supplies is currently in effect in all areas of the U.S. The Northern Mariana Islands, however, are excluded due to a regulation technicality and omission. As such, the Northern Mariana Islands are currently the only state or territory not limited to the nine suppliers included in the national mail order program. Nonetheless, CMS currently pays for mail order items in the Northern Mariana Islands at the same rates as all other areas under the program. CMS proposes to include the Northern Mariana Islands in all future competitions under the national mail order program.
This proposal has no fiscal impact.
Breaking Up Nine Really Big CBAs For Future Competitions
In previous rounds of bidding, CMS subdivided the three largest metropolitan areas from initial rounds: New York, Los Angeles and Chicago. In the Rule, CMS wants input on whether or not they should split nine more CBAs into smaller service areas. CMS is evaluating the following nine competitive bid areas:
CMS acknowledges that breaking up these MSAs would require more bids and surety bonds from suppliers. CMS also believes that smaller geographical areas may be more reasonable to service.
Suppliers can submit comments to CMS on any provision of this proposed rule before September 10, 2018.
SOURCE LINKS
https://www.gpo.gov/fdsys/pkg/FR-2018-07-19/pdf/2018-14986.pdf
The manufacturer designed the multifunctional unit to address customer portability and independence needs. With an estimated acquisition cost of $22,000, suppliers should evaluate durability and other factors to ensure the investment makes sense over a 5-year useful lifetime.
Adding the Northern Mariana Islands to National Mail Order Competitions
The national mail order program for diabetic testing supplies is currently in effect in all areas of the U.S. The Northern Mariana Islands, however, are excluded due to a regulation technicality and omission. As such, the Northern Mariana Islands are currently the only state or territory not limited to the nine suppliers included in the national mail order program. Nonetheless, CMS currently pays for mail order items in the Northern Mariana Islands at the same rates as all other areas under the program. CMS proposes to include the Northern Mariana Islands in all future competitions under the national mail order program.
This proposal has no fiscal impact.
Breaking Up Nine Really Big CBAs For Future Competitions
In previous rounds of bidding, CMS subdivided the three largest metropolitan areas from initial rounds: New York, Los Angeles and Chicago. In the Rule, CMS wants input on whether or not they should split nine more CBAs into smaller service areas. CMS is evaluating the following nine competitive bid areas:
- Phoenix-Mesa-Scottsdale, AZ
- Boise City, ID
- Dallas-Fort Worth-Arlington, TX
- Riverside-San Bernardino-Ontario, California
- Houston-The Woodlands-Sugar Land, Texas
- Bakersfield, California
- Salt Lake City, Utah
- San Antonio-New Braunfels, Texas
- Atlanta-Sandy Springs-Roswell, Georgia
CMS acknowledges that breaking up these MSAs would require more bids and surety bonds from suppliers. CMS also believes that smaller geographical areas may be more reasonable to service.
Suppliers can submit comments to CMS on any provision of this proposed rule before September 10, 2018.
SOURCE LINKS
https://www.gpo.gov/fdsys/pkg/FR-2018-07-19/pdf/2018-14986.pdf
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