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Mark J. Higley New England Medical Equipment Dealers Association December 7, 2006. You’ve probably seen this slide before…but again, the HME industry needs to emphasize that…. Homecare is the most cost-effective setting for healthcare…a fact that is amply documented in medical literature.

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Mark J. Higley New England Medical Equipment Dealers Association December 7, 2006

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Mark J. Higley

New England Medical Equipment Dealers Association

December 7, 2006

you ve probably seen this slide before but again the hme industry needs to emphasize that
You’ve probably seen this slide before…but again, the HME industry needs to emphasize that…
Homecare is the most cost-effective setting for healthcare…a fact that is amply documented in medical literature.
  • Moreover, homecare spending represents a very modest proportion of the total Medicare budget. The previous chart attached shows that home medical equipment expenditures and home health expenditures in Medicare over the past decade represent small fractions of the Medicare budget.
  • Demand for homecare has increased along with the medical needs of a growing population of older Americans. But spending for homecare is clearly not the problem with Medicare. In fact, it's part of the solution.
vgm fraud abuse initiative
VGM “Fraud & Abuse” Initiative
  • Result of conversations with Senate Finance Committee
  • Email sent to 5,300 provider locations
  • Hard copies sent to 1,800 provider physical addresses
  • Hard copies faxed to all members of Congress and certain other appropriate officials

Homecare’s key issues include…

  • CMS 1270- P; the May 1 proposed rule re the competitive bidding program for DMEPOS
  • Section 6109 of the Deficit Reduction Act; eliminating the Medicare beneficiary’s choice of continuing to rent oxygen equipment in the capped rental category, followed by…
  • CMS 1304 – F; The final rule that revamps oxygen classification system by splitting stationary & portable oxygen contents into two separate payment classes, and calls for a third payment class for new technologies, such as portable concentrators and

home transfilling systems.


And most recently…

  • The October 2, 2006, CMS announcement of the reduced reimbursement levels for power wheelchairs that was effective on November 15, 2006.
  • The original proposed fee schedule called for substantial cuts in rehab reimbursement, which would significantly limit access to the medically appropriate power mobility device (PMD) for the disabled community.
  • However, as a result of continued discussions with manufacturers, suppliers, and clinicians, a decision has been made to further revise the PMD policy.

Other Items We Will Review…

  • An economist report summarizing cost and savings issues associated with competitive bidding
we will also review important these regulatory issues including
We will also review important these regulatory issues, including…
  • The final supplier quality standards--which HME providers must meet not only to participate in competitive bidding but also to do any Part B business.
  • CMS 1540-F; the August 1 final rule that establishes requirements for accreditation of DMEPOS suppliers and lays the groundwork for timely implementation of NCB.
  • The Accrediting organizations selection, of which the selection of “deemed status” entities has now occurred.
  • NPI Concerns
lame duck session issues
“Lame Duck” Session Issues:
  • Congress returned on December 4, & is now considering add-ons to Medicare Physician Payment Legislation totaling $20B. This may be considered along with unrelated extensions for certain tax breaks.
  • Lawmakers continue to work toward an agreement on cuts in the Lame-Duck Session.
  • Our concern: Is there potential for further reducing O2 reimbursement (13 mo.) due to an estimated $6.5 billion savings?
doc fix
“Doc Fix”
  • Medicare physician reimbursements will decrease by 5.1% in January 2007 without congressional action during the lame-duck session, which likely will end this week
  • Frist: 4 different proposals under consideration, including a doubling of the reduction in 2008 to cover the cost
  • Also: Lawmakers "are weighing a lengthy list of possible add-ons to the Medicare physician payments legislation," such as provisions that involve nursing homes, physical therapists, medical device companies, rural health care facilities and kidney dialysis providers.
The provisions have "a collective price tag approaching $20 billion, and there appear to be few available offsets that do not spark strenuous objections from health care interests" or the Bush administration
  • Other potential funding reductions under consideration include a freeze on Medicare reimbursements to payments for hospice and home health providers
As the 109th Congress comes to an end and the industry heads toward a pivotal year, it’s time to make yourself known and lay the groundwork for the 110th Congress.
  • It is time to mobilize your local home care community—providers, manufacturer representatives, patients, and families.
hme industry wins one

“Skirmish” NOT THE









the future we don t know
The Future We Don’t Know

(WRITTEN BEFORE THE ELECTION)….Democrats "plan to undo the Medicare drug program" if they win a majority of one or both chambers of Congress, Robert Goldberg, vice president for strategic initiatives at the Center for Medicine in the Public Interest, writes in a Washington Times opinion piece. According to Goldberg,

House Minority Leader Nancy Pelosi (D-Calif.)

recently "promised that if Democrats took control

of Congress, her party would eliminate the choice

of private-sector plans in favor of a single govern-

ment purchaser for seniors' medications &

medical equipment" Such a Program would reduce

costs“ only by drastically limiting the choice of

Medicines that doctors and seniors now have,“

adding that the Department of Veterans Affairs (VA) drug plan

"offers 30% fewer drugs than the average Medicare plan.“ ..“the Democrats will again push for a nationalized healthcare plan similar to the “Hillary Plan” of the early 1990’s.” (National Journal, 10/17)

Members of Congress do want to hear from their constituents—that is, anyone who lives in the state (for Senators) or the specific Congressional District they are from (for House members). Links on VGM allow you to punch in a zip code and receive a link to your corresponding senator or House member.
FACTS: In any given year, only a small percentage of constituents contact their members of Congress. Fewer than 3% of constituents contact their member of Congress about legislative issues. Fewer than 2% of constituents are active in political campaigns.
  • That means that, as a constituent, your calls, e-mails, and meetings make a big difference—especially if you underscore the role your organization plays in the community with your number of employees and the number of home care patients you represent.  
In some cases, a few calls from just one well-connected, politically active home care provider can produce huge results in getting a member to cosponsor or even introduce legislation.
  • We have seen that happen several times this year already on the Home Oxygen Patient Protection Act. We encourage all NEMED providers to become a well-connected activist.  
next chairman of ways means committee
  • Rep. Charlie Rangel (D-NY)

(Incoming Chairman)

  • Rep. Jim McCrery (R-LA)

(Ranking Member)

next chairman of energy commerce committee
NEXT CHAIRMAN OF Energy & Commerce Committee
  • Rep. Joe Barton (R-TX)

(outgoing Chairman –

New Ranking Member)

  • Rep. John Dingell (D-MI)

(New Chairman)

next chairman of senate finance committee
NEXT CHAIRMAN OF Senate Finance Committee…
  • Sen. Charles Grassley (R-IA)

(Former Chairman –

New Ranking Member)

  • Sen. Max Baucus (D-MT)

(New Chairman)

A minimum of about 400 e-mails or letters and 500 phone calls are required to get a Congressional office to modify or reconsider its position on an issue. If every home care provider in a given Congressional district contacts his member of Congress, it may not be enough to push our issues to the top of the heap.
  • Knowing this makes it all the more essential to make sure that home care providers recognize their role as leaders who can bring more stakeholders into the picture. One of the stakeholder groups you can bring in is employees. The drivers, therapists, and others who work for your organization can champion home care issues if they are in the loop about them and are encouraged to contact Congress.  
Mobilizing patients to contact Congress can be an effective means of advocating for stronger home care policy in Washington.
  • Ask the member of Congress to perform a specific action. For instance, to fix competitive bidding, ask members to sign on to the Hobson-Tanner bill (HR 3559 in the 109th; re-introduction is very likely). For the oxygen issue, ask members of the House cosponsor the Home Oxygen Patient Protection Act (HR 5513) and Senators to cosponsor S 3814 (re-introduction of each also likely).  
Be prepared, professional, polite, and patient. Time is tight.  Get to the point quickly, be brief, and summarize—always summarize.  
  • Congressional staff members have more issues and details to cover than they can manage. Reinforce the issue as much as possible with one-page leave-behinds.
  • Talking points & summaries are available from VGM & AAHomecare.
requests during the lame duck session
Requests during the lame duck session:
  • Don’t consider adding the capping of oxygen reimbursement at 13 months to any appropriations bills
  • Add language to an HHS appropriations bill to strike the DRA’s provision for capped rental oxygen at 36 months
  • PMD implementation delay to get all the miscalculations and errors fixed before a final implementation date of January 1, 2007
nemed provider call to action
NEMED Provider Call To Action...
  • After the lame duck session and the 110th Congress is in…emphasize to your elected officials the importance of co-sponsoring and supporting the (reintroduced) H.R. 3559 and S.3920, and also the Home Oxygen Patient Protection bills (H.R. 5513 and S. 3814.)
rep hobson hr 3559
Rep. Hobson: HR 3559

On July 28, 2005, Congressmen David Hobson (R-OH) and John Tanner (D-TN) introduced The Medicare Durable Medical Equipment Access Act of 2005. This bill would remedy many of the “competitive acquisition” provisions of the Medicare Modernization Act of 2003 (MMA). In remarks at AAHomecare’s Congressional reception in June, Congressman Hobson said he had vetted HR 3559 through the Ways and Means Committee (Chairman Bill Thomas) with no major objections.


Note: There were 149 Co-Sponsors to HR 3559 in the 109TH Congress!


Hobson – Tanner Recap

H.R. 3559 would amend the MMA to protect patient access to homecare and allow qualified small providers to participate in the bidding program. The bill would:- Exempt smaller, rural (populations under 500,000) MSAs;

- Allow all qualified providers that are small businesses and that submitted a bid below the current allowable to participate at the selected award price;

- Restore the right of providers participating in the program to administrative and judicial review;


Hobson – Tanner Recap

- Exempt items and services unless savings of at least 10 % can be demonstrated, compared to the fee schedule in effect January 1, 2005; - Protect beneficiary access to care by requiring CMS to conduct a comparability analysis for areas that are not competitively bid to ensure the rate is appropriate to costs and does not reduce access to care; - Subject the PAOC to the Federal Advisory Committee Act (FACA), which requires public access to meetings and proceedings.

s 3920
S. 3920


September 21, 2006

Mr. HATCH (for himself and Mr. CONRAD) introduced the following bill; which was read twice and referred to the Committee on Finance

To amend part B of title XVIII of the Social Security Act to assure access to durable medical equipment under the Medicare Program.

Note: There were 2 Co-Sponsors to S. 3920 in the 109TH Congress

hr 5513
HR. 5513
  • H.R.5513 -- Title: To amend part B of title XVIII of the Social Security Act to restore the Medicare treatment of ownership of oxygen equipment to that in effect before enactment of the Deficit Reduction Act of 2005. Sponsor: Rep Schwarz, John J.H. "Joe" [MI-7] (introduced 5/25/2006)      Cosponsors (74) Latest Major Action: Referred to House subcommittee. Status: Referred to the Subcommittee on Health.

Note: Rep. Schwarz was defeated in the primary. However

Rep. Tom Price (R-GA), a physician, has indicated he will reintroduce the bill

s 3814
S. 3814
  • S.3814Title: A bill to amend part B of title XVIII of the Social Security Act to restore the Medicare treatment of ownership of oxygen equipment to that in effect before enactment of the Deficit Reduction Act of 2005. Sponsor: Sen Roberts, Pat [KS] (introduced 8/3/2006)      Cosponsors (6) Latest Major Action: 8/3/2006 Referred to Senate committee. Status: Read twice and referred to the Committee on Finance.

Note: Senator Roberts has indicated he will reintroduce the bill

hr 4994
HR 4994


Title: To amend title XVIII of the Social Security Act to exempt complex rehabilitation products and assistive technology products from the Medicare competitive acquisition program. Sponsor: Rep Lewis, Ron [KY-2] (introduced 3/16/2006)      Cosponsors (7) Latest Major Action: 3/16/2006 Referred to House committee. Status: Referred to the Committee on Energy and Commerce, and in addition to the Committee on Ways and Means

hatch is committed to reintroduce senate bill
Hatch is committed to reintroduce Senate bill

Alpine Home Medical Equipment, Peterson Medical receive "promise to study the issue" from Utah Senator during “MEET & GREET”

Local providers of home medical equipment set aside their competitive interests Tuesday and joined forces to lobby for help in stopping legislation deemed detrimental to the industry from taking effect early next year. Business owners and their patients met with Sen. Orrin Hatch, R-Utah, to encourage him to sponsor a bill that would prevent competitive bidding for home medical equipment, particularly oxygen, from becoming part of the Medicare program absent demonstrated cost savings and other quality control measures. A similar bill is making its way through the House of Representatives.

Tell a story by putting a human face on the issue. Try to know the member’s position beforehand so you can be prepared. A face-to-face meeting with the member of Congress or staff is the most effective means of getting your point across. The meeting can take place in Washington in the member’s Capitol Hill office, in the district office back in the state, or during a visit to your site or facility.
  • Examples follow…
Mercy Assisted Care meets with Rep. Paul Ryan (R-WI/Ways & Means) and demonstrated oxygen concentrator functions and maintenance
PENNSYLVANIA MEMBERS MEET WITH REP. TIMOTHY MURPHY, a physician who thought “DME suppliers just deliver…”
connecticut co sponsors hr 3559

Connecticut (3 out of 5 = 66%)

Rep John Larson (D-1st Dist) Ways & Means

Rep Robert Simmons (R-2nd Dist) DEFEATED IN NOV

Rep Rose deLauro (D-3rd Dist) Budget

Rep. Christopher Shays (R-4th Dist)

Rep. Nancy Johnson (R-5th Dist) Ways & Means DEFEATED IN NOV

new conn members

Rep.-Elect Joe Courtney (D—Conn.)

Replaced Rep. Robert Simmons

2nd District

Residence: VernonBorn: April 6, 1953; Hartford, Conn.Religion: Roman CatholicFamily: Wife, Audrey Budarz Courtney; two childrenEducation: Tufts U., B.A. 1975 (history); U. of Connecticut, J.D. 1978Military Service: NoneCareer: Lawyer; public defenderPolitical Highlights: Conn. House, 1987-1995; Democratic nominee

for lieutenant governor, 1998; Democratic nominee for U.S. House, 2002

  • Joe Courtney comes to Congress with an extensive background in health care issues, but he realizes that freshmen sometimes have limited opportunities to exploit their strengths.
  • Courtney was a leader on health issues while serving in the state legislature.
new conn members1

Rep.-Elect Christopher S. Murphy (D—Conn.)

Replaced Rep. Nancy Johnson

5th DistrictResidence: CheshireBorn: August 3, 1973; White Plains, N.Y.Religion: ProtestantFamily: Engaged to Cathy HolahanEducation: Williams College, B.A. 1996 (history & political science); U. of Connecticut, J.D. 2002Military Service: NoneCareer: Lawyer; state legislative and campaign aidePolitical Highlights: Southington Planning and Zoning Commission, 1997-99; Conn. House, 1999-03; Conn. Senate, 2003-present

massachusetts co sponsors

Massachusetts (8 out of 10 = 80%)

Rep John Olver (D-1st Dist)

Rep. Richard Neal (D-2nd Dist) Ways & Means

Rep. James McGovern (D-3rd Dist)

Rep. Barney Frank (D-4th Dist)

Rep. Marty Meehan (D-5th Dist)

Rep. John Tierney (D-6th Dist)

Rep. Edward Markey (D-7th Dist) Energy & Commerce

Rep. Michael Capuano (D-8th Dist)

Rep. Stephen Lynch (D-9th Dist)

Rep. William Delahunt (D-10th Dist)

maine co sponsors

MAINE (2 out of 2 = 100%)

Rep Thomas Allen (D-1st Dist) ENERGY & COMMERCE

Rep. Michael Michaud (D-2nd)

new hampshire co sponsors

New Hampshire CO-SPONSORS (1 out of 2 = 50%)

Rep Jeb Bradley (R-1st Dist) BUDGET DEFEATED IN NOV

Rep. Charles Bass (R-2nd Dist) Energy & Commerce DEFEATED IN NOV

new new hampshire members

Rep.-Elect Paul W. Hodes (D-N.H.)

Replaced Rep. Charlie Bass

2nd DistrictResidence: ConcordBorn: March 21, 1951; Manhattan, N.Y.Religion: JewishFamily: Wife, Peggo Horstmann Hodes; two childrenEducation: Dartmouth College, A.B. 1972 (French & drama); Boston College, J.D. 1978Military Service: NoneCareer: Lawyer; musician; state prosecutorPolitical Highlights: Democratic nominee for U.S. House, 2004

  • Paul W. Hodes says a career in law and public service, complemented by his passion for the arts, should bode well for him in what could be a hostile 110th Congress.
  • Hodes is interested in serving on the Energy and Commerce and the Judiciary committees.
new new hampshire members1

Rep.-Elect Carol Shea-Porter (D—N.H.)

Replaced Rep. Jeb Bradley

1st DistrictResidence: RochesterBorn: December 1952; New York, N.Y.Religion: Roman CatholicFamily: Husband, Gene; two childrenEducation: U. of New Hampshire, B.A. 1975 (social services), M.P.A. 1979Military Service: NoneCareer: Community college instructor; social workerPolitical Highlights: No previous office

Prognosis: Very Liberal


Rhode Island CO-SPONSORS (2 out of 2 = 100%)

Rep Patrick Kennedy (D- 1st Dist)

Rep. James Langevin (D-2nd Dist)

Senator Lincoln Chafee (R-RI)DEFEATED IN NOV

new senator in ri

Sen.-Elect Sheldon Whitehouse (D—R.I.)

Replaced Senator Lincoln Chafee

Residence: ProvidenceBorn: October 20, 1955; Manhattan, N.Y.Religion: EpiscopalianFamily: Wife, Sandra Whitehouse; two childrenEducation: Yale U., B.A. 1978 (architecture); U. of Virginia, J.D. 1982Military Service: NoneCareer: Lawyer; gubernatorial aidePolitical Highlights: R.I. Department of Business Regulation director, 1992-94; U.S. attorney, 1994-98; R.I. attorney general, 1999-2003; sought Democratic nomination for governor, 2002


VERMONT CO-SPONSORS (1 out of 1 = 100%)

Rep. Bernard Sanders (I – At Large) WON SENATE RACE

Senator James Jeffords (R-VT) Retired

vermont new member

New Member Profile: Rep.-Elect Peter Welch (D—Vt.)

Replaced Rep. Bernard Sanders

Residence: HartlandBorn: May 2, 1947; Springfield, Mass.Religion: Roman CatholicFamily: Widowed; five childrenEducation: College of the Holy Cross, A.B. 1969 (history); U. of California, Berkeley, J.D., 1973Military Service: NoneCareer: Lawyer; county public defenderPolitical Highlights: Vt. Senate, 1981-89 (minority leader 1983-85; president pro tempore, 1985-89); sought Democratic nomination for U.S. House, 1988; Democratic nominee for governor, 1990; Vt. Senate, 2002-present (president pro tempore, 2003-present)

  • Peter Welch says "fiscal responsibility" has been one of his guiding principles as president pro-tem of the Vermont Senate, and from his perspective, the Republican Party has not handled the federal government's finances very well.
  • Welch says the Bush administration's tax cuts contributed to deficits and did little to help the middle class. In particular, he wants to reverse the cuts given to large energy producers.
  • Following the Democratic Party line, Welch also wants to immediately work toward raising the minimum wage. A seat on the Ways and Means Committee is one of his long-term goals.
power wheelchairs
Power Wheelchairs
  • CMS's latest action lowered the Medicare reimbursements for power wheelchairs and scooters by 21 percent to 41 percent
  • Many providers from around the country said they would stop providing mobility equipment or go out of business because the Medicare reimbursement payments will be too low to cover the cost of acquiring the chair, fitting the patient and servicing the equipment.
Restrictive changes in the coding and coverage policies and price reductions were to take effect 11/15
  • The industry’s messages were clear:

1. You have chipped away at the benefit over the last three years, and this latest step ensures that people living with disabilities will get little help from Medicare when they need a power wheelchair to remain independent, and out of institutions.

2. This is an intolerable situation that amounts to dismantling an important Medicare benefit for senior citizens and people living with disabilities. There will be a loud and powerful outcry. CMS won't be allowed to turn back the clock on providing a critical piece of medical equipment for people who need mobility assistance.
3. Clinically, it is standard professional practice to address all mobility needs for typical daily activities; essentially, these cuts will sentence people to live their lives in institutions or they will be forced to hire caretakers. The costs of caretakers and institutionalization will ultimately far outdistance the price of a wheelchair.
some success
Some success…
  • The power wheelchair industry had lined up a bi-partisan group of 44 members of Congress and asked Health and Human Services (HHS) Secretary Michael Leavitt to delay Medicare cuts to power wheelchairs.
  • Muscular Dystrophy advocate and comedian Jerry Lewis joined in.
as a result
As a result…
  • CMS issued “Revisions to the fee schedules” on November 9, 2006.
  • These revisions were in response to recognized flaws and miscalculations in the fee schedules. Although this was welcomed and appropriate, the industry remains very concerned with the level of reductions and believe calculation errors and anomalies still exist.
Providers should continue to move forward with the November 15th, 2006 effective date of the new PMD LCD and fee schedules.  When filing claims for dates of service on or after November 15th, providers should utilize the new LCD as the coverage policy for PMDs and should also continue to bill in the same customary manner with their retail pricing information.
industry position
Industry Position:
  • The new fee schedules released by CMS result in payment reductions of approximately 25% ($175 million from a $720 million benefit) which are extremely unsustainable, will force Medicare beneficiaries into inappropriate Power Mobility Devices (PMDs), and will cause unnecessary harm to Medicare providers and quality U.S. PMD manufacturers.
NEMED providers should continue to communicate their concerns to HHS Secretary Michael Leavitt, Acting CMS Administrator Leslie Norwalk, Acting CMS Deputy Administrator Herb Kuhn, and their Congressional Representatives.
  • Members of Congress must communicate their concerns and the need for a retraction and delay directly to HHS and CMS.
  • You can email these key contacts directly from VGM or the websites
national competitive bidding
  • What is the criteria for selection of the first 10 MSA’s?
  • Where will the first 10 MSA’s be?
  • How will initial bidding effect NEMED Members?
  • Will there be protection for Small Business Providers?
  • When will CMS announce the first 10 MSA’s?
nemed providers are not necessarily exempt
NEMED Providers are not necessarily “exempt”
  • It is important to remember that all payers (e.g., Medicaid, managed care) will likely base their fee schedules on Medicare… so there will be a ripple effect if these polices and fee schedule are implemented!
  • The MMA allows the schedule to be implemented in non-CBAs. “CMS intends to use this authority”
The NPRM, over 200 pages, did not identify exactly which items will be subject to bid, nor name the exact MSAs where competitive bidding will begin in 2007.
  • It did include a formula suggesting the selection process, which includes the total population in an area, total Medicare DME spending in the area, per beneficiary spending and the number of suppliers per beneficiary.
As you are most aware, on May 1 CMS published its proposed rule to phase in the competitive acquisition program for DMEPOS under Medicare Part B.
  • Thousands of stakeholder comments were submitted prior to the June 30 deadline
  • We will review some of the most frequently commented issues
The rule specifically excludes the top three MSAs (New York, Los Angeles and Chicago) to allow the agency more time to gain experience with the program.
Other MSA selection criteria within the proposal:* MSAs that cross DMERC regions will not be included * Requires at least one competitive bidding area in each DMERC region. CMS will select the highest scoring MSA in each DMERC. * No more than two MSAs per state * CMS may exclude from competitive bidding a rural area or an area with low population density
based on cms proposed formula the top msas using 2003 data would include in order
Based on CMS' proposed formula, the top MSAs (using 2003 data) would include, in order:

San AntonioTampa, FLKansas City, MOVirginia Beach, VASt. LouisSan FranciscoClevelandDetroitBaltimorePhiladelphiaWashington, D.C.Boston.

Miami Riverside, CAPittsburghCincinnatiHoustonDallasCharlotte NCOrlandoSan Juan, PR Atlanta

Important Note: The actual cities will be selected using 2005 data. This data is not yet published.

  • The competitive bidding program will be phased in over several years. CMS proposed to implement the program in 10 of the largest metropolitan areas in 2007, 80 more cities in 2009, and others after 2009.
beneficiary access
Beneficiary access…
  • When competitive bidding is implemented, beneficiaries who live in a CBA will be permitted to obtain DMEPOS only from contracted suppliers.
  • Beneficiaries whose permanent residence is outside a CBA but visit a CBA also will be required to utilize contracted suppliers.
  • The Medicare payment amounts would be the median of (only) the winning suppliers’ bids for selected items.
  • The proposed rule allowed suppliers whose bids are lower than the Medicare payment amounts set under the competitive bidding program could offer a rebate to beneficiaries.
product selection
Product Selection
  • The MMA directs CMS to prioritize competitive bidding by beginning with the items that have the highest volume and highest cost, or that have the greatest potential for savings. CMS will begin with the high cost, high volume items first, using SADMERC utilization data from 2004.
the bid process
The Bid Process
  • Competitive bidding items will be included in product categories and identified by HCPCS codes. Suppliers may choose to bid on one, some, or all of the product categories, but if they bid on a category, they must bid on each item included in the category.
  • Bidders who bid at or below the “pivotal bid” are winning bidders, assuming they meet other requirements.
bid selection
Bid Selection
  • After calculating the composite bid for each bidder, CMS would determine the capacity or market demand it would have to meet to service beneficiaries in an area. Capacity would be measured based on the projected utilization demands of the market (i.e., the MSA) and a bidder’s individual capacity.
  • This analysis would determine the number of winning bidders CMS must select for a given area. CMS would pick the pivotal bid by counting up from the lowest bid until it has counted as many suppliers as it needs to meet the capacity for the area.
bid selection1
Bid Selection
  • For example, if CMS receives 100 bids, but only needs five contract suppliers to service an MSA, bidder five will have the pivotal bid.
  • This methodology could result in a pivotal bid that is substantially lower than the median of all submitted bids.
payment amount
Payment Amount
  • To determine the single payment amount, CMS proposes to use the median of the bids submitted by the winners.
  • Frequent Comment: Using the median of the winning bids to establish the payment amount could drive down reimbursement because the median of the winning bids will be lower than the pivotal bid. CMS considered as an alternative the pricing methodology used in the demonstrations. Using this methodology, after the pivotal bid is determined, a supplier’s bid for each item in the product category would be adjusted so that each winning bid would equal the pivotal bid.
payment amount1
Payment Amount
  • CMS suggests the advantage of this option is that bidders are paid at least as much as they bid.
  • Frequent Comment: On the other hand, since most bidders will be paid more than their bid amount, it could encourage low bids.
transition policies
Transition Policies
  • The MMA requires CMS to develop transition policies to ensure continuity of service for beneficiaries. These polices would allow losing bidders to at least keep a portion of their existing patient base when competitive bidding begins. Losing bidders would not be allowed to take on any new patients for any of the items that come under a transition policy.
transition policies1
Transition Policies
  • For capped-rental equipment the payment rate would remain at the pre-competitive bidding level, i.e., the fee schedule amount in effect before the bidding.
  • For oxygen (and other equipment in the frequent/substantial servicing category) the supplier must agree to accept the competitive bidding price for the item. In each case, the losing bidder is precluded from taking on new patients for these items.
transition policies2
Transition Policies
  • CMS’ intent is to drive all business for competitively bid products to the contract supplier. Beneficiaries who visit the competitive bidding area and need products included in the bidding program would be required to obtain them from a contract supplier.
  • Conversely, beneficiaries who live in a competitive bidding area and need competitively bid equipment when they visit other areas can obtain the equipment from any Medicare supplier. However, Medicare will only pay the competitive bidding contract amount for the item.
transition policies3
Transition Policies
  • Finally, the NPRM would require winning bidders to accept every beneficiary in the MSA no matter how many months rental they have remaining on their equipment. CMS refers to this as a beneficiary protection in the event the beneficiary has a supplier who looses the bid and does not agree to the grandfathering terms.
national or regional competitive bidding area
National or Regional Competitive Bidding Area
  • Beginning in 2010 CMS is considering conducting national or regional competitions for products for which there is a national or regional mail order market.
  • In particular, CMS is considering requiring that all replacement supplies such as blood glucose test strips be furnished via mail order from a contract supplier. CMS is specifically requesting comments on how to implement this proposal.
protections for small suppliers
Protections for Small Suppliers
  • The MMA requires CMS to ensure that small providers have the opportunity to participate in the bid process, but does not require it to guarantee that small suppliers will be winning bidders.
  • CMS proposed to allow suppliers to form networks and to enter into sub-contracting arrangements. CMS considered whether to also allow suppliers to bid by zip code. According to CMS, this would permit small suppliers to maintain their service area without committing to serving the entire MSA.
protections for small suppliers1
Protections for Small Suppliers
  • However, the NPRM rejects this option because it can lead to “cherry picking” the best markets within an MSA. CMS also believes that allowing suppliers to choose what product categories to bid protects small suppliers because they do not have to offer a full array of products to compete in the bidding.
  • A legal entity must be formed for the purpose of competitive bidding, such as a joint venture, limited partnership, or contractor/subcontractor relationship which would act as the applicant and submit the bid.
  • For example, one supplier could be designated as a primary contractor and the other suppliers in the group would function as subcontractors.
  • Each member of the network must be independently eligible to bid.
  • Each member must meet any accreditation and quality standards that are required.
  • The network cannot be anti-competitive. The network members’ market shares for competitive bid item(s) when added together, cannot exceed 20 percent of the Medicare market within a competitive bidding area.
  • A supplier may only join one network and cannot submit individual bids if part of a network. The network must identify itself as a network and identify all members in the network.
  • The legal entity would be responsible for billing Medicare and receiving payment on behalf of the network suppliers. The legal entity would also be responsible for appropriately distributing reimbursements to the other network members.
vgm forms homecare providers of america network hpa
VGM Forms Homecare Providers of America Network (HPA)
  • Allows member companies the opportunity to participate as either a network member or a subcontractor in an assisted and fully administered combined bid and service process.
  • Members are expected to be able to select from available participation levels, product types and geographic service areas within the individually bid MSA's.
  • The proposed rule allows providers to network collectively to bid and furnish covered items. It also allows established provider networks and others to use qualified and identified subcontractors.
  • It is expected that VGM's entry will end up with operating programs in each competitive acquisition area in which a sufficient number of Members are interested in working together.
quality standards
Quality Standards
  • The NPRM states that only the bids from “eligible” providers will be evaluated when selecting the winning bid, but it is unclear how the determination of “eligibility” will relate to quality standards and accreditation. The eligibility criteria described in the NPRM are similar to the current Medicare enrollment standards and not as extensive as the standards accredited providers follow.
Unaccredited providers will have a grace period to become accredited if they want to participate in the bidding. A winning bidder who does not become accredited within the grace period will lose its contract supplier status.

Providers who are already accredited by one of the organizations chosen by CMS will be “grandfathered until their next accreditation cycle.

In August of this year CMS released the final supplier quality standards--which HME providers must meet not only to participate in the bid but also to do any Part B business
  • More than 5,600 stakeholders commented, with the most common complaint that they were "too prescriptive. Agency officials agreed.
CMS performed “significant revisions to reduce burden on small suppliers and ensure quality services for Medicare beneficiaries.”
  • The final standards reflect more general good business practices and product specific services.
  • CMS suggested that many suppliers already comply.
key revisions
Key Revisions
  • Removed “unnecessary specificity” and “redundant information” to reduce document from 104 pages to 14 pages.
  • Reduced “overly-prescriptive requirements”. Example: Eliminated requirement to be open for 40 hours/wk. & replaced with requirement to maintain posted business hours.
  • Clarified requirements for performance management; allows suppliers flexibility in determining indicators
  • Reduced the number of product specific standards from 15 to 3 via consolidation of product specific standards into general product service standards
CMS will post responses in more detail to all comments received.
  • The quality standards will be used as part of the accreditation organization selection process.
  • An Executive Summary and copies of the final standards are available on
accreditation update

On August 1 CMS released CMS 1540-F

This final rule:

  • establishes requirements for accreditation of DME suppliers
  • application process for accrediting organizations
  • lays the groundwork for timely implementation of NCB
accreditation update1
  • CMS has now approved eleven accrediting bodies in order to meet the bidding dates and to induce competition and assist in decreasing accreditation costs.
  • CMS will request accreditors to prioritize their surveys to assist suppliers located in the first bidding areas
Joint Commission on Accreditation of Healthcare Organizations
  • Community Health Accreditation Program
  • Healthcare Quality Association on Accreditation
  • National Board of Accreditation for Orthotic Suppliers
  • Board of Certification in Pedorthics
  • Accreditation Commission for Healthcare, Inc
  • Board for Orthotist/Prosthetist Certification
  • National Association of Boards of Pharmacy
  • Commission on Accreditation of Rehabilitation Facilities
  • American Board for Certification in Orthotics and Prosthetics, Inc.
  • The Compliance Team, Inc.
hobson tanner bill h r 3559 hatch conrad bill s 3920 update
Hobson-Tanner bill, H.R. 3559 Hatch-Conrad bill, S. 3920 Update
  • An economist has released a new report indicating H.R. 3559 will not result in significant changes in the savings Medicare can expect from national competitive bidding.
  • Dr. Kenneth Brown, Ph.D., who has authored previous work involving the HME industry and competitive bidding, concludes, “H.R. 3559, which would allow small businesses to participate in the market without submitting winning bids, will have little or no impact on the recent cost savings estimate for competitive bidding for DME.”
  • “Overall, I believe this provision will be beneficial to the overall DME market, particularly in terms of product and service quality, without adversely impacting the savings from the competitive bidding program.”


Industry analysts call Brown’s report “a strong statement in support of H.R. 3559 and the companion Senate bill.
  • VGM’s John Gallagher: “Dr. Brown takes away one of the leading arguments against 3559 by concluding that the cost of allowing any qualifying willing provider is very small and should not be a deterrent to passage”
Brown notes that the provisions in H.R. 3559 which would allow qualifying small business providers to continue to serve Medicare beneficiaries as long as they submit bids at less than the existing fee schedule (“any qualifying provider”) would reduce the number of providers seeking to submit winning bids but that the number of remaining bidders would still be significant enough to result in the lower pricing sought by Congress and CMS.
  • Brown cites the Bertrand’s Oligopoly Theory as part of the basis for his conclusion. In the Bertrand model, a bid process where losing bidders are eliminated from the market results in firms charging prices equal to their marginal costs, which represents the lowest bid they can accept. The process works to drive pricing to the marginal cost level regardless of the number of bidders, as long as there are at least two.


Brown’s report also states that allowing any qualifying provider will provide a built-in incentive for providers to exceed minimum standards to maintain market share. He cites the limitation on choice by beneficiaries under the current competitive bidding model as eliminating choice and thereby reducing quality. He asserts that more choice means higher quality, convenience and support
competitive biding savings
Competitive Biding Savings
  • Brown also evaluated the current projections for CMS savings under the DME-related provisions of Medicare Prescription Drug and modernization Act of 2003, the bill that created competitive bidding as well as other reimbursement cuts.
Brown notes that of the original $9.9 billion in savings CBO envisioned with reductions in payments for DME, 70% of that total has already been achieved via the inflation freeze and FEHBP cuts.
  • Brown, after indicating that the only 30% of the prospective saving is still available to achieve, questions, “one must wonder if the costs of implementing this program (competitive bidding) and the costs to the industry, especially the small business, justify its implementation.”
new nfp attempting to mitigate competitive bidding
New NFP Attempting to Mitigate Competitive Bidding
  • Last Chance for Patient Choice (LCPC) — www.lastchanceforpatients.orgis continuing plans to challenge the legality of the “competitive acquisition” portions of the MMA.
  • Two teams of lawyers are will be ready when CMS announces which metropolitan areas will be the “victims of the scheme in the first round of bids,” explains John Gallagher, LCPC vice president.
  • “As soon as we know where they are going geographically, we will need to quickly identify beneficiaries in those areas who wish to challenge the law. Providers have already told us there are many patients who are outraged with the idea that their current provider may well be excluded from continuing their service and are eager to challenge the law.”
Preliminary indications are that the suits will face an uphill battle in the courts because government programs are often presumed to have constitutional validity and the challengers have to establish themselves as requiring “special” protections to earn court intervention. “Believe it or not, most courts to date have not recognized the right to health care for ordinary citizens as warranting special protections from the courts,” notes Jim Walsh, VGM general counsel. “Now, if you are a prisoner you are entitled to this special protection, but if you are a frail, poor, elderly Medicare beneficiary you may be out of luck.”
In at least one of the planned court actions, the argument will be raised that the creation by MMA of a “second class” of Medicare beneficiaries is unconstitutional. VGM and LCPC lawyers will argue that that class is created by virtue of the “competitive acquisition” law in MMA that requires CMS to select a group of low-cost providers to serve Medicare beneficiaries in selected metropolitan areas.
DRA of 2005 Changes to Medicare Payment for Oxygen Equipment and Capped Rental Durable Medical Equipment
  • Background: On November 1, 2006, CMS issued its final rule for payment on the above DME in response to the Deficit Reduction Act of 2005.
  • The final rule issued is 416 pages. The parts pertaining to capped rental and oxygen can be found beginning on page 130 and ending on page 278.
dra capped rental summary
DRA Capped Rental Summary
  • Beginning January 1, 2006, there is no longer a choice for the customer to rent or purchase capped rental equipment (except for power wheelchairs).
  • Once the 13th month passes, so does the title. The customer now owns the equipment. The supplier that furnishes capped rental item for the first month must continue to furnish the item for as long as the equipment remains medically necessary.
  • The supplier may not provide different equipment unless one of the following exceptions applies: (1) the equipment is lost, stolen, or irreparably damaged;(2) the equipment is being repaired while loaner equipment is in use; (3) there is a change in the beneficiary’s medical condition or (4) the carrier determines that a change in equipment is warranted.
The DRA requires that Medicare make payments for reasonable and necessary maintenance and servicing of beneficiary owned capped rental equipment for parts and labor not covered by warranty. With the exception of capped rental items furnished prior to January 1, 2006, maintenance and servicing payments may only be made after the supplier has transferred title to the equipment to the beneficiary.
  • Existing policy of not covering routine maintenance or periodic servicing of purchased equipment will remain.
Expects the supplier, when transferring title to the equipment to the beneficiary, to provide operating manuals which describe the servicing an owner may perform to properly maintain the equipment.
  • All non-routine maintenance items (such as “breaking sealed components by authorized technicians” would be covered as reasonable and necessary maintenance and servicing.
  • Same fee schedule for labor that is currently used in servicing beneficiary-owned DME will remain.
cms 1304f oxygen provisions
CMS 1304F – Oxygen Provisions
  • Revamps oxygen classification system by splitting stationary and portable oxygen contents into two separate payment classes.
  • Calls for a third payment class for new technologies, including New Oxygen Generating Portable Equipment (OGPE) Technology
  • Also calls for additional supplier requirements "to safeguard beneficiaries", such as requiring that all suppliers continue furnishing oxygen equipment throughout the entire rental period
data from the 2006 oig report medicare home oxygen equipment
Data from the 2006 OIG Report, Medicare Home Oxygen Equipment:

Cost and Servicing was utilized in determining the number of beneficiaries that would be affected “post 36 months.”

Utilizing data from the OIG report CMS made the following determinations.

  • Beneficiaries who used their equipment 1 year or less: 61%
  • Beneficiaries who used their equipment 2-3 years: 36%
  • Beneficiaries who used their equipment 3-4 years: 26%
  • Beneficiaries who used their equipment 4-5 years: 19%
  • Beneficiaries who used their equipment > 5 years: 14%

Based on the above data, the final rule establishes the following payments over the next 4 years.

new oxygen generating portable equipment ogpe technology
New Oxygen Generating Portable Equipment (OGPE) Technology
  • CMS instituted an additional payment amount for OGPE / trans-filling devices due to the absence of reimbursement post 36 months. If you deliver a device classified as a trans-filling device or OGPE you will not be able to bill or receive reimbursement post transfer of ownership. These devices are self generating / self filling and do not require the provider to fill any portable liquid or gaseous systems
the add on fee was determined by utilizing the following formula
The add-on fee was determined by utilizing the following formula:
  • If you fill a cylinder or liquid vessel post 36 months you will are entitled to bill $77.45 for delivery of contents for portable devices.
  • Medicare has determined the useful life of this equipment is 5 years (60 months). Therefore a provider would be able to bill $77.45, the billable amount for delivery of oxygen contents for portable devices, for 24 months post transfer of ownership.
  • 24 X $77.45 = $1,858.80 (amount you would be reimbursed for the entire 24 month period of remaining useful life post transfer)
  • The total amount, $1,858.80 is then divided by 36 months, the number of months a provider bills prior to transfer of ownership. $1858.80 divided by 36 = $51.63.
  • Medicare has determined the rule will be budget neutral over a 5 year period. To maintain budget neutrality the amount of reimbursement will be adjusted annually.
final rule payment amounts by year are as follows
Final rule payment amounts by year are as follows:
  • 2007 and 2008- $250.03
  • 2009- $244.84
  • 2010- $241.02
  • Medicare originally proposed a total of $241 (stationary and portable - new technology).
The proposed rule suggested a total reimbursement rate of $154.90 for delivery of stationary and portable oxygen contents. CMS further suggested that since stationary oxygen is utilized more than portable oxygen, the content delivery fee would be split 65% for stationary and 35% for portable.
  • In response to comments received by CMS, the final rule makes the delivery of stationary and portable oxygen reimbursed at the same rate of $77.45. This was determined by taking the suggested rate of $154.90 and dividing it equally for portable and stationary oxygen content delivery.
Delivery of oxygen content for stationary systems went from a proposed rate of $100.68 down to $77.45, while delivery for portable oxygen went from a proposed rate of $54.22 to a final rule rate of $77.45.
  • Delivery fees are not billable or reimbursable by CMS. CMS states the delivery fee is covered in the overall reimbursement amount. CMS further states providers are required to deliver systems and contents and cannot force beneficiaries to pick up their oxygen. CMS believes that $77.45 is adequate to cover the cost of

delivery and contents.

If a beneficiary requests new equipment, providers are able to utilize an ABN. If a physician requests a specific modality, a provider is bound by that prescription to provide that specific type of equipment.
certain details of interest in the final rule
Certain Details of Interest in the Final Rule…
  • Suppliers may bill for picking up and storing beneficiary owned equipment. This is limited to liquid or gaseous cylinders only. CMS has determined that concentrators do not pose a safety hazard and therefore are omitted.
  • Providers may purchase back equipment from a beneficiary who owns the equipment. No fees for picking up and storing beneficiary owned equipment or for buying back patient owned equipment have been established.
  • If equipment is picked up by the provider and the beneficiary should require use of the equipment again, the provider is obligated to provide equipment of equal or greater value, unless an upgrade has been requested through the use of an ABN.
  • If the combined number of years is greater than 5 (number of years equipment utilized and stored) a beneficiary may elect to receive new equipment and a new 36 month rental period will begin.
certain details of interest in the final rule1
Certain Details of Interest in the Final Rule…
  • Providers must educate beneficiaries at the time of title transfer about safety issues associated with disposing of oxygen equipment that is no longer medically necessary, and to advise beneficiaries that they must comply with all laws that govern the disposal or resale of oxygen equipment.
In the proposed rule, CMS required suppliers to transfer the number of tanks being utilized by the beneficiary and the number of tanks that would be delivered to the patient to replace the empty tanks. In the final rule providers are required to transfer only the number of tanks that a beneficiary uses for one month. In addition, you can utilize the beneficiary owned tanks within your oxygen cylinder pool to supply other oxygen patients. If a patient wishes to switch providers after the equipment has transferred ownership, the beneficiary owned tanks may now be utilized by the new supplier. The supplier must transfer the quantity of tanks the beneficiary owned when transfer of ownership occurred.
certain details of interest in the final rule2
Certain Details of Interest in the Final Rule…
  • The DRA of 2005 mandates transfer of ownership at 36 months, and there is no provision in the DRA that makes transfer of ownership contingent upon payment by a beneficiary. Transfer of ownership is not contingent upon any of the following criteria: Unpaid co-insurance, rented equipment and/or leased equipment with remaining payments on the lease will not delay transfer of ownership.
  • A beneficiary is free to choose any approved supplier. However, if a beneficiary chooses to change suppliers at anytime during the

36 month rental period a new rental period does not begin.

certain details of interest in the final rule3
Certain Details of Interest in the Final Rule…
  • Medicare will reimburse for routine maintenance beginning the 42 month (6 months from ownership transfer). The reimbursable amount cannot exceed 30 minutes of labor for routine maintenance. This rate also includes time in transit. The maintenance fee covers maintenance on concentrators, OGPE and transfilling equipment only. Maintenance for cylinders and tanks is not billable as CMS expects tanks and cylinders providers are filling to be in good working order.
  • Local Coverage Determination is what has established the requirement for emergency back up equipment. Because it is not medically necessary, rental payments are not made on emergency back up equipment.
npi issues and concerns
NPI Issues and Concerns
  • How does a provider terminate an NPI?
  • Third party payers are informing provider to enumerate by service line/legacy provider number – this is contradictory to the intent of the NPI.
  • Suppliers have multiple taxonomy codes for the various services provided. If payers start requiring multiple NPIs by taxonomy code, which NPI will a provider use when dealing with Medicare and Medicaid?
The UPIN number for physicians will in turn become NPI numbers. Currently providers can access a web site to obtain this information. Will this be created for NPIs as well?
  • Since October 1, 2006, claims submitted containing only an NPI have been returned as unprocessable if a properly matching legacy number cannot be found.
When will providers have access to NPI numbers for physicians? All supplier databases will need to be updated as of the May, 2007 effective date – access will be needed to accomplish this task. If the thought process is to obtain from physicians office’s directly, this will require thousands of calls to physicians per provider to update databases. This would not seem the optimum process for physicians who are already very busy dealing with patient concerns.