NCB: Will you accept a grandfathering agreement?

Sunday, April 22, 2007

Many suppliers question how competitive bidding will affect their businesses if they do not win a bid. Beneficiaries, to the extent they are aware about the new program, might also wonder how they will fare if they are forced to change suppliers once winning bidders are announced. Generally, suppliers must submit a bid and win in order to continue servicing a competitive bidding area (CBA), but the Medicare Modernization Act of 2003 (MMA) authorized CMS to continue to pay for certain items of DME furnished by noncontract suppliers in a CBA under limited circumstances.

Essentially the law creates a "grandfathering" exception for beneficiaries using capped rental DME or oxygen. In order for the exception to apply, there must have been an existing relationship between the supplier and the beneficiary at the time competitive bidding begins--hence the term "grandfathering." After that, there can be no grandfathering because Medicare will only reimburse DME items subject to competitive bidding if they are furnished by a contract supplier. Both the supplier and the beneficiary must agree to the grandfathering; the beneficiary can change suppliers if he desires. For oxygen, the noncontract supplier must agree to accept the new competitive bid payment amount. In contrast, for capped rental DME, payment will remain at the fee schedule amount in effect before competitive bidding began. CMS justified the difference in the payment policies for capped rental items and oxygen by stating that capped rentals are short-term arrangements where payments are based on the purchase price of the equipment. Monthly payment for oxygen, on the other hand, continues for a longer term, and, in any case, Medicare oxygen reimbursement has not been based on the equipment's purchase price.

The decision to accept a grandfathering arrangement will be a business decision. Grandfathering is voluntary, but suppliers will not be able to pick and choose which beneficiaries they want to continue serving. Once they have decided to grandfather their patients receiving oxygen, for example, they will be required to grandfather all of their patients, not just the ones that have less intensive service needs.

The grandfathering policy primarily services the interest of beneficiaries who otherwise would be forced to change a supplier they might like. At the same time, the policy streamlines program administration by reducing the possibility that large numbers of beneficiaries will migrate to contract suppliers at the same time. Finally, suppliers may determine that grandfathering meets the interests of their businesses as they adapt to the changes brought on by competitive bidding.

Asela Cuervo is a healthcare attorney based in Washington, D.C.