AMARILLO, TX – Until last week, the DME industry was unsure regarding the next round of competitive bidding (“CB”). The existing Round One 2017 and Round Two Recompete contracts will terminate on December 31, 2018. And while, historically, the bid process leading up to a round of CB takes almost two years, as of last week CMS had not given any guidance to the industry regarding the round that was supposed to begin on January 1, 2019.
As I discussed in last week’s Medtrade Monday article, much of the ambiguity was cleared up with CMS’s issuance of a Proposed Rule that addresses the future of CB. The proposed rule is a “positive” for the DME industry. In issuing the Proposed Rule, it is obvious that CMS recognizes the problems inherent with CB. AAHomecare has taken the leadership role in gathering information, preparing detailed analysis regarding the problems inherent with CB, and submitting the analysis to CMS. Much work remains and industry stakeholders, under AAHomecare’s leadership, will work together to submit comments to CMS in response to the Proposed Rule. Here are the key components of the Proposed Rule:
- Suspension of CB – Beginning with January 1, 2019, there will be a 12 to 24 month period in which CB will be suspended and in which “any willing provider” can provide bid products. During this “gap period,” CMS proposes different payment methodologies based on the location of the service area. Specifically, there will be areas that are (i) currently CBAs, (ii) not currently CBAs, not rural areas, and located in areas contiguous to the United States, and (iii) not CBAs and are either in rural areas or in non-contiguous areas. For those suppliers that fall under “(iii),” CMS proposes to pay a blend of 50% of the adjusted fee schedule amounts and 50% from unadjusted amounts. For those suppliers that fall under “(ii),” CMS proposes to pay 100% of the adjusted fee schedule amounts. For those suppliers that fall under “(i),” CMS proposes to pay on an adjusted fee schedule basis. Basically the rates during the gap period will be equal to the rates in effect on December 31, 2018…updated each year if the gap lasts more than one year.
- Lead Item Pricing – DME suppliers will bid on one item (“Lead Item”) in a product category. The Lead Item is the item with the greatest national allowed charges in the product category during the preceding year. The bid submitted on the Lead Item will be the “composite bid” and the bid cannot be greater than the 2015 fee schedule. The Single Payment Amount (“SPA”) for the non-lead items will be based on the relative difference in the 2015 fee schedule amounts for the non-lead item and the Lead Item in 2015. As a result, the payment level of the Lead Item will determine the prices of the remaining items in the product category. Additionally, the product categories will be split into more specific product categories.
- Clearing Price – Instead of the “median bid” being used to set the SPA, CMS proposes to use a “clearing price” (also referred to as the “maximum winning bid”) that sets the SPA. The end result is that no winning bidder will be paid less for the Lead Item than what was bid.
- Splitting CBAs Into Smaller Sizes – CMS is soliciting comments on whether it should split large CBAs into “more manageable” service areas.
- Oxygen and Oxygen Equipment – CMS proposes to create a new class for portable liquid oxygen equipment by splitting the existing class of portable gaseous and portable liquid oxygen. CMS proposes to increase the payment amount for the new portable liquid oxygen class. Additionally, CMS proposes to add a liquid high-flow oxygen contents class. Lastly, CMS proposes to change the way that it calculates budget neutrality. Under the new methodology, rather than applying the offset to payment for stationary equipment and oxygen contents only, CMS proposes to apply the offset to all oxygen and oxygen equipment classes and HCPCS codes beginning on January 1, 2019.
- Multi-Function Ventilator (“MFV”) – The FDA has recently cleared an MFV that can function as a portable oxygen concentrator, nebulizer, suction pump and cough stimulator. The MFV raises the following question: “How will the MFV fit into CB when some of the functions are currently performed by items that are not part of CB?” Under the proposed rule, CMS will treat the device in the frequent and substantial servicing payment category and establish fee schedule payments based upon the functions performed by the MFV when used by a particular Medicare beneficiary. Payment will be made on a monthly rental basis.
As a result of the Proposed Rule (and the anticipated Final Rule), DME suppliers need to address several important issues:
- Common Ownership – A number of DME suppliers have entered into common ownership arrangements with other suppliers, resulting in a non-CB supplier being added to the contract of a CB supplier. If the next round of CB would start on January 1, 2019, and if these common ownership arrangements remain in place on January 1, 2019, then the suppliers have to be careful regarding how the bids will be submitted (i.e., commonly owned suppliers cannot separately submit bids for the same product categories in the same CBAs). However, the next round of CB will notbegin on January 1, 2019. Rather, it will likely begin 12 to 24 months after January 1, 2019. This means that during this “gap period,” any supplier can provide products so long as the supplier is willing to accept the reimbursement. And so the commonly owned suppliers may decide that effective January 1, 2019, they no longer need each other. As such, some commonly owned suppliers may want to unwind their arrangement. In doing so, it will be important for them to (i) comply with the requirements of the documents that established the common ownership and (ii) comply with the notice requirements when there is a “change in ownership.”
- Subcontracts – A number of CB suppliers and non-CB suppliers have entered into Subcontract Agreements that allow the non-CB supplier (the “subcontractor”) to perform services for the CB supplier (the “contractor”) such as delivery of equipment, patient education and set-up, and repair and maintenance. When the CB program goes on hiatus beginning January 1, 2019, the parties to these subcontract arrangements need to decide whether to continue…or terminate…these arrangements. If the parties decide to terminate a subcontract arrangement, they need to keep in mind that the patients are “patients of the contractor,” not“patients of the subcontractor.”
- Preparation for the Next Round – It is likely that the next round of CB will kick off during 2020. In preparation for the next round, suppliers need to make a number of important decisions and take preparatory steps. For example, the supplier must answer the threshold question of whether or not it even wants to submit a bid for a contract. I say this because a number of suppliers were awarded contracts for Round One 2017 and Round Two Recompete…only to later regret being tied to the contracts. If a supplier believes that it may not want to “play in the CB arena” in the future, then it needs to start making decisions now as to how it will recalibrate its business model so as not to be dependent on CB. As another example, if a supplier believes it will submit a bid for the next round, then it needs to take steps now to ensure that its financials are as solid as possible. The same concept holds true for licensing. If a supplier believes it will submit a bid for the next round, then it needs to take steps now to ensure that it has all of the required state licensure in place. Lastly, the supplier may want to engage in conversations now with other suppliers about entering into common ownership or subcontract arrangements in the event that one of them does not secure a future CB contract.
Medtrade 2018 will be an important show for suppliers to attend. Just a few days ago, the Medtrade Education Advisory Board (in conjunction with AAHomecare, VGM and Brown & Fortunato) made the decision to include a separate education track at Medtrade that will focus exclusively on the Proposed Rule and the Final Rule (which should be issued a couple of weeks after Medtrade). This special track will (i) consist of four or five separate programs and (ii) will give concrete tools for DME suppliers to use as they contemplate the “gap” beginning January 1, 2019 and as they contemplate the next round of CB.
Jeff Baird will present the following webinar:
AAHOMECARE’S EDUCATIONAL WEBINAR
Proper vs Improper Telehealth Arrangements
Presented by: Jeffrey S. Baird, Esq., Brown & Fortunato, P.C.
Tuesday, July 24, 2018
2:30-3:30 p.m. EASTERN TIME
As the 78 million Baby Boomers continue to age and retire, the demand for health care will increase exponentially. The challenge is that this demand will run up against the fact that there is limited money to pay for health care. As a result, third party payers and health care providers are searching for ways to provide health care more cost effectively. One of these ways is telehealth. Utilization of remote patient monitoring and video conferencing can allow the DME supplier to maintain real time communication with its patients and their caregivers…thereby eliminating the need for the supplier to send an employee to the patient’s residence. When a physician has a telehealth encounter with a patient, and if the encounter results in an order being transmitted to the DME supplier, then this is a faster way for the supplier to receive and process orders. All of this is the “wave of the future.” However, as is often the case, the “devil is in the details.” This webinar will discuss the legal parameters within which the DME supplier can use telehealth/video conferencing to monitor patients and communicate with their caregivers. The webinar will also focus on when, in the eyes of CMS, a physician order received by a DME supplier (resulting from a telehealth encounter between the patient and the physician) is valid…and when it will be rejected by CMS.
Jeffrey S. Baird, JD, is chairman of the Health Care Group at Brown & Fortunato, PC, a law firm based in Amarillo, Tex. He represents pharmacies, infusion companies, HME companies and other health care providers throughout the United States. Mr. Baird is Board Certified in Health Law by the Texas Board of Legal Specialization, and can be reached at (806) 345-6320 or firstname.lastname@example.org.