CMS Proposes Several Competitive Bidding Changes

The changes include a new ‘lead item’ rule, and a new method for setting single payment amounts, as well as rural relief and oxygen reimbursement changes.

A new CMS proposed rule would revise the national competitive bidding program with a blend of smaller, short-term tweaks and larger, more structural changes; provides longer relief for rural and non-competitive bid area (CBA) providers; and addresses oxygen reimbursement.

One of the primary changes to the competitive bidding program is that future rounds of competitive bidding would use lead item pricing, which would prevent ostensibly cheaper, less sophisticated devices from receiving more reimbursement than items in the same product category that should cost more. (CMS uses the example of a walker without wheels costing more than a walker with wheels.) In the proposed rule, the item in the group of products with the highest total national allowed paid units during a specified base period would be considered the lead item in that particular grouping.

CMS labeled the phenomenon of presumably cheaper products costing “price inversion” and noted that it occurs in several categories, including standard power wheelchairs, walkers, hospital beds, enteral infusion pumps, TENS devices, support surface mattresses and overlays and seat lift mechanisms.

Following from that, the rule also establishes a new method for setting single payment amounts (SPAs) using maximum winning bids. The SPA for the lead item in each product category and CBA would be based on the maximum or highest amount bid for the item by suppliers in the winning range. The SPAs for all other items in the product category would be based on a percentage of the maximum winning bid for the lead item.

Other proposed bidding changes include:

  • The definition of a composite bid would be revised to mean the bid submitted by the supplier for the lead item in the product category. 
  • To address any lapses in competitive bidding contracts after Dec. 31, starting Jan. 1, 2019 Medicare beneficiaries can receive DMEPOS items from any Medicare-enrolled DMEPOS supplier until new contracts are awarded under the next round of the bidding program.
  • CBA pricing will be subject to annual consumer price index (CPI) adjustments until the next bidding round takes place.

Proposed rural relief changes include:

  • The proposed rule would extend the 50/50 blended rate reimbursement rates for rural and non-contiguous areas (Alaska, Hawaii and U.S. territories) provided in CMS’s May IFR through Dec. 31, 2020.
  • A request from CMS for more comments on whether the 50/50 blended rates should be extended to other non-bid areas.
  • CMS will continue monitoring healthcare outcomes data and information in order to amend how it sets rates in the future.

The proposed rule also includes changes that would ensure that all new payment for oxygen and oxygen equipment added since 2006 are budget neutral. Two key proposed changes in that regard:

  • The rule would add new payment classes for oxygen, including portable liquid oxygen equipment only; portable gaseous oxygen equipment only; and high-flow portable liquid oxygen contents. I
  • Sets new rules regarding reimbursement for ventilators that also perform the functions of other DME items.

Part of CMS’s broader “Patients over Paperwork” initiative, the proposed rule included both changes to the DMEPOS and End-Stage Renal Disease (ESRD) programs.

“At CMS, we celebrate innovation in the healthcare system and encourage new therapies that will help save lives and lower costs for patients,” said CMS Administrator Seema Verma. “Today’s proposals will help secure sustainable access to durable medical equipment and reward dialysis facilities that adopt innovative new therapies.”

Both the American Association for Homecare and VGM Government Relations reported they were engaged in deeper analysis of the proposed rule.

“At first glance, CMS’ new proposals look very promising,” said Tom Ryan, president and CEO of the American Association for Homecare. “It looks like CMS has incorporated significant recommendations from HME stakeholders into the new rule, which should help improve the bidding program. … It appears that CMS has taken an important step towards stabilizing reimbursement policy for our industry, setting the stage for us to advocate for additional reforms and relief going forward."

On first blush, HME legal expert Jeff Baird, Esq., chairman of the Health Care Group for industry law firm Brown & Fortunato, P.C. received the proposed rule positively.

“You know I hate competitive bidding, but I look at this as a win for the industry,” he said. "As industry stakeholders, we've been pushing and pushing on Capitol Hill and with CMS for years. … It looks like former HHS Secretary Tom Price got the ball rolling, and now these are some really nice modifications."

A fact sheet is available at and a PDF of the full text of the proposed rule is available at


About the Author

David Kopf is the Publisher and Executive Editor of HME Business and DME Pharmacy magazines. Follow him on LinkedIn at and on Twitter at @postacutenews.

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