Tom Ryan, the CEO/president for the American Association for Homecare (AAHomecare) was straightforward during an Aug. 6 webinar on the upcoming resumption of Medicare’s competitive bidding program for durable medical equipment (DME).
“I shared in a meeting with CMS [Centers for Medicare & Medicaid Services] last week that there’s an asteroid heading straight to planet DME,” Ryan told webinar attendees. “This rule as proposed cannot be finalized in its current form. We must delay it, get it pulled, or work collaboratively with CMS to make it workable.”
The Home Health proposed rule that includes competitive bidding policy was published July 2 in the Federal Register. CMS is taking public comments through Aug. 29.
Not competitive bidding as we’ve known it
Ryan was joined on the webinar by Cara Bachenheimer, AAHomecare’s general counsel, Brown & Fortunato; Jay Witter, senior vice president, public policy; Mina Uehara, senior director, regulatory affairs; and Gordon Barnes, senior director, communications.
The opening message from Ryan: The iteration of competitive bidding that’s been proposed is very different from what competitive bidding has been — and different even than it was under the first Trump administration.
“We’re operating today in a different political environment,” Ryan said. “They want to get this done, and they want to save money. We must convince them it is not good public policy. It is government-administered pricing that will decimate the industry and cause businesses to close.”
And that would cause a ripple effect that would harm the very patients that Medicare is supposed to be supporting.
“For patients, DMEPOS [durable medical equipment, prosthetics, orthotics and supplies] isn’t a commodity,” Ryan said. “It’s a lifeline between immobility and independence, between isolation and engagement, between pain and relief. And yet, CMS’s proposed expansion of competitive bidding threatens to slash reimbursement rates across multiple product categories, undermine suppliers’ sustainability, introduce administrative burdens that compromise patient care, reward lowest bids over proven quality and continuity.”
Bachenheimer began the heart of the presentation by explaining the timeline that’s been revealed so far.
“This is a proposed rule; it came out about a month ago,” she said. “There’s a 60-day comment period, and that comment period closes in a few weeks, on Aug. 29. CMS will then consider comments and issue a final rule responding to comments around Nov. 1 with an effective date on the final regulations around Jan. 1.”
Beyond that, the timing is still in flux, Bachenheimer said. “Everybody wants to know what the implementation timeline is beyond that. And if CMS were in its mode of how it’s done it historically, we could say that there’s almost a two-year period where CMS implements — meaning the period where they announced product categories, the geographic areas, and all the other sub-regulatory details that are so critical. And bidding suppliers would submit bids, etc.”
But Bachenheimer acknowledged, “It’s a new world. We’re not quite sure that that timeline will be the same. This administration could be more aggressive and try to implement it more quickly. So it could be less than two years.”
CMS proposes adding product categories
CMS also wants to expand the types of DMEPOS that would be subject to competitive bidding, Bachenheimer said.
A “straightforward analysis of the statute” has for years concluded that urological supplies, ostomy supplies, and tracheostomy supplies “are not authorized to be included in the bidding program,” she said. “However, in the proposed rule, CMS makes a very creative and novel interpretation of the statutory language and states that they have the authority” to include those supplies.
“That’s a very dramatic departure from the past,” Bachenheimer said.
Also proposed for competitive bidding: continuous glucose monitors (CGMs) and insulin infusion pumps.
As new technology, CGMs haven’t been in included in competitive bidding before. But going forward, CMS has proposed that CGMs be considered in the “frequent and substantial servicing” payment category for both competitive-bid and non-competitive-bid areas. “CMS plans to amortize the purchase price of the monitor over 60 months to establish a monthly bid limit of only a few dollars for the actual device,” Bachenheimer said, adding that CMS paying on a bundled basis “that few dollars plus the monthly amount for supplies that obviously have to be replaced on a regular basis” would result in a bid ceiling that “would be very dramatically low.”
CMS also proposed combining CGMs and insulin infusion pumps into a single product category, with CGMs as the lead items in the category. Bachenheimer said many suppliers who provide CGMs don’t also provide insulin pumps.
Uehara added that the proposed rule “actually provides a number for the CGM bid limit, and they estimate [that] to be around $272.69 for the rental for the CGM.” The insulin pump rate would be $226.22.
“This is based on supplies plus accessories, and the rental purchase would divide by 60 months,” Bachenheimer said. “So that would be the monthly bid limit. Your bid would have to come in at no more than basically a penny below those numbers.”
CMS’s explanation, Bachenheimer said, “is they understand that CGM technology is advancing so rapidly, there’s an expectation that suppliers would be replacing devices at least [once] a year or even more frequently as new technology and new software come out” — a puzzling theory “given the extraordinarily low bid limit that would result.”
In its commenting guidance for the proposed rule, AAHomecare said, “CGM is a new and evolving technology and is not suited to be included in [the] competitive bidding program. The payment calculation for both CGMs and insulin infusion pumps is not sustainable.”
Proposed changes to bid ceilings and single payment amounts
Bachenheimer said CMS “is proposing to significantly decrease the bid ceiling, the maximum that you can bid in a product category for a particular lead item. In fact, they are proposing to limit it to an amount that’s only a little bit more than the previous SPA, which is the single payment mount or the bid amount for the lead item in a category. The most recent rounds of competitive bidding were ones where CMS utilized what they called lead-item pricing, so that, for example, in an oxygen category, you’re only bidding on E1390” — the HCPCS code for an oxygen concentrator, single delivery port, capable of delivering 85% or greater oxygen concentration at the prescribed flow rate.
“It’s the HCPCS code that CMS pays the most money for,” she explained of lead-item pricing. “It’s the most highly utilized times the dollar amount. And then all the other HCPCS codes in that product category are essentially lowered based on the ratio of the existing relative spots, the single payment amounts.”
While the lead-item process is meant to simplify the bidding process, Bachenheimer said, “The impact on the non-lead items can be very dramatic. This has changed the bid ceiling.
“If you take it to its logical conclusion, eventually the bid ceiling’s going to be close to zero. It’s going to keep going down, down, down. The idea of this program, as Tom [Ryan] has said, is very much to reduce pricing and reduce the number of suppliers serving beneficiaries for these product categories.”
CMS also wants to change the way it calculates the single payment amount (SPA).
“Under the current regulations, the SPA was based on basically the last man in,” Bachenheimer said. “So if there were 20 winners for a product category in a particular bidding area, the entity that is the last man in would establish the bid price. CMS is proposing to just arbitrarily reduce that by 25%.”
If the new SPA process is adopted, CMS would set the SPA at the 75% mark of the contractors who have won bids, meaning “25% of the contractors will get paid less than what their best bid was,” Bachenheimer said.
The bid of the final supplier — i.e., the last man — to win a contract, she added, “is called the clearing price. Clearing price methodology is typically the standard in auctions, because it doesn’t make any sense to pay a bidder less than their best price. This composite bid is the actual number that would be that 75th percentile, and that establishes the single payment amount.”
Uehara said CMS proposed the 75th percentile rule “because they did see a significant increase in costs with using the clearing price in the proposed rule. They estimated about a $1.2 billion increase in payments, and so that is the reason they’re trying to artificially lower the winning bid.”
How many contracts will be awarded?
“In terms of the number of contracts, CMS has a significant amount of commentary, basically saying they think there were too many contractors in prior competitions,” Bachenheimer said. In response, “If there’s a product category that has already been included in a competitive bid, then the number of contracts will be no more than double the number of contract suppliers that previously furnished at least 5% of the items or services.
“So they’re looking at a particular bid area, and they’re looking at how many of those contractors actually serve the beneficiaries for at least 5% of the utilization for that particular product. It’s actually the lead item, not the whole product category, and then they’ll double that to have the maximum number of contracts.”
Previously, CMS determined the number of contracts by examining the bidders’ capacity, “meaning how many Medicare beneficiaries did they provide with oxygen concentrators previously?” Bachenheimer said as an example. “So you have a sense of the relative size of a bidder.”
That information told CMS how many oxygen concentrators the supplier could provide if that supplier submitted a winning bid. But “this new proposed methodology does not appear to take into account at all the bidder’s capacity. That potentially could result in serious access issues if you had much smaller companies winning the contracts, and they simply wouldn’t be able to establish the capacity.”
For products new to competitive bidding, Bachenheimer added, the number of winning contracts “would be based on 125% of the number of suppliers that furnished at least 3% of the total utilization of the lead item in a product category during the most recent calendar year prior to bidding.”
Current regulations require at least five contractors for a particular product category. The proposed rule drops that number to just two contractors per category.
“So for a particular product category and a particular bid area, there could be as few as only two suppliers eligible to provide products,” Bachenheimer said.
New to competitive bidding: Remote item delivery contractors
The new version of mail-order competitive bidding is Remote Item Delivery (RID), according to the proposed rule.
“They did it for diabetic testing strips a number of years ago,” Bachenheimer said of mail-order competitive bidding. “Not great results with that, from our perspective.”
For this next iteration, Bachenheimer said CMS examined product categories where a significant number of Medicare beneficiaries’ homes are 500 miles or more from suppliers’ locations. CMS concluded “that these items would be appropriate for RID competitive bidding because they are typically delivered remotely. They talk about there being potentially national remote item delivery programs or regional. They don’t define exactly how big a regional program would be.
“CMS [says] beneficiaries still might have the ability to pick up their supplies at a physical location if a supplier had a physical location there. But it doesn’t say that contractors would have to have a physical location in every area across what is in included in a national or regional RID.”
For beneficiaries, Bachenheimer said, “Patients that wanted to pick up their supplies would need to go to a supplier that is contracted. Patients can’t just go to any place to get their supplies. They would need to go to a contracted supplier, unless they want to pay out of pocket. Obviously, with things like ostomy supplies, if you have an emergency need — if your delivery didn’t make it for whatever reason — that would put the financial responsibility on the beneficiary, if they wanted to go to their local retailer.”
Financial status of competing providers
In the past, providers competing for contracts have had to provide documentation — tax returns, income statements, P&L statements, cashflows, and proof that they were financially capable of providing the volume of products that they bid for. “CMS is proposing to get rid of all of that,” Bachenheimer said. Instead, CMS is proposing that competing contractors “submit a credit report, such as a D&B [Dun & Bradstreet] report, which has absolutely nothing to say about how big a company is, what its potential capacity is. There’s no way to evaluate whether, if there’s only seven contractors, they have the financial wherewithal to ramp up so significantly to what the potential demand would be.”
AAHomecare’s position, Bachenheimer said, is that this supposed administrative simplification “comes grossly at the expense of CMS’s ability to understand whether the companies have the financial wherewithal to serve.”
A credit score also will not identify a small supplier, Bachenheimer added.
“CMS has a goal to have 30% of the contractors being small suppliers, but they don’t talk about it really at all in the proposed rule, except for this one issue of the gross revenue information,” she said. “The statutory language doesn’t require CMS to include a certain number of small suppliers. It simply says that CMS basically shall take into account the needs of small suppliers, but there is absolutely no requirement, and it’s simply a goal. If they don’t meet the goal, there’s no ramifications.”
Comment time: All hands on deck
In the face of this potentially devastating new version of competitive bidding, AAHomecare is calling on all stakeholders to submit comments before the public comment period closes on Aug. 29. (Note the amended date; CMS previously published a later, incorrect date.)
AAHomecare will be submitting official comments, but urged providers and other stakeholders to participate as well.
“It’s important to have first-hand experience and really relate to CMS what the impact will be on you, your company, your employees, your patients, and what you do in the community,” Bachenheimer said. “It’s also important to be respectful and professional in your comments. A lot of the proposals are so outrageous that you want to respond with outrage. But it’s important to explain why they are outrageous and to do that in a responsible and professional way.
“Focus on the issues that are most important to you and your business, on the product categories,” she added. “And it’s important to explain why, instead of just saying, ‘I oppose, we oppose.’ Provide that rationale; say why it will be so negatively impacting.”
AAHomecare has a resources section on its website devoted to competitive bidding and the proposed rule. Witter added that the organization is simultaneously working with Congress on how this next version of competitive bidding will operate.
“We have a lot of champions on the Hill,” he said. “We’ve already started to talk to them. So lobbying, grassroots advocacy will be extremely important. We’re partnering with VGM on a grassroots initiative; state leaders are doing August recess visits. So if you get emails from us or VGM or the state associations, please join their efforts to educate Congress on how bad this rule is.”
Witter added that past versions of competitive bidding “were really pushed by lower-level staff, and we were able to go to higher levels in the administration to pressure changes.”
This time, “Our intel is that it’s coming from very high in the administration, and it will take a huge effort to make significant changes to delay or stop this rule,” he said, noting that competitive bidding “guardrails” put in place during the first Trump administration were excluded from the current proposed rule.
“AAHomecare can provide the industry’s positions and data-driven comments,” Uehara noted. “But really what would help from suppliers is providing who you are, what kind of patients you provide for, and how that would impact you as a business and the patients you serve. Just real, first-hand examples are what’s going to be helping AAHomecare’s comments.”
Time to Make It Personal
Ryan — who began the presentation by saying that competitive bidding shuttered his business years ago — exhorted attendees to get involved.
“At the end of the day, we can’t put our heads in the sand,” he said, adding that it’s unrealistic to hope that competitive bidding will be completely abolished. “If [CMS] wants to move forward with it, we have to do it collaboratively, and we have to do it with a thought process in mind. Not this process that is strictly looking to decrease the number of suppliers.
“So we are going to continue to work the Hill. We are an association with good long-term reserves. We are not keeping our powder dry. We’re going to fight this with everything we’ve got.”
But Ryan added that creating change will require an industry-wide effort. “You’ve got to mobilize,” he said. “You’ve got to help in the fight. [Competitive bidding in the proposed rule] can’t go forward.”
He noted that in previous bid rounds, “We saw nearly 20% of suppliers close their doors within a year, leading to service and access delays for essential equipment. But behind every statistic stands a real person, a real business that was lost by poor public policy. I know. I’m the human toll. I lost my business. I do not want to see it happen to you and others.
“I don’t want to see you lose your business or any patients not get the quality services and equipment they so deserve.”
