The recently passed “Coronavirus Aid, Relief, and Economic Security Act” (CARES Act) is sweeping legislation that will have widespread impact on companies in the health care and life sciences space. In addition to expanding coverage of COVID-19 testing and preventive services, the Act includes provisions to address health care workforce needs, eases restrictions surrounding telehealth
Shortly after President Trump declared a national emergency related to COVID-19, CMS issued blanket waivers under section 1135 of the Social Security Act that are intended to ensure there are sufficient health care items and services available to meet the increased need, as well as reduce related administrative burdens on health care providers.
The Trump Administration’s proposed fiscal year (FY) 2021 budget calls for significant cuts to federal health spending, including a 10% decrease in Department of Health and Human Services (HHS) discretionary spending in FY 2021 and a $1.6 trillion net reduction in health entitlements over the next decade. House Budget Committee leaders have blasted the HHS provisions, and the package as a whole is unlikely to be advanced by Congress. Nevertheless, the document reflects the Administration’s current Medicare and Medicaid priorities, some of which are administrative and could be advanced without Congress. Furthermore, Medicare provider/supplier cost-saving recommendations could be incorporated into future budget agreements or potentially other entitlement reform efforts down the road.
Highlights of the Trump Administration’s major Medicare and Medicaid budget proposals are presented below.
Medicare Payment Policies
The Administration estimates that its proposed Medicare legislative package would result in $756 billion in Medicare Trust Fund savings over 10 years (net impact after offsets of $450 billion/10 years). Many of the legislative recommendations have been made in previous budget proposals. Budget provisions that would result in significant net Medicare savings include the following (net savings figures are over the 10-year period of FYs 2021-2030):
- Elimination of the Medicare Advantage (MA) benchmark cap and quality “double bonus” for plans in eligible counties [$1.2 billion].
- Reform of hospital uncompensated care payments, including basing payments on a hospital’s share of charity care and non-Medicare bad debt [$87.9 billion].
- Establishment of site neutral payments between on-campus hospital outpatient departments and physician offices for certain services (e.g., clinic visits) [$2 billion] and payment for all off-campus hospital outpatient departments under the physician fee schedule [$47.2 billion].
- Adoption of a unified post-acute care system for skilled nursing facilities (SNFs), home health agencies, inpatient rehabilitation facilities, and long-term care hospitals (LTCHs) beginning in FY 2026, with reduced annual Medicare payment updates from FYs 2021-2025 [$101.5 billion].
- Elimination of Medicare reimbursement for disproportionate share hospital (DSH) bad debt, with an exemption for rural hospitals [$33.6 billion].
- Reduced Medicare payment for hospice services under the SNF routine home care level of care. [$4.5 billion].
- An increase in the intensive care unit minimum stay threshold from three days to eight days to qualify for LTCH prospective payment system payment [$9.4 billion].
- Expansion of the durable medical equipment (DME), prosthetics, orthotics, and supplies competitive bidding program to all geographic areas and to inhalation drugs, payment of contract suppliers based on their own bids, and elimination of the surety bid bond requirement [$7.73 billion Medicare savings, $435 million in Medicaid savings]. Separate from the bidding program, the Centers for Medicare & Medicaid Services (CMS) would be authorized to update DME rates based on retail prices through rulemaking, without using the inherent reasonableness process [$1.6 billion Medicare savings, $85 million in Medicaid savings].
Other legislative proposals are intended to promote value-based care; in some cases, these proposals also would result in cost savings. For instance, the budget proposes the following:
- Basing Medicare beneficiary accountable care organization assignment on a broader set of non-physician primary care providers [$80 million].
- Consolidation of the four Medicare inpatient hospital quality programs into a single hospital quality payment program [budget neutral].
- Implementation of hospital outpatient department and ambulatory surgical center (ASC) value-based programs, with 2% of payments linked to quality/outcomes performance. Payment would be risk adjusted based on patient diagnosis severity to promote site neutrality [budget neutral].
- Creation of a risk-adjusted monthly Medicare Priority Care payment for providers eligible to bill for evaluation and management (E/M) services who provide ongoing primary care to beneficiaries. The payment would be funded by a 5% annual cut in valuations of non-E/M services [budget neutral].
Medicare Transparency, Quality, Coverage, and Benefits
The budget includes a series of proposals intended to increase access to price and quality information and/or clarify Medicare coverage and payment processes. For instance, the budget would:…
Continue Reading Medicare/Medicaid Policy Provisions in Trump Administration’s FY 2021 Budget Proposal
CMS is adding six types of lower limb prosthetics to the list of equipment subject to Medicare prior authorization (PA) requirements, and extending certain current PA requirements. Specifically, CMS is requiring PA as a condition of Medicare payment for the following items on the basis of their being “frequently subject to unnecessary utilization”:
The Centers for Medicare & Medicaid Services (CMS) has released the 2020 Medicare fee schedule for durable medical equipment, prosthetics, orthotics, and supplies (DMEPOS). The 2020 update factor is 0.9%, although other pricing policies are applied in specific circumstances, including separate adjustments for certain DMEPOS furnished in former competitive bidding areas. Additional details are provided…
The Centers for Medicare & Medicaid Services (CMS) is seeking public input on surveys that are intended to “further strengthen the monitoring, outreach, and enforcement functions” of the Medicare durable medical equipment, prosthetics, orthotics, and supplies (DMEPOS) competitive bidding program – even though the agency has asserted that the program “has maintained beneficiary access to…
The Centers for Medicare & Medicaid Services (CMS) has adopted — with limited changes — its controversial plan to rewrite Medicare pricing rules for new items of durable medical equipment (DME), prosthetics, orthotics and supplies (DMEPOS) as part of its annual DMEPOS policy update for calendar year (CY) 2020. The rule also makes minor changes to DMEPOS competitive bidding program (CBP) rules, streamlines certain requirements for ordering DMEPOS items, and makes other related policy changes. The rule is effective January 1, 2020.
Revised Pricing Policy for New DMEPOS
CMS currently uses an arcane “gap-fill” process to establish rates for new DMEPOS items. In short, if pricing is not available for the item in the statutory “base year” (1986 or 1987, depending on the item), CMS considers current fees for comparable items, supplier prices, manufacturer’s suggested retail prices (MSRPs), or wholesale prices. That amount is then subject to a series of deflation adjustments and statutory updates to achieve the new Medicare rate. CMS’s reliance on the pricing of existing products has been a point of contention when a manufacturer does not believe any items currently on the market are comparable to the innovative technology. At the same time, CMS does not believe that MSRPs “represent accurate pricing from actual retail markets.”
To “improve … transparency and predictability,” CMS is adopting a new framework for setting fees for new DMEPOS items (i.e., new Healthcare Common Procedure Coding System (HCPCS) codes that do not have a fee schedule pricing history). As it proposed, CMS will first seek to use existing fee schedule amounts for DMEPOS that it determines to be “comparable” based on the following five components and attributes (the new product does not need to be comparable within each category, and there is no prioritization of the categories):…
Continue Reading CMS Updates Medicare DMEPOS Policies, Including Overhaul of Pricing Framework for New HCPCS Codes
The Centers for Medicare & Medicaid Services (CMS) is planning a potentially-significant overhaul of Medicare pricing rules for new items of durable medical equipment (DME), prosthetics, orthotics and supplies (DMEPOS) as part of its proposed annual DMEPOS policy update for calendar year (CY) 2020. The proposed rule also includes DMEPOS competitive bidding program (CBP) updates and proposals to streamline requirements for ordering DMEPOS items.
Under a decades-old policy, CMS uses a highly imprecise “gap-fill” process to establish fees for new items of DMEPOS for which charges in the statutory “base year” are unavailable. In such cases, CMS and its contractors use fees for comparable items, supplier prices, manufacturer’s suggested retail prices, or wholesale prices plus a markup to approximate current pricing. To remove the impact of inflation, CMS next “deflates” the prices back to the base year period (1986 or 1987 depending on the item – well before the time the item was available or likely even invented). CMS then applies the annual covered item update factors specified in the statute to establish current rates.
CMS notes that it has “heard frequently from manufacturers that do not agree that their newly developed DMEPOS item is comparable to older technology DMEPOS items and services.” Nevertheless, CMS contends that there are benefits to identifying and basing rates on comparable items, including avoiding providing a competitive advantage to manufacturers of new items. To improve transparency and predictability in the sources of data and selection of comparable items and services for gap-fill purposes, however, CMS proposes to codify a framework for establishing fees for new DMEPOS items (i.e., new Healthcare Common Procedure Coding System (HCPCS) codes) that do not have a fee schedule pricing history).
CMS’ proposal is complex. In general, under the proposal, CMS would first seek to use existing fee schedule amounts for DMEPOS that it determines to be “comparable” based on one or more of the following “components and attributes”:
Comparable Item Analysis (Any combination of, but not limited to, the categories below for a device or its subcomponents)
|Physical Components||Aesthetics, Design, Customized vs. Standard, Material, Portable, Size, Temperature Range/ Tolerance, Weight.|
|Mechanical Components||Automated vs. Manual, Brittleness, Ductility, Durability, Elasticity, Fatigue, Flexibility, Hardness, Load Capacity, Flow-Control, Permeability, Strength.|
|Electrical Components||Capacitance, Conductivity, Dielectric Constant, Frequency, Generator, Impedance, Piezo-electric, Power, Power Source, Resistance.|
|Function and Intended||Function, Intended Use.|
|Additional Attributes and Features||‘‘Smart’’, Alarms, Constraints, Device Limitations, Disposable Parts, Features, Invasive vs. Non-Invasive|
If CMS determines that there are no items with existing fee schedule amounts considered comparable to the new item, CMS would establish the fee schedule amount based on either:…
Continue Reading CMS Proposes Medicare DMEPOS Policy Updates, Including New Methodology for Pricing New Codes
Medical equipment suppliers can submit bids for Round 2021 of the Medicare Durable Medical Equipment, Prosthetics, Orthotics, and Supplies (DMEPOS) Competitive Bidding Program (CBP) from July 16 through September 18, 2019, the Centers for Medicare & Medicaid Services (CMS) has just announced.
As previously reported, Round 2021 of the CBP round will cover…
The Centers for Medicare & Medicaid Services (CMS) is expanding the types of durable medical equipment (DME), prosthetic, orthotics, supplies (DMEPOS) that are subject to Medicare prior authorization requirements on the basis of being “frequently subject to unnecessary utilization.” Specifically, CMS announced that it is adding to the Required Prior Authorization List:
- Seven power wheelchair codes (K0857, K0858, K0859, K0860, K0862. K0863, and K0864), effective July 22, 2019.
- Five support surface codes (E0193, E0277, E0371. E0372.and E0373), to be implemented in two phases to allow CMS “to identity and resolve any unforeseen issues. . . before nationwide implementation.” During phase one, which begins July 22, 2019, CMS will limit the prior authorization requirement to one state in each of the DME Medicare Administrative Contractor (MAC) jurisdictions, as follows: California, Indiana, New Jersey, and North Carolina. In phase two, which begins October 21, 2019, CMS will expand the program to the remaining states.
Separately, CMS announced that it is adding the following items to its “Master List of Items Frequently Subject to Unnecessary Utilization”:…
Continue Reading CMS Expands DMEPOS Items Subject to Prior Authorization Due to “Unnecessary Utilization”
The Trump Administration’s proposed fiscal year (FY) 2020 budget includes extensive health policy provisions – as evidenced by the 162-page Department of Health and Human Services (HHS) “Budget in Brief.” This summary focuses on the major Medicare and Medicaid proposals most directly impacting providers and suppliers; note that we discuss the Administration’s proposed prescription drug reimbursement provisions in a separate blog post.
Medicare, Value-Based, and Related Reforms
The Administration estimates that its Medicare policy reforms would save approximately $811 billion over 10 years. The Administration states that these proposals are “designed to improve value-based systems of care, exercise fiscal integrity, promote competition, reduce provider burdens, improve the appeals system, and address high drug prices.” Budget provisions that would result in significant Medicare savings include the following (savings are over the 10-year period of FYs 2020-2029):
- A new process to distribute uncompensated care payments to hospitals based on share of charity care and non-Medicare bad debt. [$98.0 billion net]
- Site neutral payments between on-campus hospital outpatient departments and physician offices for certain services (e.g., clinic visits). [$131.4 billion]
- Payment for all off-campus hospital outpatient departments under the physician fee schedule (PFS) effective CY 2020. [$28.7 billion]
- A unified post-acute care system for skilled nursing facilities, home health agencies, inpatient rehabilitation facilities, and long-term care hospitals (LTCHs) beginning in 2025. [$101.2 billion]
- An increase in the intensive care unit minimum stay threshold from three days to eight days in order to qualify for payment under the LTCH prospective payment system. [$10.0 billion]
- A reduction in Medicare reimbursement of bad debt from 65% to 25% over three years beginning in FY 2020. [$38.5 billion]
- Expansion of the durable medical equipment (DME), prosthetics, orthotics, and supplies (DMEPOS) competitive bidding program to all areas of the country. The proposal also would reimburse contract suppliers based on their own bids rather than a single payment amount. [$7.1 billion]
- Consolidation of federal spending for graduate medical education (GME) programs. [$211.8 billion in Medicare savings].
Other legislative proposals intended to promote value-based care that are not expected to have a budget impact include the following:…
Continue Reading Trump Administration Calls for Medicare/Medicaid Cuts, Program Reforms in FY 2020 Budget Proposal
The Centers for Medicare & Medicaid Services (CMS) has announced its plans for Round 2021 of the Medicare Durable Medical Equipment, Prosthetics, Orthotics, and Supplies (DMEPOS) Competitive Bidding Program (CBP), featuring new “lead item” bidding rules and new product categories. Following on the heels of this announcement, the Trump Administration proposed additional legislative changes to the CBP that would cut Medicare DMEPOS spending by more than $7 billion over 10 years.
Round 2021 of the CBP
As previously reported, there has been a “temporary gap” in the DMEPOS CBP since the last round of contracts expired on December 31, 2018. Last week CMS confirmed that it will launch a new competition – dubbed Round 2021 – for contracts that will run from January 1, 2021 through December 31, 2023. The competition will cover geographic areas included in Round 1 2017 and the Round 2 Recompete, for a total of 130 competitive bidding areas (CBAs).
For Round 2021, CMS is adding three product categories that have never been subject to competitive bidding: off-the-shelf (OTS) back braces, OTS knee braces, and non-invasive ventilators. The full list of the 16 product categories included in Round 2021 is as follows:
- Commode Chairs
- Continuous Positive Airway Pressure (CPAP) Devices and Respiratory Assist Devices (RADs)
- Enteral Nutrition
- Hospital Beds
- Negative Pressure Wound Therapy (NPWT) Pumps
- Non-Invasive Ventilators
- OTS Back Braces
- OTS Knee Braces
- Oxygen and Oxygen Equipment
- Patient Lifts and Seat Lifts
- Standard Manual Wheelchairs
- Standard Power Mobility Devices
- Support Surfaces (Groups 1 and 2)
- Transcutaneous Electrical Nerve Stimulation (TENS) Devices and Supplies
The specific HCPCS codes subject to this round of bidding is posted on the Competitive Bidding Implementation Contractor (CBIC) website. Note that CMS is not including a national mail-order program for diabetes testing supplies in Round 2021, since the agency is working to implement separate statutory requirements for those items included in the Bipartisan Budget Act (BBA) of 2018.
CMS will use a new “lead item” bidding methodology in Round 2021. That is, instead of bidding on each item/HCPCS code within a product category, suppliers will submit a single bid for that item in the product category designated by CMS to have the highest total nationwide Medicare allowed charges. CMS will calculate a single payment amount (SPA) for that lead item in the CBA based on the highest amount bid within the winning bids, rather than the median of winning bids. The SPAs for non-lead items will be based on the relative difference in the fee schedule amounts for the lead and non-lead items. A “Lead Item Calculator” is available on the CBIC site to show the impact of the lead item bid amount on the non-lead items in the product category.
The following is the schedule for the Round 2021 competition (dates are subject to change):…
Continue Reading CMS Announces Plans to Restart DMEPOS Competitive Bidding Program in 2021; Trump Proposed Budget Seeks Authority for Lower Payments to “Winning” Suppliers
CMS has posted calendar year 2019 Medicare fee schedule rates for durable medical equipment, prosthetics, orthotics, and supplies (DMEPOS). The 2019 update factor is 2.3%, although other pricing policies are applied in specific circumstances. For instance, adjusted fee schedule amounts for former competitive bidding areas are based on single payment amounts in effect December 31,…
The Centers for Medicare & Medicaid Services has confirmed that it expects to have a “temporary gap” in the durable medical equipment, prosthetics, orthotics and supplies (DMEPOS) competitive bidding program (CBP) during calendar years 2019-2020. As a result, beginning January 1, 2019, Medicare beneficiaries may receive DMEPOS items from any Medicare-enrolled supplier until such time as new CBP contracts go into effect. When competitive bidding resumes, it will be under new program rules, as discussed below. Furthermore, CMS has announced that it intends to include in the next round of the CBP the following new product categories: ventilators, off-the-shelf back braces, and off-the-shelf knee braces. CMS has posted the specific HCPCS codes it intends to subject to bidding within these new product categories, and the agency will accept comments on these codes through December 3, 2018. [Note — CMS subsequently extended the comment deadline until December 17, 2018.]
Future Competitive Bidding Program Rules. In a final rule scheduled to be published on November 14, 2018, CMS adopted a number of “market-oriented reforms” and technical policy changes for future rounds of competitive bidding. According to CMS, the new rules will simplify the bidding process, preserve beneficiary access to items and services, and make the DMEPOS CBP more sustainable.
Of particular note, CMS has finalized its proposed “lead item pricing” methodology. Rather than bid on each item/HCPCS code in a product category for each competitive bidding area (CBA), suppliers will submit a single bid for the item in the product category designated by CMS to have the highest total nationwide Medicare allowed charges. CMS will calculate a single payment amount (SPA) for that lead item in the CBA based on the highest amount bid within the winning bids, rather than the median of winning bids. Thus under this methodology, suppliers in the winning range will be paid at least what they bid for the lead item, which CMS expects “will have a positive economic impact on bidding suppliers.”
Under the final rule, the SPAs for non-lead items will be based on the relative difference in the fee schedule amounts for the lead and non-lead items (prior to fee schedule adjustments based on CBP pricing). CMS provides an example of a non-lead item such as a wheelchair battery with an average 2015 fee schedule amount of $107.25, and a lead item (Group 2, captains chair power wheelchair) with an average 2015 fee schedule amount of $578.51. The ratio for these items would be computed by dividing $107.25 by $578.51 to get 0.18539. If the maximum winning bid/SPA for the power wheelchair (lead item) is $433.88, the SPA for the wheelchair battery (non-lead item) would be computed by multiplying $433.88 by 0.18539 to generate an SPA of $80.44.
Fee Schedule Updates. In the Final Rule, CMS adopted without change its three proposed methodologies for updating the DMEPOS fee schedule, depending on the geographic area in which the items and services were furnished:…
Continue Reading Two-Year Break in Store for Medicare DMEPOS Competitive Bidding Program, But CMS Gears Up for 2021 Restart with Expanded Product Categories and New Rules
Agency Anticipates Temporary Lapse in Competitive Bidding Program after 2018
CMS is proposing a number of changes to Medicare durable medical equipment, prosthetics, orthotics and supplies (DMEPOS) reimbursement policies for 2019, including fee schedule adjustments to account for a “temporary lapse” in the competitive bidding program (CBP). Consistent with the Administration’s stated goal of reducing regulatory burdens on providers and suppliers, CMS also proposes changes to CBP bidding rules for future rounds of bidding and other policy changes that generally have been welcomed by industry. CMS will accept comments on the proposed rule until September 10, 2018.
Provision of DMEPOS During Competitive Bidding Gap. With regard to DMEPOS competitive bidding, CMS acknowledges that there will be a lapse in the competitive bidding program (including the national mail-order program for diabetic testing supplies) because the agency has not begun the recompete process for current contracts that end on December 31, 2018. Therefore beginning January 1, 2019, beneficiaries may receive DMEPOS items from any Medicare-enrolled supplier until such time as new CBP contracts are awarded. CMS anticipates that the next round of bidding “could potentially be delayed until January 1, 2021.”
Future Competitive Bidding Program Rules. CMS proposes a number of “market-oriented reforms” and technical policy changes that would apply to future rounds of competitive bidding, including the following:…
Continue Reading CMS Proposes Medicare DMEPOS Rate Changes and Competitive Bidding Reforms
The Medicare Payment Advisory Commission (MedPAC) has released its annual report to Congress on “Medicare and the Health Care Delivery System.” This year’s report includes recommendations for changes to emergency department services policies, along with analyses of potential changes that would impact physicians, medical equipment suppliers, post-acute care providers, and others. Highlights include the following:…
CMS is adding 31 power mobility device Healthcare Common Procedure Coding System (HCPCS) codes to the list of durable medical equipment, prosthetics, orthotics, and supplies (DMEPOS) items that require prior authorization as a condition of Medicare payment. All of the new codes are currently included in the Medicare Prior Authorization for Power Mobility Devices (PMDs)…
Today the Centers for Medicare & Medicaid Services (CMS) published an interim final rule with comment period that will provide a temporary Medicare rate hike for certain durable medical equipment (DME) and enteral nutrition furnished in rural and non-contiguous areas of the country (Alaska, Hawaii, and U.S. territories) that are not included in competitive bidding.
By way of background, the Affordable Care Act mandated that CMS use pricing information from the DME, prosthetics, orthotics, and supplies (DMEPOS) competitive bidding program (CBP) to adjust fee schedule amounts for items furnished in areas where the CBP is not implemented. A highly-technical CMS rule implemented these adjustments, with a transition period during January 1, 2016 – June 30, 2016, during which CMS used 50/50 blended rates. The 21st Century Cures Act extended the transition period through December 31, 2016, mandated that CMS study the impact of the CBP on beneficiary access to DME, and established additional factors for CMS to consider in making fee schedule adjustments effective beginning January 1, 2019. Fully-adjusted fee schedule rates went into effect January 1, 2017, with rates that were on average 50% lower than the unadjusted rates for all of the items and services subject to the adjustments (“Adjusted Rates”).
Continue Reading CMS Announces Temporary Fee Schedule Increase for Certain Medical Equipment Furnished in Rural Areas
CMS is removing the Medicare prior authorization (PA) requirement for several types of medical equipment because the items no longer meet the standard set forth in a 2015 final rule. Under these regulations, CMS requires PA for certain items of durable medical equipment, prosthetics, orthotics, and supplies (DMEPOS) that the agency characterizes as “frequently…
The new Bipartisan Budget Act of 2018 (the Act), recently signed into law by President Trump, includes extensive Medicare, Medicaid, and other health policy and payment provisions. Policy changes that will be welcome to health care providers and manufacturers include: repeal of the Independent Payment Advisory Board (IPAB); elimination of the Medicare outpatient therapy caps;…