OIG Reviews Impact of DMEPOS Bidding Program on Billing for Diabetes Test Strips (DTS)

A recent OIG report – “Supplier Billing for Diabetes Test Strips and Inappropriate Supplier Activities in Competitive Bidding Areas” -- assesses how suppliers have changed their delivery and billing practices for DTS in areas where the Medicare DMEPOS competitive bidding program for mail-order DTS was implemented in 2011. By way of background, Round 1 of the DMEPOS competitive bidding program, currently underway in nine competitive bidding areas (CBAs), applies to mail-order DTS and certain other specific items of DME. For purposes of Round 1 only, the term “mail-order” is defined as ordered remotely and delivered by common carrier; in contrast, DTS delivered to a beneficiary’s home by a local store front supplier using its own vehicles and W2 employees is not considered mail order under Round 1, and therefore is not subject to competitive bidding. The net effect if this bifurcation is that beneficiaries residing in one of the Round 1 CBAs must purchase mail-order DTS from a winning contract supplier, but may purchase non-mail order DTS from any enrolled Medicare supplier. Significantly, the mail-order DTS contract prices under Round 1 average less than half of the Medicare fee schedule amount, and the OIG observes that this price disparity provides suppliers with “a financial incentive to bill for non-mail order DTS,” even though beneficiaries in turn will be responsible for higher copayments for non-mail order DTS. According to the OIG report, claims for non-mail order DTS increased by 33% in 2011 compared to 2010, while claims for mail-order DTS fell by 71%. The OIG also states that sampled beneficiaries sometimes reported receiving less expensive mail-order DTS – notwithstanding that Medicare claims records reflected billing for non-mail order items (although the OIG warns that self-reported data from beneficiaries were not independently verified, and beneficiaries’ ability to recall events over a span of 2 years could affect the data). The OIG observed that suppliers’ inappropriate waiver of beneficiaries’ copayments did not appear to contribute to the increase in non-mail order DTS claims, but almost a quarter of the sample of beneficiaries interviewed by the OIG reported supplier activities such as routine waver of copayments or shipments of unsolicited DTS that the OIG determined to be inappropriate. The report does not contain any recommendations. Note that a national mail order (NMO) program for diabetic supplies is scheduled to go into effect July 1, 2013, and will apply nationally to DTS that are delivered via any method (i.e., common carrier or supplier delivery).

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