As Thanksgiving approached, the home medical equipment (HME) industry awaited the final home health final rule, expected to contain significant changes to Medicare’s competitive bidding program and HME provider accreditation.
But on Nov. 25, the Office of the Inspector General (OIG) released a report of its own that focused on continuous glucose monitors (CGMs). The OIG report tied CGM expenditures to the new competitive bidding processes revealed when the final rule was published Nov. 28.
Rising expenditures for CGMs
The key takeaway of the OIG report is in its lengthy title: Medicare Payments for Continuous Glucose Monitors and Supplies Exceeded Supplier Costs and Retail Market Prices, Indicating Medicare Can Save at Least Tens of Millions of Dollars in One Year.
“Medicare Part B payments for CGMs and supplies rose from $109 million in 2018 to $1.3 billion in 2023,” the OIG report said, in explaining the reason for the review. “This review compared Medicare payments for CGMs and associated supplies to the costs incurred by suppliers and retail prices to assess the potential for Medicare cost savings. Previous OIG work determined that Medicare was paying more than other payors for other types of durable medical equipment, other than CGMs, inflating Medicare’s overall expenses and the enrollee copayments.”
From July 2022 to June 2023, the report continued, “Medicare payments for CGMs and supplies exceeded suppliers’ acquisition costs and suppliers’ estimated total costs. Medicare payments for CGMs and supplies exceeded suppliers’ acquisition costs by $377 million (or 69 percent) in a year, and their total estimated costs by $70 million (or 8%) in one year.”
The OIG’s conclusion: “CGM supplies — the most common CGM-related Medicare billing — represent the largest potential number of dollars saved. Medicare payments exceeded suppliers’ acquisition costs by $359 million and their total estimated costs by $61 million. Medicare payments for CGM supplies also exceeded retail market prices by $290 million in one year.”
In commenting on the final rule and the new competitive bidding processes it established, Noel Neil, JM, CDME, chief compliance officer at ACU-Serve, told HME Business, “The timing of this release — just days after the Office of Inspector General report recommending cost reductions for continuous glucose monitors and related supplies — appears strategically rather than coincidentally.”
Do the numbers add up?
“While the OIG report emphasizes potential savings through competitive bidding, its methodology raises concerns,” Neil said. “Specifically, the report mischaracterizes ‘Medicare payment’ by using the allowed amount rather than Medicare’s actual outlay.
“Under Part B, Medicare pays 80% of the allowed amount, reduced by 2% sequestration, while beneficiaries or their supplemental plans cover the remaining 20%. The OIG’s approach inflates program spending and misrepresents supplier revenue.”
Neil added that suppliers “often don’t collect the full 20%” referenced by the OIG report due to several factors, including:
— Secondary coverage limitations (e.g., CGMs not covered by supplemental insurance, network restrictions or pharmacy instead of medical coverage).
— Medicare payment exceeding secondary payer allowances.
— Financial hardship waivers for beneficiaries enrolled in compliance hardship programs.
“Consequently, using allowed amounts overstates Medicare spending by approximately 21.6% and exaggerates supplier revenue,” Neil said.
Among the “impactful provisions” in the Centers for Medicare & Medicaid Services (CMS) home health final rule, Neil added, is the reclassification of CGMs and insulin pumps.
“These items are now categorized under ‘frequent and substantial servicing,’ with payment shifting to a monthly rental model that includes all necessary supplies and accessories,” he said.
For its report, the OIG used “national claims history data from the CMS Integrated Data Repository to obtain a stratified, random sample of 1,000 Medicare part B claims for CGMs and supplies.”
The OIG then identified the corresponding CGM suppliers for those claims and “collected acquisitions costs and supporting documentation from sampled suppliers for four strata: Class 2 CGMs, Class 2 supplies, Class 3 CGMs, and Class 3 supplies.” Acquisitions cost was defined as “the supplier’s cost to purchase the item from a manufacturer or an intermediary, including any applicable discounts.”
To ascertain other costs — including delivery fees, rent, utilities and employee salaries — that CGM suppliers acquire, the OIG used estimates of costs provided by the American Association for Homecare (AAHomecare), who surveyed members whose companies do significant CGM business.
“[AAHomecare] reported that, on average, acquisition costs were 64% of total costs, and other costs represented 36& of total costs (21% for direct costs and 15% for indirect costs),” the report said.
