IR makes a comeback?

CMS proposes using inherent reasonableness to set payment amounts for non-mail-order diabetes supplies
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Monday, June 25, 2012

WASHINGTON – CMS announced late on Friday that it plans to host a public meeting next month to consult with stakeholders on adjusting Medicare payment amounts for non-mail order diabetes supplies.

CMS already has a national competitive bidding program in place to set payment amounts for mail-order diabetes supplies. But rather than add non-mail order supplies to the mix, the agency is considering using inherent reasonableness (IR) to set payment amounts for these products in the short term.

“We believe that this alternative would allow beneficiaries the greatest degree of choice in deciding where to obtain their non-mail-order diabetic testing supplies as suppliers would not have to be awarded contracts to continue furnishing these items to Medicare beneficiaries,” CMS states in a notice posted to the Federal Register (CMS-1445-N). “It also has the potential to reduce the significant discrepancy in payment amounts between mail order and non-mail order diabetic testing supplies and generate beneficiary and program savings sooner than could be achieved through competitive bidding.”

IR goes back to 2005, when CMS published a rule in the Federal Register finalizing “a process for establishing a realistic and equitable payment amount when the existing payment amounts are inherently unreasonable because they are either grossly excessive or deficient payment amounts.” The rule also provided “criteria for using valid and reliable data in making inherent reasonableness determination.”

CMS states that factors considered in determining whether payment amounts are “grossly excessive or deficient” include the payment amounts for a category of items or services in a particular locality are grossly high or lower than payment amounts in other comparable localities for the category of items or services; payment amounts for a category of items and services are grossly higher or lower than acquisition or production costs for the category of items and services; and the payment amounts for an item or service are grossly higher or lower than the payment amounts made for the item or service by other purchasers in the same locality.

CMS states that factors considered in establishing a payment limit include price markup, differences in charges, costs, use and payment amounts in other localities.

In 2011, annual Medicare Part B allowed charges for diabetes supplies were about $1.6 billion, of which about $552 million was attributed to claims for non-mail order items, according to CMS.

The meeting is scheduled for July 23 from 9 a.m. to 1 p.m. EST.

For more info, go to http://www.ofr.gov/OFRUpload/OFRData/2012-15425_PI.pdf.