VGM Weighs Pros and Cons of ESRD/DMEPOS Proposed Rule

Highlights from VGM's analysis of the competitive bidding and oxygen elements of CMS's proposed rule leave questions regarding how much the changes will actually help HME providers.

The Government Relations wing of VGM Group released its analysis of CMS’s recent proposed ESRD and DMEPOS rule, offering the pros and cons of the rule’s various DMEPOS proposals.

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.

VGM said it was generally supportive if the idea and concluded the practice would simplify bidding. However, VGM also noted that CMS would determine the percentage of each part of the equipment.

“The devil is in the details as suppliers have little transparency to determine payment amounts for these additional items,” VGM’s analysis reads. “A primary example of this would be accessory items on wheelchairs, where suppliers deserve transparency on how these prices will be set.”

Another key element of the new rule is that 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. VGM noted that this lets providers easily exit the bid program as well as let new suppliers offer products in contracted categories in competitive bidding areas, but without being bound by a contract.

However, VGM also underscored that competitive bidding SPAs were set under the assumption that contracted providers could make up the lower reimbursement by having a more exclusive dominion over certain categories in certain areas, and thus a higher volume in patients.

“By shifting to any willing supplier, it removes the potential volume of new patients coming through a supplier’s door,” VGM noted. “This also is not fair to contracted suppliers who have shifted their business models, based on multiple rounds of bidding, while having to accept the lower reimbursement. Without CMS rolling out a bid program every three years, as it is required by law, with the announcement suppliers have no long-term stability in making business decisions.”

The proposed rule also includes changes that would ensure that all new payment for oxygen and oxygen equipment added since 2006 are budget neutral. 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. It also sets new rules regarding reimbursement for ventilators that also perform the functions of other DME items.

VGM said that the separation of liquid oxygen classes is a recognition of the sizable differences between providing liquid and stationary oxygen.

However, the organization said it was “seriously concerned” because the rule does not address the significant costs associated with delivering oxygen.

“Suppliers needing to deliver this equipment at least twice a month are going to be severely limited when it comes to servicing the patient properly,” VGM said. “With the added costs such as a commercial driver’s license and hazmat labeling, the current payment methodology does not meet the costs associated with providing liquid oxygen. Additionally, CMS has doubled down on the authority to artificially reduce oxygen rates by applying an outdated budget neutrality regulation to oxygen equipment. Lastly, this language only addresses portable liquid oxygen, not stationary liquid oxygen tanks.”

It also added that patients would likely be required to use several providers because most won’t have all the contracts.

VGM encouraged providers to submit their public comments on the proposed rule by Aug. 20, rather than the Sept. 10 deadline, in order to ensure CMS has adequate time to see comments. VGM also offered some final conclusions:

 “While CMS is calling this ‘modernizing’ the DMEPOS program, disguising it as an overhaul, VGM believes that this was a missed opportunity for major regulatory reform to strengthen access to DME in urban, non-rural, and rural areas across the country,” VGM’s statement said. “In reality, while the competitive bidding program is inevitably delayed until CMS conducts another round of bidding, they have effectively extended the current program. With no indication of when the next program will be, which is one of the few methods of pushing prices upwards for this equipment, it could be a few years before a new round is conducted. The status of the industry right now is not acceptable, as suppliers are at the mercy of CMS to make these crucial changes.”

To see more VGM analysis of the proposed rule, check out its video from last week.

About the Author

David Kopf is the Editor of HME Business.

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