CMS Suggest Gap-Filling Changes in Proposed Rule

Recently unveiled 2020 ESRD/DMEPOS Proposed Rule includes various changes to how reimbursement rates are set.

On Monday, CMS released a Proposed ESRD/DMEPOS Rule for 2020 that contains several provisions related to home medical equipment, including changes to its method for “gap-filling” reimbursement rates on certain DME items.

Important links for the proposed rule:

The HME-related provisions concern gap-filling; payment requirements; requesting market-based data related to diabetic testing suppliers; and change of ownership.

The gap-filling change is particularly worth noting as it shows CMS plans to alter the way its shape reimbursement rate changes on certain items.

To regularly adjust its reimbursement rates Medicare needs to estimate what it should pay for various items in the time since a fee schedule was initially set. (Those initial amounts were set for different items in different years.) It bases these estimates using what it calls “reasonable charge data.”

However, existing statute does not specify how CMS should make its estimates when the charge data doesn’t exist. That’s where gap-filling comes into play.

Since 1989, CMS has used a process used gap-filling to literally fill the gap in the reasonable charge data for new DMEPOS items. CMS has used various methods and resources to gap-fill DMEPOS fee schedule amounts including use of fees for comparable items; supplier prices; manufacturer’s suggested retail prices (MSRPs); wholesale prices plus a markup percentage to convert the prices to retail prices; internet catalog pricing; and other methods.

The net-net is that the gap-filling process is very complex and hard for providers to follow. In comments to 2019 proposed ESRD/DMEPOS rulemaking, stakeholders asked for increased transparency. Specific concerns included:

  • How CMS determines that items and services are comparable.
  • Sources of pricing data other than fees for comparable items.
  • Timing of fee schedule calculations and use of interim fees.
  • Public consultation.
  • Pricing data and information integrity.
  • Adjustment of newly established fees over time.

In response, CMS proposes several gap-filling changes in the proposed rule:

For new DMEPOS items without a pricing history, CMS would establish five main categories of components or attributes of DMEPOS items (as shown in Table 1 of the aforementioned fact sheet) that would be evaluated to determine if a new item is comparable to an older existing item for gap-filling purposes. 

If the new item is determined to be comparable to the older existing item, CMS would base the new items fee schedule on the fee schedule amounts for the older existing item.

If there are no comparable items to use for gap-filling purposes, the fee schedule amounts for the new item would be based on other, more accurate sources of commercial pricing data to establish Medicare payments -- such as internet retail prices or information from supplier invoices -- deflated to the fee schedule base period and updated by the covered item update factors.

If supplier or commercial price lists are not available, verifiable, or do not “represent a reasonable relative difference in supplier costs of furnishing the new DMEPOS item relative to the supplier costs of furnishing DMEPOS items from the fee schedule base period,” CMS would use “technology assessments” to determine the relative costs of the newer DMEPOS items compared to older DMEPOS item to establish the fee schedule amounts for the newer items.

If supplier or commercial prices are used to establish fee schedule amounts for new items, and the prices then go down once the market for the new items is more established, Medicare would adjust its rates based on the new, updated prices. CMS noted it considers a one-time decease to the fee schedule amounts using the new, lower prices to be reasonable.

On the other hand, CMS does not believe that a similar adjustment is necessary to account for increases in prices and is not proposing anything in that regard, but says it is inviting comments on the issue.

While complex, HME stakeholders should review both CMS’s fact sheet and the DMEPOS provisions of the proposed rule, starting on page 146.

About the Author

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


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