CMS issues revised IR rule

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Tuesday, December 31, 2002

WASHINGTON - CMS published its interim final rule on inherent reasonableness Dec. 13, and industry watchers say the rule doesn’t differ greatly from the last interim final rule on IR, which CMS published in 1998.

“I’m not sure that this interim final rule will, in a practical sense, make any difference in how the DMERCs will go about making IR adjustments,” said Cara Bachenheimer, a healthcare attorney at Epstein, Becker & Green in Washington.

Although CMS is soliciting comments on its revised IR rule, the new regulation goes into effect Feb. 11.

Redressing one of the principal criticisms of the 1998 rule, CMS now spells out the steps the DMERCs have to take to ensure the use of valid and reliable data when exercising that authority. That’s a step in the right direction, said AAHome-care’s Asela Cuervo, senior v.p. of government relations and general counsel. Although, the process, as now laid out, still looks rather informal, Cuervo said.

“It doesn’t specify where they have to get the data, or what kind of analysis needs to be done,” she said. “There’s still a lot of discretion for the DMERCs in there.”

The industry remembers well the last time the DMERCs exercised its IR authority. In late 1998, the Region B DMERC proposed a series of cuts of 3% to 36% on a range of items including blood glucose strips and enteral formula. Region B pegged those amounts after surveying retail prices at 200 retail outlets in 16 states.

But those cuts did not go into effect. Bowing to criticism that the survey methodology was willy nilly, HCFA (now CMS) put IR on hold in early 1999 after Rep. William Thomas (R-Calif.) asked the GAO to investigate whether IR makes reimbursement cuts fairly.

The new rule is more explicit about the size of the cuts that are likely to come under IR. Another significant criticism of the former rule involved the lack of clarity associated with the terms “grossly excessive” and “grossly deficient.” That language came out of the original IR statute language in 1986.

The new rule doesn’t define how the DMERCS should determine whether reimbursement for a DMEPOS item is grossly excessive or grossly deficient. But it does seem to identify the minimum size of an IR cut.

“The differences between current and proposed payment amounts of less than 15% should not be considered grossly excessive or grossly deficient and therefore do not provide a sufficient basis for using Inherent Reasonableness authority,” CMS writes in the Federal Register.

“The whole notion of IR is based on the fact that the reimbursement amount is either grossly excessive or grossly deficient,” said Bachenheimer. “I’m not sure if they can arbitrarily state that because Congress drew this 15% line in the sand, they can make the jump to saying something less than 15% is not grossly excessive or grossly deficient.” HME

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