AAH highlights key aspects of NCB proposal

Sunday, April 30, 2006

WASHINGTON - In a three-page document posted to its Web site Wednesday, AAHomecare boiled down CMS's 203-page proposal for national competitive bidding into nine key categories.

CMS released its proposal Monday, April 24. The proposal was slated for publication in the Federal Register today, and CMS will accept comments until June 30.

AAHomecare's document reads as follows:

CMS proposes to contract with one or more contractors that would be responsible for implementing competitive bidding nationally. The DMERCs/MACs would continue to have responsibility for processing claims in each region and would continue to perform other existing DMERC functions. The CBICs would perform functions like preparing the request for bids, performing bid evaluations, selecting qualified suppliers and setting the payment amounts in competitive bid areas. The CBIC would also assist CMS and the DMERCs in monitoring the program on an ongoing basis.

CMS would establish a "single payment amount" for the items subject to competitive bidding based on the bids submitted. The single payment amount would become the new Medicare payment basis in the competitive bid areas. Beneficiaries who use oxygen or capped rental equipment will have the opportunity to continue using their existing provider, even if the provider is not a winning bidder. A provider who agrees to be a grandfathered provider must agree to do so for all beneficiaries it serves, unless the beneficiary desires to transition to a winning bidder or a "contract supplier." The grandfathered provider must agree to accept the competitive bid payment amount for oxygen and equipment in the frequent and substantial servicing category. For capped rental equipment, the grandfathered provider would continue to receive the Medicare fee schedule amount for the duration of the rental period. The single payment amount would be adjusted annually for inflation. CMS states that bidders will not have to factor inflation into their bids.

CMS proposes a methodology for selecting the competitive bid areas as follows:
- Select the top 50 metropolitan statistical areas (MSAs) using Census Bureau population data published as July 1, 2005, and exclude the top three: New York, Los Angeles and Chicago.
- Eliminate the 25 MSAs that have the fewest DMEPOS allowed charges for items furnished in 2004.
- Score the remaining 25 MSAs on combined rankings for the following (with equal weight being given to each factor): DMEPOS allowed charges per fee-for-service beneficiary, and ratio of providers to beneficiaries using DMEPOS in 2004.
If more than one MSA receives the same score, CMS will use the total allowed charges for products subject to competitive bidding as the tiebreaker. CMS would not include areas that are in more than one DMERC region to avoid having more than one DMERC process competitive bidding claims in that area. However, it plans to make sure that there is at least one competitive bidding area in each DMERC region by selecting the highest scoring MSA in each DMERC region. CMS would not select more than two competitive bidding sites for each state.

CMS would modify the formula for selecting MSAs as follows:
- CMS would not exclude the three largest MSAs or MSAs that cross DMERC boundaries, and it would not limit the number of MSAs that can be selected from any one state.
- CMS would use the most current list of MSAs published by the Census Bureau.
- CMS would use the same criteria it uses in 2007, but it would use data from 2006.

CMS proposes to establish a nationwide or regional competitive bidding program after 2010 for items that are furnished by mail order like diabetic testing supplies. Prior to that time, mail order suppliers would be eligible to submit bids in the competitive bidding areas identified in 2007 and 2009.

The proposal identifies criteria that CMS will use in selecting products for competitive bidding. CMS will begin with high-cost, high-volume items, and those that have the greatest potential for savings. The items selected for competitive bidding will be described in the request for bids (RFB). CMS will select product categories using SADMERC data, and suppliers will be required to submit a bid for each item included in a product category. CMS will include a core set of product categories in each competitive bid area.

All suppliers will have to meet quality standards. The standards will be administered by an independent accreditation organization designated by CMS. CMS will allow a grace period for unaccredited providers who submit bids to attain accreditation. If the provider is not accredited by the end of the grace period, the provider's contract will be terminated. The length of the grace period will be determined by the accrediting organization's ability to complete the accreditation process in a competitive bidding area. The grace period will be announced in the RFB for each area. Providers would also be required to meet the eligibility requirements in the current CMS supplier standards and financial standards. The proposal also addresses criteria that accrediting organizations will have to meet to be selected by CMS to administer the standards.

CMS will select bidders using a formula that determines how many bidders will be required to service beneficiary needs in the competitive bidding area. The formula will rely on utilization data for the area and will include an assessment of the individual bidder's capacity to service beneficiary needs in the area. The winning bids will be selected using a "composite bid" of the supplier's bids for each item in a product category. The composite bid will be the weighted sum of the supplier's bid for each item in the product category. The items' weight will be based on Medicare utilization data for the item. CMS is seeking comments on the methodology for weighting the items. CMS would select the winning bid amount, or "pivotal" bid, based on "where expected combined capacity of the bidders is sufficient to meet the expected demands of the beneficiaries for items in a product category." All bidders whose bid is at or below the pivotal bid amount would be selected as winning bidders. CMS would designate at least two winning bidders in each competitive bidding area. CMS will not accept any bid for an item that is higher than the current fee schedule amount for the item.

CMS will use the following principles to guide the establishment of the single payment amount:
- All winning bid amounts in a competitive bidding area will be used to establish the single payment amount.
- Single payment amounts cannot be higher than the current payment under the existing fee schedule for the item.
CMS would calculate the average of the winning bids for each item. Then CMS would calculate the average of the composite bids by taking the sum of the composite bids for all contract suppliers in a competitive bidding area and dividing it by the number of contract suppliers. Finally, CMS would apply an adjustment factor that would bring all individual bids up to the pivotal bidder's composite bid. All winning bidders would be paid as much for the total product category as the bidder with the pivotal bid. Winning bidders whose bid was below the single payment amount would have the option of offering beneficiaries rebates representing the difference between their bid amount and the Medicare single payment amount.