CMS has proposed a series of complex and detailed revisions to Medicare durable medical equipment, prosthetics, orthotics, and supplies (DMEPOS) policies for 2017, including changes to the competitive bidding program (CBP) requirements and adjustments to DMEPOS fee schedules based on CBP pricing. The proposed DMEPOS policies are included in the Medicare ESRD PPS proposed rule for CY 2017.

With regard to the CBP, CMS proposes to implement a Medicare Access and CHIP Reauthorization Act of 2015 (MACRA) provision requiring entities bidding in the DMEPOS competitive bidding program to submit proof of an authorized “bid surety bond” for each competitive bidding area (CBA) in which the supplier is bidding. Under the proposed rule, the surety bond amount would be set at $100,000 for each CBA associated with the bid. If the bidder is offered a contract for any product category in the CBA, and the supplier’s bid for the product category was at or below the median composite bid rate used to calculate single payment amounts, the bid bond would be forfeited and CMS would collect on the bond if the supplier does not accept the contract. In all other cases, the bid bond would be returned to the bidder within 90 days of CMS’s public announcement of the contract suppliers for the CBA. This provision is intended to prevent suppliers from submitting – but not accepting — “low-ball” bids that artificially drive down prices to improve the supplier’s chances of being offered a contract.   The rule also addresses penalties for bidders that provide falsified surety bonds or accept a contract offer and then renege on it in order to avoid surety bond forfeiture.

The proposed rule also would implement a MACRA provision that prevents a contract from being awarded to a bidding entity unless the bidding entity meets applicable state licensure requirements (for purposes of the rule, bidding entity is defined as the entity whose legal business name is identified in the ‘‘Form A: Business Organization Information” section of the bid). CMS notes that this does not represent a change in policy, since CMS already requires suppliers to meet applicable state licensure requirements.

In addition, CMS proposes technical methodological changes to address “price inversions” among similar products that sometimes occur in the CBP, whereby the single payment amount (SPA) for an item with fewer features is higher than the SPA for the item with more features (e.g., non-powered versus powered mattress, enteral pump without alarm versus pump with alarm). To prevent situations in which beneficiaries receive items with fewer features at higher prices than items with more features, CMS is proposing to adopt a “lead item” methodology under which all HCPCS codes for similar items with different features would be grouped together and priced relative to the bid for the lead item. CMS also proposes a methodology for using SPA information for such related products to adjust DMEPOS fee schedule amounts outside of CBAs.

Furthermore, CMS proposes to modify its current policy limiting CBP bids for individual items to the DMEPOS fee schedule amounts. Since CMS now reduces fee schedules based on bid prices, CMS has agreed with those raising concerns that as the amounts paid under CBPs decline, it may ultimately make it difficult for suppliers to bid below the adjusted fee schedule amounts and accept contract offers. To “enhance the long term viability of the CBPs,” CMS is proposing to limit bids for future competitions to the fee schedule amounts that would otherwise apply if CBPs had not been implemented – that is, as if CMS had not made adjustments to the fee schedule amounts using information from CBPs. According to CMS, this proposal “would allow suppliers to take into account both decreases and increases in costs in determining their bids, while ensuring that payments under the CBPs do not exceed the amounts that would otherwise be paid had the DMEPOS CBP not been implemented.”

In addition, CMS proposes to expand contract suppliers’ appeal rights in the event of a breach of contract action by CMS and clarify related provision. CMS also requests comments on a series of issues related to timely access to DME benefits for individuals dually eligible for Medicare and Medicaid. CMS will accept comments on the proposed rule until August 23, 2016.